The Israeli Payment Services Law entered into force on January 9, 2020. The law is a comprehensive legislative arrangement of all types of payment services, including digital payment methods such as payment applications. The new law regulates the use and offering of payment services on three levels:
- Oversight of payment service providers;
- The contractual relationship between a payment service provider and its customer (payer or payee); and
- Consumer protections and rights when engaging with payment service providers.
The law is designed to regulate both traditional and innovative payment methods, as well as payment services operated by non-banking entities. Among other issues, the law requires a payment service provider to conclude a written agreement with its customers that is written in clear and simple language. The service provider must obtain and document the customer’s explicit consent to use the services and allow the customer to end the agreement at any time.
The law also provides that a service provider may perform a payment transaction only upon the customer’s instruction to do so and prohibits service providers from unreasonably refusing to comply with instructions from customers.
The law also establishes a liability mechanism protecting customers when they use a payment service. The service provider is liable for loss or damage suffered by the customer, even if the service provider is not at fault. The law also limits customers’ liability where their account is breached. Non-compliance with the law can also attract criminal penalties of up to NIS 450,000 (approximately US $130,000) and up to one-year imprisonment.
CLICK HERE to read the Payment Services Law (in Hebrew).