Circular 1/2015 of the Bank of Spain to Payment Service Providers on Reporting Interchange and Discount Fees

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Circular 1/2015, of March 24, of the Bank of Spain, to payment service providers, regarding information on perceived discount and interchange rates (BOE of March 30).

Royal Decree-Law 8/2014, of July 4, approving urgent measures for growth, competitiveness, and efficiency, in Chapter Three of Title One, has regulated the maximum limits of interchange rates applicable to payment operations carried out, from September 1, 2014, at point-of-sale terminals located in Spain, by means of debit or credit cards (distinct from corporate cards), regardless of the marketing channel used.

This regulation, with the aim of adequately monitoring the application of the new regulation applicable to interchange rates and the general evolution of costs in card payments, provides that payment service providers must inform the Bank of Spain of the discount and interchange rates effectively applied to payment services in card operations, and that this information be published on the Bank of Spain's website.

Subsequently, this royal decree-law was processed as a bill. As a result of this processing, Law 18/2014, of October 15, approving urgent measures for growth, competitiveness, and efficiency, was approved, which was subsequently modified by the final third provision of Law 22/2014, of November 12, regulating venture capital entities, other closed-end collective investment entities, and management companies of closed-end collective investment entities, and modifying Law 35/2003, of November 4, on Collective Investment Institutions (hereinafter, Law 18/2014). This law specifies that the limitation of rates will apply when both the payment service provider of the payer and that of the payee are established in Spain. For this reason, this circular does not apply to entities operating in Spain under the principle of free provision of services.

Article 13 of Law 18/2014 establishes that i) payment service providers must inform the Bank of Spain of the discount and interchange rates effectively applied to payment services in card operations, and that ii) this information will be supplied in the form and with the content and periodicity determined by the Bank of Spain and will be published on the Bank of Spain's website and on that of the payment service provider.

This circular fulfills the mandates received by the Bank of Spain through the aforementioned legal norm regarding the determination of the content and other aspects related to the information and publication obligations of the data cited in the previous paragraph. Regarding the publication of discount and interchange rates, it should be clarified that this circular provides that the Bank of Spain will publish on its website, in an aggregated manner, all information received quarterly from entities, except that relating to discount rates perceived in tripartite payment card systems. The reason justifying this exclusion is to avoid that the publication of these discount rates could allow calculating, even indirectly, the volume of operations of tripartite payment card systems operating in Spain, an aspect that is confidential.

Consequently, in exercise of the powers conferred upon it, the Board of Governors of the Bank of Spain, upon proposal of the Executive Committee and in agreement with the Council of State, has approved this circular, which contains the following provisions:

First Provision.

Object and Scope of Application.

This circular, developing what is provided in Article 13 of Law 18/2014, aims to specify the information obligations of entities acting as payment service providers regarding the discount and interchange rates perceived in payment operations carried out at point-of-sale terminals located in Spain, by means of debit or credit cards, regardless of the marketing channel used, when both the payment service provider of the payer and that of the payee are established in Spain. In the case of operations carried out electronically, to determine whether a service provider is established in Spain, the provisions of Article 2 of Law 34/2002, of July 11, on Information Society Services and Electronic Commerce, shall apply.

The following entities are subject to the provisions of this circular: credit institutions, credit financing establishments, payment institutions, electronic money institutions, and branches in Spain of any of the aforementioned foreign entities (hereinafter, the entities).

Second Provision.

Definitions.

For the purposes of this circular, and in accordance with the definitions contained in Article 10.1 of Law 18/2014 and in Article 2 of Law 16/2009, of November 13, on Payment Services (hereinafter, Law 16/2009), the following shall be understood:

a) "Interchange rate": Any commission or remuneration paid, directly or indirectly, for each operation carried out between the payment service providers of the payer and the payee intervening in a card payment operation [Article 10.1.a) of Law 18/2014]. For these purposes, any commission, remuneration, or net compensation received by a payment card issuer service provider with respect to payment operations or auxiliary activities thereto shall be considered part of the interchange rate.

b) "Discount rate": Any commission or remuneration paid by the payee of the payment operation to their payment service provider for each operation carried out by card, composed of the interchange rate, the processing and payment system commission, and the acquirer's margin [Article 10.1.b) of Law 18/2014].

c) "Debit card": A payment instrument issued by a payment service provider for the purpose of allowing its holder to acquire goods or services from affiliated businesses or establishments, and whose use implies the immediate disposal of the balance existing in the payment account associated with it for subsequent transfer to the payee, as well as prepaid cards that meet the definition collected in Article 1.2 of Law 21/2011, of July 26, on Electronic Money [Article 10.1.c) of Law 18/2014].

d) "Credit card": A payment instrument issued by a payment service provider by which the issuing entity makes a line of credit available to the holder [Article 10.1.d) of Law 18/2014].

e) "Corporate card": Any payment card issued to companies or public sector entities, the use of which is restricted to the professional expenses of their employees, or any card issued to natural persons carrying out an activity on their own behalf, the use of which is restricted to their professional expenses or those of their employees [Article 10.1.e) of Law 18/2014].

f) "Point-of-sale terminal": Device or hardware equipment installed in commercial establishments or businesses, as well as equivalent computer applications, which allow them to accept payment for goods and services by means of a debit or credit card [Article 10.1.f) of Law 18/2014].

g) "Payment card system": A unique set of provisions, practices, rules, or guidelines that supports the functioning, among payment service providers adhering to it, of the payment operation carried out with the cards bearing the flag or brand it supports [Article 10.1.g) of Law 18/2014].

