Has ‘Lex Warzywniak’ impeded the provision of payment services?

The term ‘Lex Warzywniak’ is the colloquial name of the Act of 16 August 2023 amending certain acts in connection with ensuring the development of the financial market and the protection of investors in that market, which amended dozens of legal acts in the financial market area. The amendment covered, among others, the Payment Services Act of 19 October 2011 (the ‘Act’). In this article, we will take a closer look at selected amendments to the Act from the perspective of entities providing or wishing to provide payment services. The lion's share of the ‘Vegetable’ provisions amending the Act came into force on 29 September 2023, but some came into force at the beginning of 2024. In addition, a regulation clarifying reporting to the NBP under the Act came into force at the beginning of the year.

Impeded operation of a small payment institution

Activities as an MIP can be carried out subject to a statutory limit, which dictates that the average total amount of payment transactions over the preceding 12 months carried out by the MIP, including by the agents through which it provides payment services, must not exceed an amount equivalent to €1,500,000 per month. If the aforementioned threshold is exceeded, the MIP should make a notification to the FSA, specifying the value of the excess, and adjust the size of its business to the statutory threshold, or alternatively apply for FSA authorisation to provide payment services as a PAC. The latter option, i.e. de facto expansion of the scope of the MIP's activities pending authorisation by the KIP, has so far been the most common path taken by MIPs.

As of 1 January 2024, a significant restriction on a MIP's application for a KNF authorisation to provide payment services as a KIP came into force. This is because an MIP can no longer submit such an application during the period in which the average total amount of payment transactions exceeds the statutory threshold. Also, until the proceedings for the issuance of an authorisation to operate as a PIE are concluded, the average total amount of transactions may not exceed the amount reported to the FSA in the MIP's notification of exceeding the limit. In practice, therefore, this undoubtedly reduces the freedom and attractiveness of providing payment services as an MIP, as even applying for KIP status can no longer provide grounds for exceeding the limits imposed by the Act.

The other changes to the Act described in the article came into force on 29 September 2023. One of them is the expansion of the documents and information to be attached by an entrepreneur applying to the FSA for entry into the register of small payment institutions (‘MIP’). In this respect, we are dealing with the approximation of the legal situation of an MIP with the status of a national payment institution (‘NIP’).

MIP also faces a new obligation to hold a special account with a payment account provider. Through it, MIP is to transfer funds received from the payer. If enforcement proceedings are initiated against the MIP, the funds in the above payment account are free from seizure on the basis of a judicial or administrative enforcement order. The solution coincides with the requirement for KIPs and is aimed at safeguarding the funds entrusted to MIPs by users by separating them from the funds of the MIPs held under another title and risk related to the other activities of this trader. A similar requirement for a supervised entity is provided for by, for example, the current Law on Trading in Financial Instruments.

Easier amendment of the authorisation of a national payment institution

‘Lex Warzywniak’ included a simplification of the procedure for amending the authorisation of payment services as a NIP, as the Legislator abandoned the appropriate application of a number of requirements existing at the stage of the application for the authorisation of payment services by a NIP. Up to now, the extension of the scope of payment services provided by a KIP required a re-examination of the proceedings including, inter alia, an examination of issues that have already been previously verified and are subject to ongoing supervision by the FSA. At the same time, however, as a result of the amendment, the authority will, as of 29 September 2023, refuse to issue an amendment to a KIP's authorisation if its intended activities would jeopardise its financial security or violate the law or the interests of users.

New reporting obligations for entrepreneurs

The legislator has imposed new reporting obligations to the NBP on a large group of entities. These are: the owner or holder of an ATM or pay-in machine that is not the issuer of payment instruments, the provider that maintains a payment account, the provider that provides the service of initiating a payment transaction and the provider that provides the service of accessing account information. The provision of information to the NBP also applies to this group if they provide services in the territory of the Republic of Poland as part of a cross-border activity, through a branch or via an agent. Reporting obligations have also been extended to a provider that only provides an account information access service. The extension of the reporting obligations is a consequence of the entry into force of the European Central Bank (EU) 2020 Regulation of 1 December 2020 amending the European Central Bank (EU) Regulation 1409/2013 on payment statistics (ECB/2013/43). In addition, as in the case of new reporting entities, payment instrument issuers and electronic money issuers also report when they provide payment services in the territory of the Republic of Poland as part of cross-border activities, through a branch or via an agent.

The scope of the information provided is specified in the Ordinance of the Minister of Finance of 22 December 2023 on the provision of information to the National Bank of Poland by payment service providers and other obliged entities, which entered into force on 1 January 2024. The provisions of the Ordinance apply for the first time to the information provided for the first quarter of 2024 and the first half of 2024.

With the Variation, the frequency of providers' reporting of payment services fraud data to the FSA was also increased from annual to semi-annual periods. The change was carried out due to a guideline from the European Banking Authority (‘EBA’), which provides for the submission of the aforementioned data every six months.

In addition, as of 29 September 2023, the provision of payment services requires taking into account the guidelines issued by the EBA on security control and risk mitigation measures in the area of payment services, which are specified in Article 64a(3a) of the Act. These EBA guidelines must be taken into account when applying such measures. The change is not significant, as until now it was the Minister of Finance who was to take into account the EBA guidelines on the above measures in the regulation he issued.

Changes to the payment initiation service

Let us further analyse the changes to the Payment Initiation Service (‘PIS’) provided by the so-called PISP (Payment Initiation Service Provider, in the Act ‘payment transaction initiation service provider’). Popular providers of this service are, for example, PayU or Przelewy24. The execution of this type of service only takes place online when the payer, i.e. the entity submitting the payment order, makes a purchase in an online shop and wishes to pay the payee, i.e. the entity that accepts the payment, for it.

