New Rules for Bank Accounts

Providers of consumer banking services face new EU-wide rules on what they offer to consumers and how they offer it. Requirements concerning rights of citizens to open accounts, non-discrimination, provision of transparent information, and facilitating of account switching will be imposed under new legislation proposed last week by the European Commission.
 
The goal, says the Commission, is to make it easier to compare bank account fees, switch banks and open a payment account in another EU country.

The Commission believes that consumers are often overcharged for services they receive and that some people are still finding it too difficult to even open an account.

While single market legislation has ensured that banks can operate throughout the EU and provide cross-border services, this mobility is not mirrored for citizens, who are often unable to open an account in another Member State or to easily switch from one bank to another.

Efforts have been made in the past to address these issues, including self-regulation and the adoption of a Commission Recommendation on access to a basic payment account in 2011. However, the Commission believes that improvements have been limited. More comprehensive and legally binding measures on payment accounts are needed in order to ensure that the single market works effectively.

The proposal addresses three key areas: comparability of payment account fees, payment account switching and access to payment accounts.

Comparability of Fees

The proposal aims to make it easier for consumers to compare the fees charged for payment accounts by payment service providers in the EU. This would allow consumers to make informed choices when choosing payment service providers. Access to this information will make the retail financial services sector more competitive and reduce fees.

EU Standardised Terminology

Member States will establish a list of the most representative payment services subject to a fee at national level, with related terms and definitions. Based on the notified lists, the Commission will adopt EU delegated acts setting out an EU standardised terminology, which Member States will need to integrate into their lists.

Transparency and Information

Payment service providers will need to provide consumers with a free of charge fee information document, listing the most representative services and corresponding fees, before entering into a contract for a payment account. They will also need to provide consumers with a statement of all fees incurred on their payment accounts for the services provided at least annually.

Furthermore, payment service providers will make available to consumers a glossary of terms used in relation to payment accounts. Those documents will need to be drafted using the EU standardised terminology, so brand names won’t be allowed.

In other contractual and commercial information, when using brand names to designate services, payment service providers will still need to identify the corresponding term of the EU standardised terminology.

Comparison Websites

Member States will ensure that consumers have access to at least one website comparing fees charged by payment service providers for services offered on payment accounts at national level.

Member States will establish a voluntary accreditation scheme for websites comparing fees.

To be granted accreditation, websites will need to be independent of any payment service provider, use plain language and the standardised terminology, provide up-to-date information and a sufficiently broad overview of the payment accounts market, and operate an effective enquiry and complaints handling procedure.

Packaged Accounts

When a payment account is offered together with another service or product as part of a package, the payment service provider will inform the consumer of whether it is possible to buy the payment account separately, and will provide separate information regarding the costs and fees associated with each of the products and services offered in the package.

Account Switching

The switching process should be as straightforward as possible for the consumer, says the Commission. The proposal aims to establish a simple and quick procedure for consumers who wish to change from their payment account to one with another bank or payment service provider.

Switching Service

The switching service will be initiated by the receiving payment service provider, based on a written authorisation from the consumer.

Consumers will be allowed to request the transfer of all or part of the recurring payment orders (such as credit transfers or direct debits) established on his account to another account, and payment service providers will have to deal with all the steps involved in the switch. Customers will be able to request the transfer of the remaining balance on the old account as well as its closure.

Financial Loss for Consumers

Consumers will not be subject to penalties or any other financial detriment caused by the misdirection of incoming credit transfers or direct debits.

Information about the Switching Service

Payment service providers will need to make available to consumers, and free of charge, adequate information about their rights to switch bank accounts and the process involved, including: the roles of the transferring and receiving payment service provider for each step of the switching process, the timeframe for completion of the respective steps (which should not be more than 15 days in total); and the fees, if any, charged for the switching process.

Access to Payment Accounts

Non-Discrimination

Consumers legally resident in the EU should not be discriminated against by reason of their nationality or place of residence when applying for or accessing a payment account within the Union.

Right of Access to a Payment Account

Member States will ensure that at least one payment service provider in their territory, operating not only through online banking facilities, offers a payment account with basic features to consumers. Access to a payment account with basic features will not be made conditional on the purchase of additional services.

Payment service providers will be entitled to refuse access to a basic payment account to consumers just if they do not comply with the rules on money laundering and terrorism financing, or if they already have an account guaranteeing the basic payment services with a bank located in the same territory.

In case of refusal, the consumer will be immediately informed in writing and free of charge. The payment services provider won’t be able to use the financial situation of the person as a reason to refuse the opening of an account. 

Characteristics of a Payment Account

The proposal defines a payment account with basic features as that including certain payment services: services enabling all the operations required for the opening, operating and closing of a payment account; services enabling money to be placed on a payment account and withdrawals within the EU from a payment account; and execution of certain payment transactions such as direct debit, payment through a payment card and online payments, and credit transfers.

Those services will have to be offered free of charge or for a reasonable fee. Fees charged to the consumer for non-compliance with the consumer’s commitments laid down in the framework contract will need to be reasonable, being based on certain criteria like national income levels or national consumer price.

Termination of the Contract

The payment service provider will be able to unilaterally terminate a framework contract under certain conditions: when the consumer deliberately used the account for criminal activities, when there has been no transaction on the account for more than 12 consecutive months; when the consumer provided incorrect information to obtain the payment account, or when the consumer is no longer legally resident in the Union or has opened a second payment account in the Member State where he already holds a payment account.

The payment service provider will inform the consumer of the grounds and justification for the termination of the contract at least 2 months before the termination enters into force, in writing and free of charge.

Awareness and Information on Payment Accounts

Member States will adopt measures to raise awareness among the public about the availability of payment accounts with basic features, their pricing conditions, the procedures to be followed in order to exercise the right to access payment accounts with basic features and the methods for having access to alternative resolution for the settlement of disputes.

Payment service providers will make available to consumers information about the specific features of the payment account with basic features on offer, their associated fees and their conditions of use. Member States will ensure that the consumer is informed that the purchase of additional services is not compulsory to access a payment account with basic features.

Next Steps

Once that the proposal gets adopted, Member States will have one year after the entry into force of the Directive to adopt and apply the laws, regulations and administrative provisions necessary to comply with it.