ISLAMABAD, June 15: The government has proposed a new draft act to regulate the operations of Payment Systems and Electronic Fund Transfers (PSEFT), which is expected to be effective from July 1, 2007.

Through the Finance Bill 2007, the act has been proposed to ensure safety, integrity, efficiency and reliability of payment systems and EFT and also prescribes the respective rights and obligations of the financial institutions, service providers, consumers and other participants of the systems.

Under the proposed PSEFT act, the State Bank may designate a payment system and a payment instrument as designated system and instrument respectively. Upon such designation, the operator of the designated payment system is required to institute adequate governance arrangements, rules, procedures and controls to ensure continued integrity and reliability of such system and the issuer of the designated payment instrument shall comply with the specified requirements of the State Bank.

A bank, financial institution, clearing house, service provider or any person authorised by State Bank to transact business under the PSEFT Act and providing funds transfer facility is required to retain complete record of electronic transactions in electronic form and shall ensure secure means of transfer consistent with international standards.

The State Bank is empowered under the PSEFT Act to nominate one or more clearing house to provide clearing or settlement services for a payment system and to formulate ‘settlement rules’ relating thereto.

Under the proposed Act, a financial institution or other operator of a designated payment system is required to disclose, in the specified manner, the terms and conditions of EFT to the consumer at the time the consumer contracts for the same and shall also notify the consumer of any material change in such terms and conditions.

ATM operators and other service providers seeking to impose a fee on any consumer for providing services shall be required by the State Bank to notify the consumer, in the specified manner, about such fee including the amount thereof and EFT may be preauthorised by a consumer and also be initiated by means of truncated cheque.In respect of each EFT initiated by a consumer, the financial institution holding such consumer’s account shall provide documentary proof to the consumer of such EFT setting forth the prescribed particulars. The PSEFT Act further requires the financial institution to provide periodic statement of account to each consumer in respect of each electronically accessible account.

The PSEFT Act also lays down the procedures to be followed in case of errors or omission in EFT and the respective liabilities of the financial institutions and consumers in such circumstances; and under the PSEFT Act, a consumer may also complain to the State Bank regarding EFT in case of not being satisfied with the outcome of a complaint made to financial institution without prejudice to any right to seek any other remedy under the law.