With the amendment, the ASPSP (Account Servicing Payment Service Provider), i.e. the account provider that executes the payment transaction initiated via the PISP, is obliged to apply objective, proportionate and non-discriminatory rules to the payer, the payee, the PISP and the payee's provider in relation to payment orders submitted directly by the payer, in particular with regard to the execution time of the payment order or the amount of fees charged. The regulation aims to limit the practice of indirectly introducing a charge for PIS services by the ASPSP to the payee's provider, which provider has an account with this ASPSP.

Stricter supervision of payment institutions

In the area of supervision of payment institutions, a number of modifications have also been made. First and foremost, the ‘Vegetable’ has provided for the introduction of stricter administrative sanctions by increasing the fines imposed on individuals. In addition, the amended Act includes the possibility of imposing penalties on persons who are members of the statutory bodies directly responsible for supervising the area in which irregularities have been found, and not, as before, only on persons managing entities that are subject to the Act. The change was justified by the fact that the cause of irregularities may be a lack of supervision by members of statutory bodies.

The provision of Article 116a was also introduced into the Act, which stipulates that a fine may also be imposed after the termination of the function of the manager directly responsible for the irregularities found, or after the termination of the membership relationship in the statutory body directly responsible for the supervision of the area in which the irregularities were found, if the infringement took place while the manager held this function or the membership of this body. The legislator wanted to prevent former members of the bodies resigning or being dismissed from their position from avoiding responsibility for the violations found. Moreover, at present, an administrative fine cannot be imposed if five years have elapsed from the date of the breach of the law or the occurrence of the consequences of the breach of the law, which means that the statute of limitations under the Code of Administrative Procedure applies. The previous regulation contained in the Act included a separate, much shorter statute of limitations (lapse of six months from the time the FSA became aware of the circumstances that could constitute grounds for imposing a fine or if more than two years have elapsed since the act was committed).

Analogous solutions in the sphere of sanctions, concerning the possibility of punishing former members of the authorities and with regard to the statute of limitations, had already been provided for in other regulations governing the financial market, including the Act on public offerings, the Act on insurance and reinsurance activity and in the Act on investment funds and management of alternative investment funds.

The new provisions are also a clarification of the scope of the NIP's liability set out in Section 105(1) of the Act by listing the provisions whose violation entails the liability of this institution. Until now, the provision used a general premise of violation of the law. The amendment contributes to increasing the level of legal certainty and protection of the rights of the addressees of this norm.

The legislator has supplemented the catalogue of prerequisites for the issuance of a decision by the FSA stating the expiry of an authorisation to conduct business as a PIE with the deletion of the PIE from the register of entrepreneurs. This means that the authorisation to operate as a KIP will expire not only if the KIP has not commenced payment services activities within 12 months from the date of issuance of the authorisation or has not conducted payment services activities for more than 6 consecutive months, but also if the KIP has been deleted from the register of entrepreneurs as a result of liquidation, merger or other event.

Changes to acquiring and account information service

In the meaning of the Act, acquiring is a payment service consisting of enabling the acceptance of payment instruments and the execution of payment transactions initiated with a payment instrument of the payer by or through a merchant, consisting in particular of the handling of authorisation, the transmission to the issuer of the payment instrument or payment systems of payment orders of the payer or the merchant, with a view to remitting to the merchant the funds due to him, excluding the activities of clearing and settlement of these transactions within a payment system within the meaning of the Act on Settlement Finality.

The authorisation procedure for the provision of payment services as a KIP, which includes the provision of acquiring, has become simpler. This is due to the fact that the issuance of a permit covering the provision of this type of service by the FSA is no longer associated with the obligation of prior consultation with the President of the NBP. As a reminder, until now the President of the NBP had one month from the date of submission of the application to issue such an opinion. The amendment therefore includes the removal of the obligation for an applicant wishing to provide an acquiring service as a PAC to submit an application for a permit to the NBP. The provision obliging the FSA to notify the President of the NBP of subsequent changes concerning the information and documents attached to the application for this authorisation has also been derogated. The effect of this change is to unify the KIP authorisation process for all payment services and to make the entire acquiring services market (provided by both KIPs and MIPs) supervised by a single supervisory authority, i.e. the FSA.

A new requirement will be encountered in the Act by an applicant that intends to provide, as a KIP, an Account Information Service (‘AIS’), i.e. a service to provide payment account holders with consolidated information about their accounts. It has been obliged under the ‘Variant’ to have security for user claims, i.e. to take out professional indemnity insurance or to have a bank guarantee, an insurance guarantee or other security for user claims. The above-mentioned new requirement for an AIS-providing NIP puts it on an equal footing with providers that only provide an account information service (AISP), as these entities were previously required to hold user claims security.

Extensive amendment of the Act

The amendment to the Act also includes the introduction of: 1) a definition of the service of ‘issuing a payment instrument’, which has so far been one of the payment services in the Act, but its definition has not been established, 2) amendments to the definition of a payment instrument to take into account the individual nature of such an instrument, 3) an extension of the definition of ‘parent entity’ to take into account the situation, in which the direct or indirect partners or shareholders of a NIP or NMI are or become natural persons, 4) adjustments to the transposition of the PSD2 Directive with regard to the exemption from the application of the Act, 5) the possibility of electronic delivery within the meaning of the Act of 18 November 2020 on electronic delivery with regard to documents relating to control and other supervisory activities.

The amendments to the Act carried out under the ‘Lex Warzywniak’ are so extensive and comprehensive that it would be advisable to lean into the changes described above in more detail and familiarise oneself with the remaining modifications. This should also be done with the assistance of experts.