Following a three month consultation period, the Financial Services Authority has set out a new regime, which will take effect tomorrow, for the regulation of e-money issuers in order to protect consumers and facilitate innovation of e-commerce.
In December 2001, the FSA announced it was drawing up proposals for the regulation of e-money issuers, based on requirements by the European Union to be incorporated into UK law by 27 April 2002. Since that time, it has held consultation with a number of industry parties.
David Strachan, director of deposit takers, says: "Because the feedback we received on the proposed regime was generally positive, we have not made any major changes to the framework on which we consulted. Our ongoing dialogue with industry and consumers will make sure that, as the industry and the market develop, our regulation remains up-to-date."
New modifications to the regime include the amount of money individual users can load in their electronic purses. A limit of £1000 per purse has now been put in place, over the initial £250 limit proposed. A higher purse limit may be permitted where certain safeguards are met.
Rules governing the issue of e-money at a discount have also been modified. E-money issuers will be allowed to issue e-money at a discount for marketing purposes in certain tightly controlled circumstances.
The proposals were drawn up with a view to establishing a level playing field between prospective issuers of e-money, whether banks or other firms. The FSA believes that e-money can offer consumers a flexible, secure and convenient way of making low value transactions, for example on public transport or in car parks.
However, HM Government has decided that the Financial Services Compensation Scheme will not apply to e-money issuers. Consequently, customers will have no access to compensation should an e-money issuer become insolvent.