Harmonising the regulatory regime for cross-border payment services

The European commission has proposed a new legislation harmonising the payment system in the European Union. The proposed Directive on Payment Services, also known as the New Legal Framework will replace Directive 97/5/EC, Recommendations 87/598/EEC, 88/590/EC, 97/489/EC, Article 8 of Directive 97/7/EC and Article 8 of Directive 2002/65/EC. The proposed directive is intended to help simplify existing EU regulation since it would harmonise in a codified way the core legislation on payment services. It is intended to boost consumer confidence in the modern payment infrastructures, such as electronic payments, and to foster trade. While the proposed Directive has been received positively by the business communities, the Directive has also been assailed as falling short of consumer expectations. The proposed Directive has been further weakened by the introduction of new amendments that reduced the payment provider's obligation by the European Parliament, after intense lobbying from the powerful banking institutions. The European Council is to decide on the European Parliament's propositions within the co-decision procedure. The proposed Directive is expected to sail through with little opposition - and a compromise formula reached. This paper analyses the proposed Payment Services Directive.