The UK’s Financial Conduct Authority has published its Final Guidance on the Definition of a “payment account“ under, and the application of the “Packaged Accounts” rules in, the UK’s Payment Accounts Regulations.

The Payment Accounts Regulations (PAR) will come into force on 18 September 2016 (*), and they’ll implement the EU’s Payment Accounts Directive (PAD) in and for the UK.

The Definition of a “payment account” guidance will help bank and non-bank payment services providers (PSPs) work out which of their customer accounts are caught by the PAR, and which are not.  The “Packaged Accounts” guidance will help PSPs understand and comply with the “packaged accounts” rules in the PAR – rules that are likely to apply more widely than some might have expected.

The Payment Accounts Directive (PAD) came into force on 17 September 2014, and the EU Member States have until 18 September 2016 to transpose it into their local laws, and require the PSPs operating in their jurisdictions to comply with them. The UK is using its Payment Accounts Regulations (PAR) to satisfy most of its PAD transposition obligations.

The PAR will apply to “payment services providers” including banks, electronic money issuers, UK authorised payment institutions, and UK small payment institutions, as well as EEA-authorised  payment institutions operating in the UK on a cross-border services basis, or through a local branch.

Regulation 2(1) of the PAR, provides that, “‘payment account’ means an account held in the name of one or more consumers through which consumers are able to place funds, withdraw cash and execute and receive payment transactions to and from third parties, including execution of credit transfers, but does not include any of the following types of account provided that the account is not used for day-to-day payment transactions: savings accounts; credit card accounts where funds are usually paid in for the sole purpose of repaying a credit card debt; current account mortgages or e-money accounts“.

The FCA’s guidance suggests that, when a PSP considers whether an account is caught by the PAR it should:

• start by working out whether it is a “payment account” under the UK’s Payment Services Regulations (PSRs) – if it is, it might also be an account under the PAR, as well. If it isn’t, it can’t be. There’s guidance on the scope of the PSRs in chapter 15.3 of the FCA’s Perimeter Guidance manual;
• consider whether the account could be held by a consumer – the PAR will only apply to consumer accounts;
• consider the account’s functionality – if it doesn’t have all of the functionalities of a PAR “payment account“, no further action is required;
• consider whether the account is one of those accounts that’s usually out of scope – if:
  • it’s not, it’s a “payment account“, and PAR applies;
  • if it is, the PSP will need to consider whether the account is used for day-to-day transactions – and that’s likely to mean considering (eg):
    • the purpose for which the account is designed and held out;
    • the extent to which the consumers holding the account use its payment service functionalities in practice;
    • the types of transactions carried out by consumers holding the account; and
    • the type(s) of payment instrument that are available on the account (if any).

The FCA’s guidance closes with a small number of examples of accounts that are and aren’t “payment accounts“, and some comments about what the FCA will expect PSPs to do after they’ve carried out their initial assessments.

Regulation 13 of the PAR provides that, “(1) Where a payment account is offered as part of a package with another product or service which is not linked to a payment account, the [PSP] must inform the consumer whether it is possible to purchase the payment account from it separately. (2) [If it is, the PSP must also] provide … separate information regarding the costs and fees associated with each of the other products and services offered in the package that can be purchased separately from the [PSP]“.

The FCA’s guidance notes that regulation 13:

• only applies to the sale of “packaged accounts” which take place on or after 18 September 2016;
• only applies when the additional “products and services” are available from the same PSP (it doesn’t apply if they’re available from another entity in the same group);
• is not limited (eg) to regulated products and services, or those for which a fee is charged.

The guidance includes a flowchart which makes it clear that, depending on the facts, regulation 13 might only require a PSP to tell a consumer that the relevant payment account is not available separately; or that it is available separately, but that it’s not possible to purchase the other products and services separately from that PSP.

If a PSP offers a payment account as part of a package; and the account and the same, or materially similar, products and services can be bought separately from the PSP, the FCA will usually expect the PSP to provide its customers with information about the costs and fees associated with the account, and the relevant (identical or materially similar) products and services. And this must be done in a way that (a) enables consumers to compare the products and services offered by different providers; and (b) complies with the FCA’s Principles for Businesses, Principle 6 (Customers’ interests) and Principle 7 (Communications with the clients), and the rules in chapter 2 of the FCA Banking Conduct of Business sourcebook (if it applies).

(* Regulations 1 to 5, and 13 to 44 will come into force on 18 September 2016. Regulations 6 to 12 are unlikely to come into force until 2018.)

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