On 6 October 2016 the Payment Systems Regulator (PSR) published its final guidance on how it will monitor and enforce the provisions of the Interchange Fee Regulation (IFR).
Background: the coming into force of the IFR
The IFR provisions came into force in two broad phases. The ‘Phase 1’ provisions (relating to the interchange fee caps) were in force by 9 December 2015. The PSR published final guidance on these provisions in March 2016. We considered the guidance and the PSRs determination of three party card schemes in our Spring update.
The Phase 2 conduct of business rules came into force on 9 June 2016. The PSR consulted on its Phase 2 guidance earlier this year and has now published its final ‘final guidance’, consolidating its approach to both Phase 1 and Phase 2 provisions. In addition to the guidance itself, the PSR also published a policy statement summarising the main points arising from the consultation and the areas where respondents sought further clarification.
The IFR is directly applicable in the UK and it was clear that this Regulation would, in many cases, require affected parties to amend their business practices in order to achieve compliance. However, on a ‘cold’ reading, some provisions lacked clarity as to what was operationally required. In this respect, the Guidance provides welcome insights into how the PSR interprets the provisions of the IFR and clarifies its expectations of the parties the IFR applies to.
It is worth noting that the UK is amongst the first of the EU Member States to clearly set out how the IFR is expected to apply. We look forward to seeing whether an approach similar to that set out by the PSR is adopted by regulators in other jurisdictions.
The Guidance confirms how the PSR will gather information from the UK card schemes, acquirers and issuers so that it can monitor and enforce the IFR in the UK. As an initial step, the PSR will require affected parties (for example issuers, acquirers and schemes) to file compliance reports showing how compliance has been achieved with respect to Articles 6 – 12 as applicable.
Acquirers in particular should note Articles 9 (unblended merchant service fees) and 12 (transaction information requirements), as these apply directly to acquirers. The PSR has stated in the guidance that it expects each acquirer affected by these Articles to provide an initial compliance report confirming that the acquirer is compliant and describing what it has done to become compliant. The PSR will discuss the “required content, timing and arrangements
for submission of this initial compliance report separately with each acquirer“. The PSR has not provided any information beyond this about timings etc. The PSR has confirmed that it will share these reports with the FCA where appropriate, in recognition of the FCA’s role in monitoring compliance with Articles 9 and 12.