HM Treasury

Financial services

Payments

12 July 2012

The Treasury is responsible for legislation relating to payment systems and services.This page sets out the principal areas of current activity in the UK and the EU.

Domestic UK legislation

1. Enhancing the regulatory framework for Payments Systems and services

The Parliamentary Treasury Select Committee, in its report The Future of Cheques on 24 August 20111, called on HM Treasury to legislate to bring the Payments Council formally within the financial regulation system, to be overseen by the regulatory body the Treasury identifies as being most appropriate.

The Government accepts the case made by the Treasury Select Committee for bringing the Payments Council within the scope of financial regulation. The Government believes this may necessitate going beyond the Committee’s recommendation to include the relationship between the Payments Council, its members and inter-bank payment systems.

The Government is developing a number of options for potential reforms. The Treasury will publish a consultation on the options, including options for creating a new regulatory structure for the Payments Council and the inter-bank payments regime, taking into account the need to preserve the stability and integrity of payment systems; maintain open competition; promote innovation; and reflect the needs of end users, as well as the needs of payment service providers. The consultation will take place during 2012.

2. The future of cheques

The Payments Council announced on 12 July 2011 that cheques will continue for as long as customers need them. A previously announced target for closing the cheque clearing system by 2018 has been cancelled. The withdrawal of cheques will only occur if the Government is satisfied that the needs of customers can be fully met through alternative methods of payment.

3. Card surcharges

The Government announced on 24 December 2011 that it will take action to tackle excessive card surcharges that are opaque, misleading and prevent consumers getting a good deal. The Department for Business, Innovation and Skills will consult early in 2012 on how to ban excessive surcharges on all forms of payment.

4. Inter-bank payments

Part 5 of Banking Act 2009 - statutory oversight of inter-bank payment systems

The Banking Act 2009 establishes a new regulatory framework for the oversight of recognised inter-bank payment systems. A list of recognised systems is set out below.
Part V of the Banking Act 2009 confers powers on the Treasury to designate, by order, a system as a “recognised system”, where the Treasury is satisfied that any deficiencies in the design of the system or disruption of its operation would be likely to:

The Act also confers powers on the Bank of England (the Bank) in respect of recognised systems. The Treasury, together with the Bank and the Financial Conduct Authority, keep payment systems that operate in the UK under review in order to decide whether they should become recognised. A guide to the recognition process is set out below.

Related links

Recognised systems and Recognition Orders:

The Bank’s website carries further  information on the oversight framework and the Bank’s annual oversight reports.

European legislation

Payment Services Directive2: The PSD provides the legal basis for an EU-wide single market for payments. Its aim is to enhance competition within the payment service market by enabling fairer access and to ensure that the level of protection for customers is harmonised across the European Economic Area. The Directive has been implemented in the UK through the Payment Services Regulations 2009.

The main implications of this legislation are the standardising of information requirements, the time payments will take and rights and regulations of those involved in a payment. From 1 January 2012, sterling and euro payments that are within the scope of this new legislation must be processed by the end of the next business day, this means is that cross-border payments within Europe will operate as easily and efficiently as national payments.

Electronic Money Directive3:  The latest e-money Directive updates existing e-money regulation to take into account advances in technology and make it easier for non-banking players to enter the market, such as mobile phone network providers and online payment services. It also introduced new conduct and refund rules, to enhance consumer protection and make e-money products more attractive.  The Directive has been implemented in the UK on 30 April 2011 through the Electronic Money Regulations 2011.




Single Euro Payments Area (SEPA)

SEPA is the Euro economic area in which individuals and businesses can make and receive cash, card and electronic payments in euros simply, cheaply and efficiently, regardless of their location. SEPA is seeking to creation an integrated euro payments market.


As part of this drive to create an integrated payments market, the European Commission established the ‘Regulation (EU) No 260/2012 of the European Parliament and of the Council of 14 March 2012 establishing technical and business requirements for credit transfers and direct debits in euro.’ The Regulation establishes common technical requirements for credit transfers and direct debits in Euros. The Regulation mandates a common international standard for electronic messages used by payment service providers when handling payments in Euros. Every bank handling credit transfers and direct debits in Euros must be reachable in this way. The regulation text can be found in the link below:

Useful links


1 Eighteenth Report of Session 2010-11. HC1147 
2 Directive 2007/64/EC
3 Directive 2009/10/EC





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