CONDUCT OF BUSINESS POLICY
1.1 This Conduct of Business Policy (the “COB Policy”) details the compliance policies and consequent procedures which Polaris Financial Services Limited (referred to as “we” or “us” in this document) has adopted in order to facilitate compliance with the Payment Services Regulations 2009 (the “PSRs”) and the rules of the Financial Conduct Authority (the “FCA”).
1.2 The principal sources of our regulatory obligations (the “obligations”) may be found in the PSRs (which derive from the EU Directive 2007/64/EC on payment services in the internal market). FCA guidance on our obligations may be found in their “approach document”, which can be found on the FCA’s website at www.fca.org.uk. The FCA has also published “perimeter guidance” to help firms consider whether their activities fall within the scope of the PSRs (see FCA doc 2009/19).
1.3 A copy of this COB Policy will be supplied to each employee of Polaris Financial Services Limited. The requirements set out in this COB Policy are mandatory unless otherwise stated and must be followed by all our employees and agents. It is the responsibility of each such person to acquaint themselves with the requirements of this COB Policy. Failure to comply with this COB Policy may constitute a serious disciplinary offence and could result in dismissal.
1.4 This COB Policy is supplementary to our other published policies, including our anti-money laundering, complaints, terms of website use, privacy and cookie policies.
2. NATURE OF THE CONTRACT
In order to avoid potential for misunderstanding, to minimize complexity, and to ensure that we comply with our regulatory obligations at all times, all contracts with customers (our “Contracts” or the “Contract”) must meet the requirements of a “Framework Contract” as specified and identified by the FCA in the document “The FCA’s role under the Payment Services Regulations 2009” dated June 2013 and as amended from time to time. The terms of the Contract will govern future execution of individual and successive payment transactions.
3. GENERAL OBLIGATIONS FOR THE PROVISION OF INFORMATION TO CUSTOMERS
3.1 Our principal compliance obligations include
(i) providing relevant service and charges information to our customers,
(ii) incorporating mandatory terms in our contracts with customers,
(iii) executing our customers’ orders within certain time-frames,
(iv) granting our customers refunds if certain conditions are met, and
(v) dealing with complaints in a fair manner.
3.2 All information must be provided to customers must comply with the following requirements
3.2.1 It must be provided in an easily accessible manner (for example on paper, by email or by a link to a secure website);
3.2.2 It must be set out in a clear and comprehensible form, in English (or other agreed language) and, if requested by the customer, on paper.
3.2.3 It must comply with the Communications with Clients Principles of the Financial Services and Markets Act 2000, including the requirement that information must be communication in a way that is clear, fair and not misleading.
3.3 We must provide any information specified in this COB Policy or under the terms of the relevant Contract with our customer free of charge. We may however charge for additional or more frequent provision of information, or where another means of transmission from that agreed in the relevant contract is requested, but such charges must reasonably correspond to the actual cost to us of providing the information. We must therefore be able to justify the level of any such charges.
4. REQUIREMENTS OF THE CONTRACT
4.1 A Contract must include all the information specified in Schedule 4 to the PSRs. Our employees and agents should use contracts in the form prescribed as our “Online Terms and Conditions” in order to ensure that the Contract complies with the regulatory obligations imposed upon us.
4.2 The customer has a right to obtain additional/replacement copies of the Contract upon request during the term of the Contract. If a customer so requests, we must provide post transaction information to customers on paper or another durable medium. We must also provide such information as soon as reasonably practicable after each individual transaction. If agreed in the Contract, such post transaction information may be provided or made available at least once a month, for example through a secure website or on request. Before the Contract is entered into
4.3 Our prospective customers should be provided with the Contract in good time before they will be come to be bound by its terms and conditions.
4.4 The draft Contract provided to our prospective customer should set out
4.4.1 The information or unique identifier to be provided by our customer for a payment order to be properly executed.
4.4.2 What we will take as consent for the execution of a payment order, the procedure by which the customer’s consent may be given and the procedure by which the customer may withdraw consent.
4.4.3 When a payment order will be deemed to have been received.
4.4.4 The maximum time after receipt of a payment order by which the funds will have been received by the payee’s payment service provider.
4.4.5 Where applicable, the fact that a payment instrument attached to the account has a spending limit.
4.4.6 The length of the Contract, the duration of the Contract, termination rights, and the terms under which we can unilaterally vary the Contract.
4.4.7 The law applicable to the Contract, the competent courts, and the complaints procedure (including details of complaints to the Financial Ombudsman Service and the FCA).
