Bank account switching rules should only apply where customer accounts are not in deficit, say MEPs

The European Parliament's Committee on Economic and Monetary Affairs (ECON) approved changes to the draft new Payment Accounts Directive (90-page / 614KB PDF) which has been proposed by the European Commission.

The Commission outlined plans to require payment service providers (PSPs) to generally help customers to switch their accounts to a new provider. However, the ECON committee has now suggested amending how the requirements associated with the switching rules would be triggered.

"Only an account with a positive or nil balance may be subject to switching," ECON's proposals said.

ECON's plans may also mean that an existing switching service that is available from major banks in the UK would not have to be altered to account for the new EU rules.

It said individual EU member states have the freedom to set up alternative switching service frameworks from the one contained in the EU proposals if doing so "entails efficiencies that are clearly in the interest of the consumer". It added that "this applies in particular to existing switching services systems".

In September, 33 banks and building societies in the UK signed up to a new current account switching service that allows customers to change between providers more easily. Many banks have been promoting incentives to customers to open new current accounts with them through the switching regime, including through the use of keyword advertising online.

Under ECON's proposals EU member states would be required to introduce a system that allows standing orders and direct debit arrangements set up by customers on their old account to be automatically redirected to customers' new account with their new provider. This mechanism would have to be in place for at least a year, under its plans.

ECON said its planned amendments, which also relate to account fee transparency and plans to require banks to offer unbundled access to basic accounts, are due to be voted on by all MEPs next month. If reforms are approved, ECON said negotiations would begin with EU Ministers on forming a finalised text that would become law.

Last month the Council of Ministers announced that it had agreed on a compromise text that contains amendments to the original draft Payment Accounts Directive. The Ministers have proposed to exempt online electronic payment (e-payment) account providers from being subject to the new regime.