New EBA Guidelines On The Limited Network Exemption Under PSD2: Reevaluation And Resubmission Of Existing Notifications Needed

• Published date: 19 July 2022
• Subject Matter: Finance and Banking, Financial Services
• Law Firm: Schoenherr Attorneys at Law
• Author: Mr Matthias Pressler and Maximilian Nusser

Earlier this year the European Banking Authority (EBA) published the final Guidelines on the limited network exemption (LNE) under the Payment Service Directive 2 (PSD2) (available here). Following the consultation phase initiated by the draft (our article on the draft is available here), further clarifications were added which are relevant to all service providers who plan to rely on the exclusion as well as those who already do.

Most importantly, the EBA Guidelines require a resubmission of the notification for entities which rely on the LNE and have already submitted a notification in the past.

The Financial Market Authority (FMA) - as the relevant National Competent Authority (NCA) in Austria - has notified the EBA that it is fully compliant with the Guidelines. The FMA has published the German translation of the EBA Guidelines on its website (available here) and in July 2022 published updated notification forms which implement the new EBA Guidelines (available here).

Background of the EBA Guidelines

The so-called "limited network exemption" consists of three different sub-exemptions from the licence requirements and scope of PSD2, i.e.:

• instruments allowing the holder to acquire goods or services (i) within the premises of the issuer, or (ii) within a limited network of service providers under a direct commercial agreement with a professional issuer (limited network exemption in the narrower sense);
• instruments which can be used only to acquire a very limited range of goods or services (very limited product range exemption) and
• instruments for the acquisition of specific goods or services for specific social or tax purposes (social and tax exemption).

Key aspects of the new EBA Guidelines on the Limited Network Exemption under PSD2

The following points will have the most significant impact on the current and future scope of application of the LNE:

• Technical and contractual restrictions are required cumulatively: the issuer of the instrument must use technical as well as contractual restrictions in order to ensure that the instrument is only used in a limited way and does not allow for the possibility to develop into a general-purpose payment instrument. The EBA Guidelines already in their draft version clarified that contractual restrictions alone are insufficient.
• In-premises exemption not available for online businesses: payment instruments allowing the holder to acquire goods or services only in the premises of the issuer can only be used in...