4.5 We will provide customers with information about individual transactions at least once a month.
4.6 Any changes to a Contract in place with a customer should be communicated at least two months before they are due to take effect. However, changes to exchange rates may be applied immediately and without notice if (and only if) (i) this has been agreed in the Contract and the changes are based on the “reference exchange rates” information already provided in the Contract to the customer or (ii) the changes are more favourable to our customer. The addition of new payment services to an existing Contract, which do not change the terms and conditions relating to the existing payment services, will not be treated as a change and so do not require two months’ notice.
4.7 Changes to the actual interest or exchange rates arising from changes to the reference interest and/or exchange rates must be notified to the customer as soon as possible unless another frequency has been agreed with the customer. We must make sure that any interest rate or exchange rate changes are implemented and calculated in a neutral manner that does not discriminate against our customers. This means that customers should not be unfairly disadvantaged – for example, by using a calculation method that delays passing on changes in rates that favour customers but more quickly passes on changes in our favour.
4.8 If (in the absence of any notification from the customer that we may not exercise this right), we exercise our right to make changes to the Contract unilaterally, our advice of change to the customer must state:
That the customer will be deemed to have accepted the changes unless they notify the payment service provider before the proposed date of the change; and
That the customer has a right to terminate the contract immediately and without charge before that date.
4.9 A Contract may be terminated by a customer at any time, unless a period of notice of not more than one month has been agreed. Any charge that is made for termination must reasonably correspond to our actual costs. However, if the Contract has been running for 12 months or more and is for an indefinite period, then no charge should be made for termination.
4.10 We must give at least two months’ notice if we wish to terminate a Framework Contract that is not for a defined term.
5. OTHER OBLIGATIONS
Safeguards and corrective measures
5.1 The Contract will set out the steps that a customer must take to keep a payment instrument safe and details of how they should notify use of the loss, theft or misappropriation of a payment transaction.
5.2 If a customer considers that there has been an unauthorised or incorrectly-executed transaction, in order that the customer may have the error corrected they must notify us in writing as soon as they become aware of the error, and not later than 13 months after the debit date applicable to the transaction.
5.3 We are entitled to stop or block transactions in cases in which we have suspicions relating to the security of the transaction, or where we suspect that there has been unauthorised or fraudulent activity in relation to the transaction. We are furthermore entitled to stop or block transactions for reasons relating to our legal obligations.
Information to be provided to a payer customer
5.4 We must provide our payer customers with the information set out in the Contract in respect of individual payment transactions, including
5.4.1 a reference enabling the customer to identify the payment transaction and, where appropriate, information on the payee;
5.4.2 the amount of the transaction in the currency of the payment order, along with details of any exchange rate used and the amount of the payment transaction after it was applied;
5.4.3 the amount and breakdown of any transaction charges, so that the customer knows the total charge he is required to pay; and
5.4.4 the date of receipt of the payment order.
5.5 Where a payment order is given to us direct by a payer customer, we must, at the customer’s request, inform the customer of the maximum execution time for the transaction concerned and any charges payable (including a breakdown of those charges where applicable).
Information to be provided to a payee customer
5.6 We must provide our payee customers with the information set out in the Contract in respect of individual payment transactions, namely:
5.6.1 a reference enabling the customer to identify the payment transaction and, where appropriate, information on the payer and any information transferred with the payment transaction;
5.6.2 the amount of the payment transaction in the currency in which the funds are at the customer’s disposal;
5.6.3 any exchange rate used by us and the amount of the payment transaction before it was applied; and
5.6.4 the amount and breakdown of any transaction charges.
6. LOW VALUE PAYMENT INSTRUMENTS
6.1 Low value payment instruments are those that Contract can only be used for individual transactions of €30 (or equivalent) or less, or for transactions executed wholly within the UK of €60 (or equivalent) or less.
6.2 In cases of Low Value Payment instructions, we only have to provide the following, less detailed, information to customers regarding the main characteristics of our payment service
6.2.1 the way in which the instrument can be used;
6.2.2 the payer’s liability for unauthorised payment transactions;
6.2.3 details of any charges applicable;
6.2.4 any other material information that the customer might need to make an informed decision; and
6.2.5 details of where the customer can easily access the full information in Schedule 4 of the PSRs that must normally be disclosed prior to being bound by a Framework Contract.
6.3 We may also agree with the customer that there is no need to communicate contractual changes in respect of Low Value Payment instructions on paper or another durable medium.
6.4 Fluctuations in exchange rates between euro and sterling may cause difficulties over time in determining whether a particular payment instrument is a Low Value Payment instrument. For example, if the value of the euro decreases against sterling, it may mean that transactions denominated in sterling which were formerly low value transactions may no longer be so. We must take a reasonable and consistent approach to dealing with such fluctuations.
