Payments and Funds Transfer
This chapter deals with the making and collection of payments through the financial system. There are a number of different payment and clearance mechanisms. Different mechanisms or systems operate in relation to the various means of payment. The payments may be by cheque, direct transfer, ATM, standing order, direct debit, debit card credit card or through another means of funds transfer.
A payment will involve an instruction by or on behalf of the payer to its credit institution to make payment to the payee or his account at his credit institution. The instruction may be in writing or in electronic form. There may be a collection of the payment by way of the presentation of a cheque. Alternatively, there may be a direct transfer of funds from the payer’s account at one institution to the payee’s account at another institution. The payer may be the payee.
A number of companies in Ireland operate various payment systems. The payment systems are regulated under common EU wide Regulations. The payment systems process, confirm and settle payments. The payment or clearing systems provide a means of transferring instructions and settling accounts.
Payment System Operators
The Irish Payment Clearing Company Limited (“IPCC”) comprises eight member banks. It is responsible for the clearing mechanism between banks and enables paper debits to be exchanged within the State. It provides and updates the rules and standards for the system.
The Irish Retail Electronic Payment Clearing Company (“IREPCC”) is responsible for payment and clearance of electronic items between banks, financial institutions and certain other approved originators. The system enables credit and debits to be originated and paid to and from each bank and its branches in the State. The IREPCC applies and develops the rules for the administration of the electronic clearance system. It ceased operations in 2014 with the migration to SEPA.
Laser Card Services Ltd was established by the main financial institutions to maintain and operate the debit card payment system. The company controls the marketing administration, product development and strategic elements of the scheme. IPSO Card Services Limited was established to examine security and fraud affecting card payments as well as monitoring legal and regulatory changes. Laser Card Systems Limited ceased operations in 2014 with the migration to SEPA.
Standard electronic payments provide clearance for next day value for interbank transfers, provided that the payment is received ahead of the cut off time. Most banks offer same-day value to account holders in the same bank. Funds will not be transferred unless sufficient funds are in place.
Direct Debit System
The direct debit scheme in Ireland is managed by the IREPCC. The scheme involves the originator, sponsoring banks and the paying bank. It has over 4,000 originators who may collect direct debits. The IREPCC seeks to ensure that the scheme offers a high standard of efficiency, trust and integrity. It issues originator identification numbers and maintains and updates databases. It resolves complaints and disputes. It provides a dispute resolutions forum for disputes between banks or originators arising from alleged non-compliance and breach of the scheme rules.
An originator is a body authorised to collect direct debits. It is usually a utility company or other large scale institution. The direct debit allows collection of variable amounts from the account of the payer. Once the relevant instruction is given to the originator, the payer takes no further action. The originator informs the payer in advance, of the amount and date of collection. The minimum notice is 14 days unless a shorter period is agreed upon.
The originator forwards the direct debit electronically to the payer’s bank for collection from his account. The payer can amend the direct debit at any time by informing his bank. It should also inform the originator. Once cancelled, no further collections are permitted. Originators must ensure correct advance notice is given to their customers. They must ensure the reference field is populated with the relevant information and that the correct transaction codes are provided.
Paying Bank with Direct Debits
Paying banks must only pay debits in accordance with the relevant instruction. They must ensure disputed amounts are not debited, that all amendments and cancellations are actioned promptly and that the scheme rules are adhered to. They must ensure that unauthorised and cancelled direct debits are intercepted and returned immediately on presentation. They must assist customers in resolving disputes. They must inform the sponsoring body if the originator is not adhering to the rules.
The payer is entitled to prompt repayment if an unauthorised direct debit is charged. The payer must notify the bank without undue delay on becoming aware of such a charge and in any event within 13 months. The payer is entitled to request a refund of variable direct debit exceeding the amount reasonably expected, subject to requesting the bank, within a period of eight weeks from the date of such debiting. The payer may instruct it bank to refuse a direct payment by giving notice and cancelling the direct debit in good time.
Paying banks must refund customers for indemnity claims and present the indemnity to the originator. They must settle indemnity claims within 10 days
The European Payment Services Directive provides a common legal framework for payments throughout the EU. It provides for harmonised consumer protection rules and minimum standards. The rights and obligations of payment service providers as regards each other and customers and banks are stipulated. The information to be provided to customers is specified. Electronic payments are standardised across Europe. The Single Euro Payment Area offers credit transfers within the Euro area.
Payment service providers in Ireland are regulated by the Central Bank under a common EU wide basis. Payment service providers must have minimum capital and are subject to detailed authorisation requirements. The framework contract and its rules must be approved. Parties to a framework contract may provide that particular parts do not apply to the transaction if the payment service is not used by a consumer.
Before a payment service user is bound by a framework contract, certain information must be given to him or her in durable form. This includes a statement of the key terms and conditions. The contract may be terminated provided that a period of not more than a month’s notice is given.
Before providing a payment service, certain information must be provided in advance to the user. This includes a special unique identifier, maximum execution time, charges payable, statement of breakdown, currency and the actual exchange rate. After a payment order is received, the provider must make information available to the payer including a reference to identify the transaction, the amount of charges, exchange rate and date of receipt.
Certain information is required before the execution of individual payment transactions, both to the payer and to the payee. There are exclusions for low-value payments. Information must be given in an easily accessible manner, in understandable words and in a clear and comprehensible form. All charges are to be disclosed at the point of execution. Charges should be agreed upon with the service provider in line with the service provider’s actual costs.