The recent entry into force of the Payment Accounts Directive marks a significant step for consumers’ rights in retail financial services.
Acknowledging that citizens cannot fully participate in society without a bank account, the EU Commission has worked towards the successful adoption by the European Parliament and the Council of its proposal for a directive enshrining the consumers’ right to open a bank account.
Bank accounts form an important part of our everyday life, enabling us to perform essential operations. As and when the account holder needs, money can be deposited and withdrawn. Payment to third parties, be it for utility bills, insurance premia, or online shopping, can be easily carried out through savings or current accounts or direct payments made on standing instructions. In the same manner, salaries, pensions or allowances are received directly through a bank account.
In terms of the Directive, EU member states are required to transpose its provisions into domestic legislation with a period of two years.
Across the EU, consumers are to be provided with access to some form of payment account that enables them to deposit and withdraw, settle bills by direct debit and have a card that can be used for purchases, on the Internet or through teller machines. The provision of a basic bank account will be either free of charge or for a reasonable cost.
This Directive ensures that banks’ mobility right allowing them to operate across EU borders is mirrored in the right of consumers to open accounts in a member state, other than that in which they are resident, regardless of their financial situation. To this extent, the Directive aims at boosting the single market process in financial services and preventing discrimination. The focus is largely on the consumer.
Directive marks a significant step for consumer rights
Besides making bank accounts accessible to all, the Directive substantially improves fee transparency in relation to bank accounts. This is achieved through the introduction of two measures designed to provide consumers with information, prior to the opening of a bank account and during the operation of a bank account. Before a customer subscribes to a payment account, banks are required to provide a standard form document, containing the services offered on an account and the applicable fee. This ensures that consumers are able to compare the fees charged by payment service providers in the EU, and make informed decisions when purchasing an account. While an account is in operation, consumers must be provided with a statement of fees, containing information on the fees and interest paid on the account, on an annual basis.
Furthermore, consumers are entitled to have access, free of charge, to at least one comparison website for payment accounts in each member state. Although these websites may be operated by a public authority or a private entity, quality standards and the reliability of the information provided must be met. Comparisons can be made on the basis of the information provided on the website, enabling consumers to switch service providers to benefit from less costly alternatives available across the EU. This will create dynamism in the market for payment accounts, with the consumer reaping the benefits.
The Directive aims at providing standardisation in the terminology used, in the information given to consumer before the opening of an account, during the period an account is opened, and in marketing information targeting consumers. This will create a much-needed degree of harmonisation without preventing banks in their commercial operations.
In addition to these measures, the Directive paves the way for a simple and quick procedure in payment account switching. Consumers will be entitled to make the switch by contacting their chosen payment service provider and confirming that they wish to hold an account with that bank. The latter, in turn, will take care of effecting the switch against a reasonable cost. It will contact the previous bank, set up the account under the same instructions as the old account, and inform third parties about the account change. This mechanism is available for transfers to a payment account located in the same country.
It is clear that the Directive goes a long way towards removing obstacles in cross-border banking services for consumers and ensuring access to bank accounts to vulnerable EU residents.
jgrech@demarcoassociates.com
Dr Josette Grech is advisor on EU law at Guido de Marco & Associates.