On 1 August 2018, the Financial Conduct Authority (FCA) published Consultation Paper 18/21 (CP) proposing the application of existing rules and guidance on general standards for business conduct and communication to the Payment Services and Electronic Money (E-Money) sectors and suggesting new rules for communications concerning currency conversion.
The objectives
The purpose of the proposals is to address two set of issues:
- Firstly, the FCA has identified inconsistencies in terms of the provision of Payment Services and issuance of E-Money. In particular, while both are FCA regulated activities under the Payment Services Regulations 2017 (PSRs) and the Electronic Money Regulations 2011 (EMRs), different regulatory requirements are currently applicable to different Payment Service Providers (PSPs) and E-Money issuers. This is due to the fact that within the same sector, some entities fall under the regulatory ambit of the FSMA, while others do not. Consequently, there might be a mismatch of standards of behaviour and treatment of customers among different firms in the market.
- Secondly, the FCA is concerned that communication, advertising and marketing of Payment Services and E-Money services to customers by certain firms might be misleading, to the detriment of consumers.
In light of the above, the proposals in the CP seek to clarify the FCA’s expectations regarding the standards of behaviour for firms, treatment of clients and communication practices. The suggested rules and guidance aim to serve the broader objectives of promoting fair competition and strengthening consumer protection in the market.
The proposals
More specifically, the FCA proposes the following:
- to extend the application of the Principles for Businesses (Principles) to the activities of the provision of Payment Services, the issuance of E-Money and also to Payment Institutions (PIs), Electronic Money Institutions (EMIs) and Registered Account Information Service Providers (RAISPs). The Principles set out the standards the FCA expects to be met in conducting business, which indicatively touch upon integrity, skill, care and diligence, management and control, financial prudence, market conduct, communication with clients and conflicts of interest management;
- to extend the communication rules and guidance set out in the FCA Banking Conduct of Business Sourcebook (BCOBS) on communication with retail banking customers to communication with payment services and e-money customers and PIs, EMIs and RAISPs. Thus, any communication should be fair, clear and not misleading; and
- to introduce rules and guidance on the communication and marketing of currency exchange transfer services for Payment Services and E-Money involving a currency conversion. In particular, any comparison with other providers should be meaningful, presented in a fair and balanced way and be capable of substantiation.
The FCA proposals are open for consultation with stakeholders until 1 November 2018.
and then 