Background
A recent Q&A answer published by the European Banking Authority (EBA) indicates that debt collectors, billing service firms and similar service providers could fall within the scope of payment service regulation and thus require an appropriate authorisation under Directive (EU) 2015/2366 (“PSD2”) granted by the national competent authority.
In Finland, the provision of payment services is regulated under the Payment Services Act (290/2010, the “PSA”) and the Payment Institutions Act (297/2010, the “PIA”) implementing PSD2. Payment service providers are supervised by the Financial Supervisory Authority (the “FIN-FSA”) which also grants authorisations and registrations for the provision of payment services.
Question
The Q&A question was submitted by a law firm, and it concerned the receipt and transfer of funds in different scenarios. The submitter wanted to know whether the following activities would qualify as a payment service (namely money remittance) under PSD2 and therefore require an authorisation or registration from the national competent authority:
i. an entity (such as debt collector) accepts a payment on behalf of a payee and the debt due to the payee is extinguished upon receipt of payment by the debt collector; and
ii. an entity receives money into one account and then pays these funds to a second account in its name before transferring the money to the relevant payee.
The submitter also asked whether the commercial agent exemption could be relied on when an entity receives funds but then transfers them to another account held by it before transferring them to the relevant payee.
Answer and analysis
According to the answer, the receipt and forwarding of funds qualifies as a payment service (such as money remittance or execution of payment transactions depending on the design of the services and the contractual agreements) according to Article 4(3) of PSD2 in conjunction with Annex I. Although debt collectors or other service providers were not explicitly mentioned in the answer, it was expressly stated that the settlement of the payer’s debt to the payee is not in itself a reason to exclude the service provider from the scope of PSD2. In respect of the commercial agent exemption, the answer simply referred to the wording of Article 3(b) of PSD2.
The good news is that the above answer to some extent clarifies the extent of the services exempted from the scope of PSD2, but the taken approach is indeed strict. It should also be noted that this view somewhat differs from the one taken earlier by the European Commission in respect of bill collection services (please refer to answer no. 414: Your Questions on PSD (europa.eu)).
Therefore, and at least theoretically, this could lead to an interpretation that generally all debt collectors, billing service firms and similar service providers could fall within the scope of PSD2 when their fund flows are arranged in a way as described above. For example, when the debt collector uses (other than occasionally) client fund accounts when accepting funds on behalf of their customers.
Furthermore, based on the answer, it appears that the use of the commercial agent exemption would not be applicable as these types of service providers do not generally negotiate or conclude sale or purchase of goods or services on behalf of the payee. Because of this, such service providers would need to apply for an authorisation or registration with the competent national authority. This would arguably result in significant regulatory burden and costs to the service providers, as authorisation and registration would require allocating resources to the company’s internal functions and compliance.
The answer is also in line with the FIN-FSA’s previous practice, although (traditional) debt collection agencies have not been considered to fall within the scope of PSD2. This may partly be because the obligation to supervise the debt collection agencies lies with the Finnish Regional State Administrative Agency and not with the FIN-FSA. Further, also in Finland the scope of the commercial agent exemption has been interpreted narrowly. It is generally required that the agent acts for commercial purposes (e.g. promotes the sale or purchases of goods by way of obtaining offers or entering into agreements) on behalf of the payee or the payer. Further, it has been considered that the settlement of the payer’s debt to the payee is not in itself to be a reason not to consider the service, for example, as money remittance.
Conclusion
While it remains to be seen how the EBA’s interpretation will affect the said businesses in practice, this indeed poses a further layer of regulation to be considered by the debt collectors, billing service firms and similar service providers. As always, we at Waselius & Wist are more than happy to assist you with any questions related to payment services.
The published Q&A answer can be found here: 2020_5216 Money Remittance | European Banking Authority (europa.eu)