Issuance of draft exemption from the application of the Payment Services Law to payment instruments such as gift cards and low value payment cards

The Israeli Ministry of Justice has published for the public’s comment the Draft Regulations for Payment Services (Exemption From the Application of the Law), 2020, which exclude means of payment such as gift vouchers and gift cards from the application of the Payment Services Law

Dear Clients and Friends,

Please note that the Israeli Ministry of Justice has published a draft for the public’s comments regarding an exemption from the application of the Payment Services Law, 2019 (the “Law”) for means of payment of gift certificates and gift cards and other means of payment that are essentially similar to “cash”.
The Law, which entered into force on October 14, 2020, is based on the European revised Payment Services Directive (PSD2) and the Debit Cards Act, 1986 (which it replaces), and applies to all means of payment, including advanced means of payment (but excluding banknotes, such as checks.( The law creates a new and broad regulatory framework in the provision of payment services, between the payment service provider and its customers and sets out many detailed consumer provisions, in order to provide consumers with full protection that will ensure fairness and increase public confidence in the advanced means of payment.

In light of concerns raised by the public regarding the application of the provisions of the law to means of payment such as gift certificate and gift cards, section 77 (b) of the Law was enacted, according to which the provisions of the Law will apply to such means only 18 months from the date of commencement, in order to examine the special characteristics of these means of payment and determine a desirable arrangement in relation to them.

The Israeli Ministry of Justice has determined that there is room to allow the market for gift certificates and gift cards to continue operating in the current accepted format and under more lenient conditions, given the special characteristics of these means of payment, understanding that certain rules may be too strict and damaging, without any sufficient justification, whereas simpler rules are sufficient in order to meet the need of customer protection.

According to the proposed draft, the Law will not apply to means of payment intended for use by a non-specific person, where the maximum amount that can be accumulated is NIS 1,000, an amount that cannot be recharged.

A payment service provider that issues a means of payment that meets all the above conditions will not be subject to the provisions of the Law, and will instead be required to facilitate more lenient disclosure rules, as specified in the draft, and will generally be required to restore a lost or stolen balance of payment.

Our firm has extensive expertise and many years of experience in the field of financial regulation in all its forms. We accompany and monitor all regulatory developments in this field, including with respect to the enactment of the Payment Services Law and its application to the entities operating in this field, assisting and advising the leading entities in Israel and around the world. We will be happy to be at your service and assist with any issue regarding the Payment Services Law, including with respect to the draft regulations, as well as any questions or clarifications in this regard.

To view the previous client update regarding the payment services law >> click here

Sincerely
The Financial Services Regulation Department and Banking Department
Herzog Fox & Neeman

Neta Dorfman-Raviv l Partner
Financial Services Regulation Department
dorfmann@herzoglaw.co.il

Esti Hadar l Partner
Banking & Finance Department
hadare@herzoglaw.co.il