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Implementation of the payment services directive in Luxembourg

29 December 2009

The Payment Services Act 2009, which transposes the Payment Service Directive into Luxembourg law, aims to gather in a single legal text all provisions relating to payment services and to regulate the provision of payment services by payment service providers and payment systems.

The Luxembourg act dated 10 November 2009 relating to payment services, the activities of e-money institutions, and settlement finality in payment and securities settlement systems (the PS Act 2009), which has transposed Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market (the PSD) into Luxembourg law, came into force on 1 November 2009 and was published in the Luxembourg Official Gazette on 11 November 2009. The Luxembourg financial regulator, the Commission de surveillance du secteur financier (the CSSF), issued circular 09/420 dated 12 November 2009 regarding the entry into force of the PS Act 2009 (the CSSF Circular 09/420 ).

The PS Act 2009 applies to payment services provided by payment service providers in relation to all means of payment, including electronic payments but not payment by bank notes or coins. The PS Act 2009 regulates the provision of payment services by payment service providers (prestataires de services de paiement ), and these include, amongst others (i) credit institutions, subject to the Luxembourg act dated 5 April 1993 on the financial sector, as amended (the Banking Act 1993 ), (ii) e-money institutions (now subject to the PS Act 2009) and (iii) a new category of institutions, payment institutions (établissements de paiement ).

Payment institutions, which may conduct any other commercial activity within the limits of European Union law and Luxembourg law, are subject to the licensing requirements and prudential rules of the PS Act 2009 and to the prudential supervision of the CSSF. Licensing of payment institutions may be passported into another Member State.

Payment services are regulated by Title III of the PS Act 2009, which lays down the transparency of conditions and information requirements for payment services, and by Title IV, which imposes rights and obligations in relation to the provision and use of payment services. The provisions of Title III and Title IV apply to payment service providers established in Luxembourg, when (i) a payment is made in euro or in a currency of a Member State, and (ii) the counterpart payment service provider (with whom a transaction is executed) is, subject to an exception, situated in the European Union (EU) or the European Economic Area (EEA ). Service providers may agree with their payment service users (utilisateurs de services de paiement ) who are not consumers not to apply the provisions of Title III. Only certain provisions of Title IV may be set aside when a payment service user is not a consumer.

The provisions relating to settlement finality in payment and securities settlement systems, formerly governed by the Banking Act 1993, are now governed by the PS Act 2009. The CSSF is no longer the competent authority to supervise such systems, such responsibility now being vested in the Central Bank of Luxembourg (the BCL ).

If you are interested in reading the full article, please read the document entitled: Implementation of the payment services directive in the Grand Duchy of Luxembourg