Cross-border euro payments - briefing

16 October 2008
by eub2 -- last modified 16 October 2008

The European Commission has put forward a proposal modifying the provisions and extending the scope of the 2001 Regulation on cross-border euro payments, under which cross-border bank transfers in euro within the EU cost the same as domestic transfers. The proposal comes in response to the rapid evolution of the EU payments market. It aims at extending the principle of equality of charges to direct debit payments. It also contains some provisions enhancing the protection of consumer interests and rights and alleviating the statistical reporting burden.

What is Regulation 2560/2001?

Regulation (EC) No 2560/2001 on cross-border payments in euro introduced the principle of equal charges for corresponding domestic (national) and cross-border payment transactions. It applies to credit transfers, cash withdrawals at cash dispensers and payments by means of debit and credit cards up to the value of EUR 50,000. It applies to all payments in euros within the European Economic Area countries (all 27 Member States of the European Union plus Iceland, Lichtenstein and Norway). Regulation 2560/2001 has been the launch pad of the Single Euro Payments Area (SEPA). It has brought down prices and introduced more competition in the markets.

Why does the Commission propose to modify Regulation 2560/2001?

The proposal for a modified Regulation comes in response to the rapid evolution of the EU payments market and is the result of a thorough review process, completed in February 2008.

The emergence of the SEPA and the adoption of the Payment Services Directive (PSD) are changing the payments landscape in Europe. In particular, a popular electronic payment instrument – direct debit – will become available on a cross-border basis as from November 2009. The new proposal aims, therefore, at extending the basic principle of Regulation 2560/2001, i.e. the principle of equality of charges for domestic and cross-border payments in euro, to direct debit payments. The wording of the Regulation, in particular its definitions, needs to be aligned with the PSD in order to create a fully consistent legal framework for all electronic payment instruments in Europe, and avoid any ambiguities which may result from differences between legal texts.

The review process has also identified other areas, where modifications of the Regulation were desirable. For example, the absence of clearly identified national competent authorities and out-of-court redress bodies for disputes related to the Regulation had led to enforcement problems in some Member States. Furthermore, the review highlighted the necessity to provide for a progressive phasing-out of some reporting obligations, which created obstacles to the integration of the payments market.

What are the main changes introduced by the new proposal?

The proposal introduces three main changes to the current text of Regulation 2560/2001 on cross-border payments in euro:

• It extends the principle of equality of charges for cross-border and corresponding domestic payments to cover direct debits;
• It requests Member States to appoint competent authorities and out-of-court redress bodies to deal effectively with complaints and disputes regarding this proposal;
• It phases out, until 1 January 2012, the balance-of-payments statistical reporting obligations imposed on payment service providers.

Who should benefit from these modifications?

The Regulation, as amended, will benefit consumers and companies (who will, in particular, enjoy charge equalisation for a popular payment instrument, i.e. direct debit) as well as banks (who will see their reporting obligations alleviated). It will be another important step towards the full integration of EU payment markets.

Source: European Commission