7. CHARGES AND INTEREST
7.1 The Contract will provide details of all charges payable by the customer to us. Unless specifically agreed with the customer, our charges must reasonably correspond to our actual costs. If we will make a charge for notifying the customer that a payment order has been refused under regulation 66(3), this must be specified in the Contract.
7.2 The Contract will set out details of the interest or exchange rates to be used (this will include changes to interest rates on the underlying payment account unless the use of reference interest rates has been agreed). Where reference interest or exchange rates are being used, agreement, of how, and with what frequency changes in actual interest or exchange rates will be notified, in line with regulation 42(5). If no alternative method or frequency is agreed, notification will be required as soon as possible.
7.3 We may charge regular service charges for the running of the payment services, but any advance payments in respect of such service charges must be returned on a pro-rata basis upon termination of a Contract.
Information on additional charges or reductions.
7.4 If we levy an additional charge or offer a reduction in cost for using a particular means of payment (for example an additional charge for using a credit card), we must advise the customer of this before starting the payment transaction.
Each party to a transaction to pay its own charges
7.5 Unless there is a currency conversion as part of the payment transaction, there cannot be any arrangement whereby the payer pays its own charges and those of the payee or vice versa. The payee must pay any charges levied by its payment service provider, and the payer must pay any charges levied by its payment service provider.
Currency and currency conversion
7.6 Where we offer a currency conversion service before a payment transaction, we must disclose to the customer the exchange rate to be used and all charges before the transaction is agreed. The payment transaction must be executed in the agreed currency.
7.7 We must ensure that the full amount of any payment transaction is transferred and that no charges are deducted from the amount transferred. For instance, if a payer customer transacts with us to send £100 to a payee, our obligation is to ensure the whole amount is transferred to the payee’s payment service provider.
7.8 We may agree with payee customers to deduct charges from the amount transferred to us before passing on such amount, provided that the full amount of the payment transaction and the amount of the charges are clearly stated in the information we provide to such payees. For instance, if we deduct £1 from a transferred amount of £100 (and therefore pass on £99 to a payee customer), we must ensure that this information is provided or made available to the customer.
8. EXECUTION OF PAYMENT TRANSACTIONS
8.1 Where we provide payment services to a payer customer, we must ensure that the amount of a payment transaction is credited to the payee’s payment service provider’s account by the end of the third business day following the time of receipt of the payment order. “Business day” in this context means a day on which we are open for business (other than a Saturday, Sunday or public holiday).
8.2 For the purposes of the paragraph above, the time of receipt of a payment order is the time at which the payment order is received by us. If we receive the order on a day which is not a business day for us, or if we receive an order after 16:00, we should consider ourselves as having received the order on the following business day. Where a customer agrees with us that execution of a payment order is to take place either (i) on a specific day, (ii) on the last day of a certain period, or (iii) on the day on which he has put funds at our disposal, the time of receipt is deemed to be the day so agreed. If such day agreed is not a business day for us, the payment order should be considered as having been received on the first business day thereafter.
8.3 Where we provide payment services to a payee customer, we must ensure the relevant funds are available to the payee customer immediately after the funds have been credited to our account.
8.4 Where all the conditions set out in our Contract with a customer have been satisfied, we should not refuse to execute an authorised payment order, unless such execution is otherwise unlawful (eg, due to anti-money laundering legislation). Where we do refuse to execute a payment order, we must notify the relevant customer (at the earliest opportunity, and within the periods set out in paragraphs 4.8 and 4.10 above) of the refusal, and if possible, the reasons for such refusal together with the procedure for rectifying any factual errors that may have led to the refusal. The notification must be provided or made available in the way agreed in the relevant contract with the customer. However, we should not make such a notification where it would be otherwise unlawful (eg, due to restrictions on tipping-off under anti-money laundering laws). Furthermore, we do not need to provide a notification in respect of low value payment instructions if the non-execution is apparent from the context (eg, the purchase is refused at point of sale).
8.5 A customer may only revoke a payment order after we have received such order if we consent. However, if a customer has agreed with us that execution of a payment order is to take place either (i) on a specific day, (ii) on the last day of a certain period, or (iii) on the day on which he has put funds at our disposal, such customer may revoke a payment order up to the end of the business day preceding the agreed day.
9. REFUNDS AND REDRESS
9.1 If a customer makes a request for information regarding the execution of a payment transaction, we must make immediate efforts to trace the transaction and notify the customer of the outcome.
