Last year the EU heralded two new laws which rattled the regulatory waters and legal landscapes of a number of EU member states, while generating significant press coverage across the globe. Initially, the revised Payments Services Directive (Directive 2015/2366 or PSD II) came into force in January, which was then followed by the general data protection regulation (Regulation 2016/679 or GDPR) which came into force around the end of May.
Although these two legal instruments are rarely mentioned in the same context, it is pertinent to point out that both laws share at least one common objective, albeit at different levels, namely to restore citizens’ control of their personal data.
The dichotomy between the two EU frameworks is evident in the fact that while GDPR seeks to protect personal data, PSDII aims to foster competition in the payments and financial industry by bestowing to the data subject, firmer control over its data, so it can then share it with various service providers.
The European Central Bank (ECB), in a survey carried out in 2017, exposed the increasing trend in non-cash payments in the EU wherein such payments during 2016 increased by 8.5 per cent (to €122 billion) over the previous year. In this respect, the underlying rationale behind PSDII becomes even more apparent. This exponential increase in the use of cards and online payment instruments, has made personal data generated through these payment services, a gold mine for service providers, who are able to use such data in improving and tailoring the service offering to their clients. In turn, such trend merits proper regulation, in line with the EU’s efforts to give citizens control over their personal data.
This said, GDPR and PSDII are far from uniform and there seems to be discrepancy between the two on some key issues. Looking beside the shared general principles, one notes that legislators seem to have had contradictory perspectives when drafting the two laws. To this effect the European Data Protection Board (EDPB or the Board), in reply to a clarification requested from a member of the European Parliament, set out its position on a number of matters relating to the protection of personal data under both legislative instruments, two of which are discussed in further detail below.
Among the points raised, the notion of explicit consent has raised a number of eyebrows and in fact, the EDPB outlined that the two laws have their own different versions of what constitutes explicit consent. Primarily, one must consider article 6(1)(b) GDPR which provides that the performance of a contract to which the data subject is a party, forms a legal basis to the processing of personal data. Therefore, under GDPR, no explicit consent is required for the purpose of data processing, if and when processing may be performed on the basis of another ground outlined in the same article 6. Hence, in a hypothetical scenario, a service level agreement does not need to explicitly include the consent of the data subject for the processing of his/her personal data.
There seems to be discrepancy between the two on some key issues
However, in parallel, article 94(2) PSDII, states “payment service providers shall only access, process and retain personal data necessary for the provision of their payment services, with the explicit consent of the payment service user.”
One can immediately spot the conflict between the two articles (and laws) where the regulation allows for the processing of personal data without the data subject’s express consent, while the directive requires the data subject’s explicit consent. In this regard, the Board affirmed that the “explicit” consent under article 94(2) PSDII should be regarded as an additional contractual requirement for consent, irrespective of the fact that such consent would not be required under GDPR. The Board acknowledged the reality that payment services are always provided in the context of a contract between the parties involved. In fact, it referred to recital 87 of PSDII, which limits the scope of the same directive only to contractual obligations between the payment service user and the corresponding service provider.
However, its interpretation of Article 94(2) translates into an obligation on payment service providers to ensure that payment service users are made fully aware of the purposes for which their personal data will be processed and explicitly agree to the processing of their data through clauses in the agreement that are clearly distinguishable from the rest of the agreement, at the time they enter into a contract with the payment service provider. In this respect, one notes that the obligations under PSDII are more onerous than those under GDPR in this context.
Another issue which was highlighted to the Board was the concern relating to silent party data, specifically whether the processing of personal data of the payee (as a ‘silent party’) falls within the definition of “legitimate interests” (as outlined in article 6(1)(f) GDPR), when explicit consent is only given by the payer. This discussion is particularly relevant is in the context of payment initiation service providers (PISPs), which service was conceived under PSDII. If the payer user explicitly consents to the processing of his personal data for the performance of a service in a wire transfer, can the PISP also process the personal data of the user’s counterparty?
In this scenario, the latter, being a silent party, would not have a contractual relation with the PISP, and would not have explicitly consented to the processing of his personal data. On the other hand, the transfer would not be possible if the PISP does not process the data in question.
EDPB clarified that a lawful basis for the processing of silent-party data, by the PISP could be the legitimate interests of that service provider to perform the contract with the user. However, the Board qualified this statement by subject the PISPs to the following obligations: the service provider’s legitimate interest is limited and determined by the reasonable expectations of the user and the silent party, and such interest is not overridden by the interests of fundamental rights and freedoms of both data subjects; the processing of personal data must be both necessary and proportional and in line with the other principles of the GDPR (such as data minimisation and transparency); and the data is not used for a purpose other than that for which the personal data was collected.
In its response, the EDPB has pragmatically shed some light on most of the grey areas which surfaced with the advent of GDPR and its interaction with PSDII. This article briefly pores over some of the main points raised by the Board. More detail on the EDPB’s response can be found here: edpb.europa.eu/news /news/2018/letter-regarding-psd2-directive_en.
The EDPB affirmed that there is room for “fruitful interaction” on this topic between EU data protection and financial supervision authorities to ensure a joint and coordinated effort. To this effect, we will strive to continue monitoring and keeping abreast with such discussions in order to provide further updates.
James Debono is an associate at Gando Advocates, Banking and Finance Team.
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