PSD2: Germany's ahead of the game as Parliament adopts implementing legislation

On 2 June 2017, the Deutsche Bundestag adopted a new Payment Services Supervision Act (ZAG-2017) for the implementation of PSD2. Germany is therefore all set for the implementation deadline on 13 January 2018.

The final draft Act had already been approved by the Parliament's Finance Committee, which introduced minor amendments or rather clarifications on the existing draft Payment Services Supervision Act. The clarifications mainly deal with one subcategory of limited network payment instruments, i.e. the exemption for payment instruments valid only in a single Member State for specific social or tax purposes set out under Article 3 (k) (iii) PSD2/ Sec. 2 (10) lit.b Payment Services Supervision Act (ZAG-2017). It was clarified by the Finance Committee that the scope of the exemption has to be specified by secondary legislation of the Member States. The privilege only applies to payment instruments which promote social or tax related objectives and which are provided to acquire certain goods or services laid down in that legislation.

Germany has implemented the PSD2 by entirely replacing the current Payment Services Supervision Act (ZAG) in order to ensure effective, coherent and user-friendly implementation and legal clarity. Existing provisions in other German legislation have also been amended to reflect PSD2.

Shortfalls in consumer protection?

The provisions implementing PSD2 aim at ensuring a level playing field in order to create an effective integrated market for card-based payments, as well as setting a high standard of consumer protection.

During the legislative process, the Greens made a formal request for further transparency and caps for account charges (Antrag der Fraktion BÜNDNIS 90/DIE GRÜNEN Drucksache 18/12367). The formal motion was rejected by the Government Coalition. From the Government Coalition's point of view, establishing set caps and further transparency would be contrary to EU law and unnecessarily compromise the level playing field for the banking sector.

Regarding consumer protection the final draft Act introduces, in particular, rules on the charging of interchange fees for card-based transactions ("surcharging"). Under the adopted Act, retailers cannot charge for card payments, SEPA direct debit and SEPA credit transfers. Moreover, payers can now only be held liable for unauthorised payments to the amount of EUR 50 instead of EUR 150. This causation must then be proven by the payment service provider and not the payer. Furthermore payers can demand immediate refund of the amount of that transaction in the case of an unauthorised payment transaction.

Broader drafting for commercial agent exemption

In implementing PSD2, the German legislator retains the current wording of the commercial agent exemption, which in Germany also applies to central settlers for retail chains if they fulfil the requirements for it. In this way the German implementing legislation differs from PSD2, which does not mention central settlers. However, the broader wording is not considered to be a material change from PSD2 but just a clarification as central settlers would be included as commercial agents if their role qualifies for an exemption under the draft Act.

The German interpretation of the commercial agent exemption will not change as a consequence of the different wording because the position of the Federal Financial Supervisory Authority (BaFin) on this issue has always been that which has now been clarified as part of the PSD2 implementation. Regarding online platform providers it is of particular importance that this means that the commercial agent exemption generally does not apply to mere online market platforms.

Third party access: now granted under payment services legislation, not competition law

The regulation of so-called third party payment service providers (TPPs) – one of the key changes in the PSD2 – has been implemented without specific amendments by the German government. TPPs include "payment initiation services" (PIS) and "account information services" (AIS). While the former will be added to the payment services register and will require authorisation, a special mandatory registration regime will be introduced for AIS.

The German Federal Cartel Office (Bundeskartellamt) had previously declared certain rules in the online banking conditions of the German Banking Industry Committee (Deutsche Kreditwirtschaft), which hindered the activities of payment initiation service providers (PISPs) due to restrictions on their access to information, to be illegal. This issue of "Open Banking" is now dealt with under the ZAG, which provides that account servicing payment service providers must grant PISPs access to information that's required for the execution of a payment transaction. These provisions however only come into force in Q1 in 2019 together with the Regulatory Technical Standards on strong customer authentication and secure communication (RTS SCA). Besides the implementation of the provisions in the ZAG the German Legislator further implemented a provision under Section 675f (3) German Civil Code (BGB) which grants payment service users the right to use TPPs and which comes into force on 13th January 2018. This "right of use TPPs" implies the obligation of banks keeping the account to grant TPPs access to information. Thus in Germany, provisions establishing "Open Banking" already come into force on 13th January 2018. Until then TPPs still have to rely on German Competition Law in order to guarantee access to account information. However, no technical specifications for Open Banking have been made for the transitional period until entry-into-force of the regulatory rules on Open Banking.

Other significant changes brought about by PSD2 have also been implemented, including the new requirements relating to strong customer authentication in order to improve the security aspects of payment services which were implemented without further amendments.

Next steps

The Act is now subject to approval from the German Federal Council, after which it will be passed to the Federal President for ratification. The new/amended laws implementing PSD2 will take effect on the implementation deadline of 13 January 2018. However certain provisions, including the rules on access to payment account information, only come into force in Q1 in 2019, once the RTS SCA under PSD2 become effective.

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