On the 21st of March, the ECJ published its judgement in the Tecnoservice case (C-245/18) on the Payment Services Directive (PSD1), which can have interesting repercussions for everyday payments. The case revolved around a payment made to a wrong payee, an occasion feared by most consumers when making a payment in a bank, even though it is not as common. Should the bank warn you about such a mistake, if it is clear that the name of the payee and the account number do not match, and would it be hold liable if it does not but simply proceeds with a transaction?
A debtor of Tecnoservice, an Italian company in liquidation, made an order for payment via a bank transfer in a branch of Poste Italiane. The transfer order stated the name of the account holder, as well as the international bank account number (‘IBAN’).
The transfer was made to the IBAN number provided, which, however, did not correspond with Tecnoservice, meaning the payment went to another account. Tecnoservice proceeded to bring an action against Poste Italiane for failing to check whether the IBAN provided corresponded to the account holder's name. Poste Italiane argued they transferred to the IBAN provided and were not required to conduct any additional checks.
Articles 74 and 75 of Directive 2007/64, which were in force at the time of the dispute (now replaced by Directive 2015/2366), regulate such errors.
A debtor of Tecnoservice, an Italian company in liquidation, made an order for payment via a bank transfer in a branch of Poste Italiane. The transfer order stated the name of the account holder, as well as the international bank account number (‘IBAN’).
The transfer was made to the IBAN number provided, which, however, did not correspond with Tecnoservice, meaning the payment went to another account. Tecnoservice proceeded to bring an action against Poste Italiane for failing to check whether the IBAN provided corresponded to the account holder's name. Poste Italiane argued they transferred to the IBAN provided and were not required to conduct any additional checks.
Articles 74 and 75 of Directive 2007/64, which were in force at the time of the dispute (now replaced by Directive 2015/2366), regulate such errors.
Article 74 of Directive 2007/64, entitled ‘Incorrect unique identifiers’, provides:
‘1. If
a payment order is executed in accordance with the unique identifier,
the payment order shall be deemed to have been executed correctly with
regard to the payee specified by the unique identifier.
2. If
the unique identifier provided by the payment service user is
incorrect, the payment service provider shall not be liable under
Article 75 for non-execution or defective execution of the payment
transaction.
However, the payer’s payment
service provider shall make reasonable efforts to recover the funds
involved in the payment transaction.
3. If
the payment service user provides information additional to that
specified in Articles 37(1)(a) or 42(2)(b),he payment service provider
shall be liable only for the execution of payment transactions in
accordance with the unique identifier provided by the payment service
user.’
Article 75
of the directive, entitled ‘Non-execution or defective execution’,
provides, in essence, in paragraphs 1 and 2, that the liability
established by those paragraphs is ‘without prejudice to ...
Article 74(2) and (3)’ of the directive.
The referring court asked whether articles 74 and 75 must be interpreted as being
applicable only to the payment service provider of the person who
ordered the payment, or as being applicable also to the payee’s payment
service provider?’
As the main question of the referring court related to the interpretation of art. 74(2), namely the case where the unique identifier provided (IBAN) is incorrect, the Court focused on that provision. According to the Court, the use of the term 'payment service provider' in that article should include both providers involved (payer's and payee's) as no other distinction is being made (para. 25). This means the limitation of liability applies to both.
Conversely, the second subparagraph of art. 74(2) states that it is only the payer’s payment
service provider that shall make reasonable efforts to recover the funds. Therefore, if there was an intention to limit the applicability of also the first subparagraph of art. 74(2), it could have specified only the payer's payment service provider, as well (para 27).
Following that, the Court decided that the limitation of liability provided for by art. 74(2) of Directive 2007/64 in the case of a payment order executed where the unique identifier and the payee name provided do not match, applies to both payer’s and payee’s payment service providers. (para 31).
However, the Court made sure to point out that thet MS can require payment services provider of the payer to act with due diligence in order to correct such mistakes.
So, you've been warned, payment services providers will not be held accountable for mismatching IBAN and account holder names!