9.2 Where we incorrectly execute a payment transaction or execute a payment transaction which was not authorised by a payer customer (ie where consent to the transaction has not been given or has been withdrawn sufficiently early), and we have been notified of such error by the customer within 13 months after the transaction date, we must immediately refund the amount of the unauthorised payment transaction to the customer.
9.3 However, it will usually be reasonable for us to investigate a claim before making a refund if there is evidence to suggest that either fraud or deliberate, or grossly negligent, behaviour on the part of the customer may have occurred. Where such an investigation is justified, we should carry it out as quickly as possible in light of the circumstances.
9.4 As long as we have processed the transaction in accordance with the unique identifier applicable to the transaction, we will not be liable for incorrect execution if the unique identifier provided is incorrect.
9.5 If we can demonstrate that we sent the correct amount to the beneficiary’s details as specified by our customer and that that the funds were received by the payee’s payment service provider on time, the payee’s payment service provider will be liable.
9.6 However, even where we are not liable, we should still make reasonable efforts to recover the funds involved even when they are not liable. The Contract will provide for us to charge for our costs of attempting to recover funds.
9.7 If a payee customer requests information from us regarding the execution of a payment transaction, we must make immediate efforts to trace the transaction and notify the customer of the outcome.
9.8 Assuming that we can demonstrate that we have carried out our end of the transaction properly, we will not be liable to a payee customer.
Right of recourse
9.9 If, subject to clauses 9.4 and 9.5 above, a customer has instructed us to make a payment and we have not carried out the instruction or have carried it out incorrectly, then we will be liable to our customer and we must refund the amount of the defective or non-executed transaction to our customer without undue delay, and, where applicable, restore the debited payment account to the state it would have been in had the transaction not occurred at all. If we are liable in the circumstances set out in this clause, we will also be liable to our customer for any resulting charges and /or interest incurred by the customer.
9.10 If we are responsible for using incorrect unique identifiers or otherwise responsible for the non-execution or defective execution of a transaction and the other payment service provider involved in the transaction is not similarly responsible, that payment service provider is entitled to be compensated by us. Conversely, we are not responsible for the failure of a transaction in accordance with this clause but another payment service provider is so responsible, then we are entitled to seek compensation from that payment service provider.
9.11 However, we will not be liable if the failure giving rise to the non-execution of a transaction was due to abnormal and unforeseeable circumstances beyond our control.
Please refer to our Complaints Policy for the procedures to be employed when dealing with customer complaints. We must ensure customers have access to our Complaints Policy upon request, and include a copy of such policy in any written acknowledgement of a customer complaint.
11. CONTRACTS TO WHICH THE DISTANCE MARKETING REGULATIONS APPLY
11.1 The Financial Services (Distance Marketing) Regulations 2004 (the “DMRs”) apply to “distance contracts” made on or after 31 October 2004. A “Distance Contract” is one which has been concluded with a “consumer” (defined in the DMRs as any individual who is acting for purposes which are outside any business he may carry on), either by ourselves or by an intermediary acting on our behalf, in respect of which we (or the intermediary) have made exclusive use of one or more means of distance communication up to and including the time at which the contract was concluded. Accordingly, if we negotiate and conclude a contract with a customer solely by telephone, post or via our internet site (or by other means without both parties being physically present at the same time), and such customer is an individual who is acting for purposes which are outside any business he may carry on, such contract will be a Distance Contract.
11.2 Customers who have concluded a Distance Contract with us must have the right to cancel their contract within 14 days, beginning with the day after the Distance Contract was concluded. If we provide the information referred to below in paragraph 7.3 after the date on which the Distance Contract is concluded with a customer, the cancellation period ends on the expiry of 14 calendar days from the day after the date on which the customer received the last of such information.
11.3 In addition to the terms and information we are obliged to provide under the PSRs, we must provide the information set out in paragraphs 8 to 13, 16, 17 and 21 of Schedule 1 to the DMRs to our Distance Contract customers. We must provide this information on paper or in another durable medium which is available and accessible to our Distance Contract customers prior to the conclusion of the Distance Contract. Informational requirements exceeding those under the PSRs in respect of Framework Contracts include informing our Distance Contract customers of any specific additional cost we charge for using the relevant means of distance communication – eg if we charge more for a customer to make a payment through our internet page or via the telephone than if the customer comes to our premises to make the payment, then we must inform our customer of this fact prior to concluding the contract. Note that if we enter into Single Use Contracts which are also Distance Contracts, the informational requirements in Schedule 1 to the DMRs go significantly further than those in the PSRs.