h) "Four-party payment card system": A payment card system in which payments are made from the payment account of a cardholder to the payment account of a payee through the intermediary of the system, composed of the payment service provider of the cardholder (payment card issuer) and the payment service provider of the payee (acquirer) [Article 10.1.h) of Law 18/2014].

i) "Three-party payment card system": A payment card system in which payments are made from a payment account held by the system on behalf of the cardholder to a payment account held by the system on behalf of the payee [Article 10.1.i) of Law 18/2014].

j) "Payer": A natural or legal person holding a payment account who authorizes a payment order from said account or, in the case where there is no payment account, the natural or legal person who issues a payment order (Article 2.7 of Law 16/2009).

k) "Payee": A natural or legal person who is the intended recipient of funds that have been the subject of a payment operation (Article 2.8 of Law 16/2009).

l) "Payment service provider": Public bodies, entities, and companies authorized to provide payment services in Spain or in any other Member State of the European Union, whether or not they avail themselves of the exceptions provided in Article 26 of Directive 2007/64/EC of the European Parliament and of the Council of November 13, 2007, on payment services in the internal market, amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive 97/5/EC, as well as those from third countries, that professionally engage in the provision of payment services (Article 2.9 of Law 16/2009).

Furthermore, for the purposes of this circular, the following shall be understood:

m) "Payment cards": debit or credit cards.

n) "Payee's activity": type of economic activity developed by the payee of the payment operation carried out by means of a payment card.

Third Provision.

Information to the Bank of Spain.

1. Entities acting as payment service providers in a tripartite or four-party payment card system must send quarterly to the Bank of Spain the following statements with information on interchange and discount rates (hereinafter, TID statements), in the formats included in the annex of this circular, in accordance with the following sections:

2. The TID statements to be sent depending on the activity carried out are:

a) Entities acting as payment service provider of the payer will provide information in TID statements 1 regarding interchange rates perceived in card payment operations carried out in Spain where the payment service provider of the payee is also established in Spain.

b) Entities acting as payment service provider of the payee will provide information in TID statements 2 regarding discount rates perceived in card payment operations carried out in Spain where the payment service provider of the payer is also established in Spain.

TID statements will not include information on operations carried out with cards that can only be used on a limited network, designed to meet specific needs through payment instruments whose use is limited, either because they allow their holder to acquire goods or services only at the issuer's premises, within a limited network of providers directly linked by a commercial agreement with a professional issuer, or because they can only be used to acquire a limited range of goods or services.

TID statements must be sent no later than the 15th day of the second month following the natural quarter to which the data refer (unless it is a holiday in Madrid, in which case they may be sent until the first subsequent business day in that locality).

TID statements 2 must be sent even when the payment service provider of the payer and the payee is the same entity.

3. Entities that, according to what is stated in the First Provision, may act as payment service providers must communicate to the Bank of Spain (Financial Information and CIR Department), before one month has elapsed since they begin their activities – or since the entry into force of this circular if they are already operating on that date – whether they are carrying out, or not, operations that must be subject to declaration as provided in section 1 of this provision.

When an entity that has communicated that it does not carry out operations subject to declaration begins to issue or acquire payment cards from a tripartite or four-party system, it must communicate this circumstance to the Bank of Spain within one month from the day following the issuance or acquisition of payment cards. In this case, the first declaration of TID statements must refer to the data corresponding to the quarter in which it begins to operate and must be made in the form and deadlines indicated in sections 1 and 2 of this provision.

In the communications made to the Bank of Spain in accordance with the provisions in the previous paragraphs, entities will indicate whether they manage payment cards within the framework of a four-party or tripartite system and whether they act as issuer, as acquirer, or exercising both functions.

4. The submission to the Bank of Spain of the TID statements referred to in this provision must be made via telematic transmission, in accordance with the technical specifications communicated by the Bank of Spain to entities for this purpose.

Fourth Provision.

Information to be published by the Bank of Spain on its website.

1. The Bank of Spain will publish on its website individually (identifying the entity acting as payment service provider) all information received quarterly in the TID statement formats, except that relating to the number and amount of payment operations carried out in each natural quarter, as well as the amount of rates perceived.

2. Additionally, the Bank of Spain will publish on its website, in an aggregated manner, all information received quarterly from entities in TID statements, except that relating to discount rates perceived in tripartite payment card systems. To calculate the maximum rate and the weighted average rate in aggregated statements, the following procedure will be followed:

– "Maximum rate": For each of the aggregated TID statements to be published, it will be the rate declared by the payment service provider that has reported the highest percentage for the natural quarter to which the data refer.

– "Weighted average rate": For each of the aggregated TID statements to be published, it will be the result of weighting the data of the average rates communicated by each payment service provider by the amount of payment orders communicated for the natural quarter to which the data refer.

Fifth Provision.

Information to be published by payment service providers on their website.

Entities will publish, on their website, in the format of the TID statements established in the annex of this circular, all information collected in said statements regarding operations carried out in each natural quarter for different card profiles and payee activity, except that relating to the number and amount of payment operations, as well as the amount of rates perceived. This information will be updated quarterly at the same time it is sent to the Bank of Spain in accordance with what is provided in the Third Provision.

Single Transitional Provision. First statements to be sent to the Bank of Spain.

1. The first TID statements to be declared to the Bank of Spain will be those corresponding to the third natural quarter of 2014 and will collect, exclusively, data referring to operations carried out between September 1 and September 30, 2014.

2. The statements relating to the third and fourth natural quarters of 2014 and the first natural quarter of 2015 may be sent, exceptionally, on the last business day of May 2015.

Single Final Provision. Entry into force.

This circular will enter into force the day following its publication in the "Official State Bulletin".

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ANNEX-C-1-2016.PDF (164 KB)

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TID statements replaced by Circular 1/2016, of January 29, single regulation.

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