The definition of a payment account under the PARs

Payment Service Providers (PSPs) with permission to provide payment accounts may have or be about to receive a communication from the Financial Conduct Authority (FCA). This requests information about the payment accounts they offer, falling under the definition contained within the Payment Account Regulations (PARs). This communication is headed 'FCA REP014 Payment Accounts Report', which may cause some confusion as there is no reference to a REP014 return in the FCA Approach Document, FCA Handbook or on the FCA website.

At the end of this article we show the wording of the FCA communication, but before looking at that let's consider what you are being asked and what you need to do.

What is the definition of a payment account under the PARs

The definition of a payment account for the purposes of the PARs is:

• An account held in the name of one or more consumers through which consumers are able to place funds, withdraw cash and execute and receive payment transactions to and from third parties, including the execution of credit transfers
• It does not include any of the following types of account provided that the account is not used for day-to-day payment transactions: savings accounts; credit card accounts where funds are usually paid in for the sole purpose of repaying a credit card debt; current account mortgages or e-money accounts.
• So, an e-money account would only be included if it were being used as a current account for day to day payment transactions. 

You will note that this refers to an account 'held in the name of one or more consumers'. Consumer is defined in Regulation 2 of the PARs as 'any natural person who is acting for purposes which are outside that person’s trade, business, craft or profession'. A 'natural person' is a living individual, rather than a company.

Recent ECJ review

The European Court of Justice (ECJ) recently looked at the definition of accounts in the context of the Payment Accounts Directive (PAD) and identified that a defining characteristic of a 'payment account' under PAD is the ability to execute payment transactions (including credit transfers) to a third party and receive such transactions carried out by a third party. 

This led to the finding that the correct interpretation of the Payment Services Directive is that a savings account is not a 'payment account' when it allows for sums deposited without notice and from which payment and withdrawal transactions may be made solely by way of a current account.

Payment institutions are not able to offer ’savings accounts’ per se, as this would be a breach of regulation 33 in the Payment Services Regulations (PSRs), which says “Any payment account held by an authorised payment institution or a small payment institution must be used only in relation to payment transactions". But this can be read as meaning that a significant restriction on where the funds are to be sent (e.g. only to a specific account) would be sufficient to mean that it was not a payment account.

Action you may need to take

Payment institutions with payment account permissions, therefore, need to consider whether their accounts might fall within the PSRs scope and require reporting under REP014.

You will need to report if:

1. You offer accounts to consumers AND
2. The accounts allow customers to deposit, withdraw cash and make transfers to third parties. If the payments that can be made are significantly limited (e.g. can only be made to the customer's own bank account) and/or if there is no cash withdrawal facility, this may indicate that the account is not a payment account for these purposes AND/OR
3. You are an electronic money institution and the accounts you offer to consumers are used for day to day payment transactions (i.e. as a current account alternative)

 If you have any questions, please do not hesitate to contact us.

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What the FCA communication says

“The Payment Accounts Regulations (PARs) require us to gather and submit to HM Treasury certain data on the switching of these types of payment account and the provision of "payment accounts with basic features" (basic bank accounts). Submissions covering the reporting period 1 March 2018 to 29 February 2020 are now due. In normal circumstances, we would expect to receive these within two months of the end of the relevant reporting period (in this instance, by 30 April 2020). However, for this particular reporting period, we have extended the deadline to 30 June 2020.

Please submit the required information via the link below if you offer payment accounts within the meaning of the PARs.  Before completing the form, you should familiarise yourself with the Notes for Completion which contain guidance on what information to provide and which can be found at https://www.handbook.fca.org.uk/handbook/SUP/16/Annex41B.html.

The first question in the form asks if you are a provider of payment accounts that fall within the definition in the PARs. If you have not provided these type of payment accounts in this reporting period you are not required to complete the form, but it would be helpful if you could answer question one to confirm to us that you have not offered payment accounts of this type in this reporting period.

Payment Services Providers must determine themselves whether they are providers of payment accounts that fall within the definition in the PARs. Note that this definition is narrower than that in the Payment Services Regulations 2017 and so when considering whether you offer payment accounts within the meaning of the PARs, you should refer to our Guidance on the definition of a payment account in the PARs which can be found at https://www.fca.org.uk/publication/finalised-guidance/fg16-6.pdf.

The questions on Payment Accounts with Basic Features are only relevant for Credit Institutions, and only relate to the type of 'basic bank account' that is described in the PARs. You should refer to the Notes for Completion before answering these questions. 

Please note that this information is required every two years and it is your responsibility to provide this information to us.”