Out-Law News 3 min. read

Consensus reached on new EU rules on bank account switching and fees

A UK banking trade body has given a cautious welcome to news that a political consensus has been reached on the EU's proposed Payment Accounts Directive.

The European Parliament and European Commission have both announced that MEPs and EU ministers have informally agreed on the final wording of the Directive, originally proposed by the Commission last year. Both the Parliament and the Council of Ministers need to formally vote to approve the Directive before it can take effect.

The British Bankers' Association (BBA) broadly welcomed the announcement but said there were still some issues that "need to be nailed down".

"British customers already enjoy a world class account switching service and clear information about charges, which we will be developing further with the UK government," Eric Leenders, executive director of the BBA’s retail team, said. "It is encouraging that the European Commission is looking to ensure that all countries across Europe offer customers similar levels of transparency and switching simplicity."

"We have yet to see the final wording of the Directive and there are a number of important details that still need to be nailed down. We will now work closely with the UK regulators to ensure that the new rules are introduced proportionately, with the right safeguards in place to protect customers from financial crime and any hidden costs," Leenders said.

The BBA had previously expressed concern about how the new account switching rules proposed under the Payment Accounts Directive would work in practice. Previous proposals by the Council of Ministers had suggested that banks would have to operate a switching service that would allow consumers to transfer their accounts to them from a rival provider, regardless of whether the accounts were being switched between banks operating in different countries within the EU.

However, the European Parliament and Council of Ministers have confirmed to Out-Law.com that the account switching rules that have been agreed are different from those previously proposed.

"The account switching rules apply only within one country," a spokesperson for the Council said. "However, there are provisions to facilitate cross-border switching. So for example if a customer wants to close an account in one member state and open an account in another, the first bank will help with printing of standing orders or transfers to the new bank account."

"The cross border switching was in fact limited to the facilitation of switching, customer will be provided with the information about the standing orders, positive balance and the account could be closed on his request," a spokesperson for the Parliament's Economic and Monetary Affairs Committee added. 

A statement from the European Commission said that the agreement had established "a simple and quick procedure for consumers who wish to switch their payment account to one with another payment service provider within the same member state; and by facilitating the process of closing a bank account in one member state and opening it in another".

A spokesperson for the BBA previously told Out-Law.com that it had concerns about the potential for the account switching obligations to be applied cross border within the EU.

They said that there was no evidence of there being a demand for such a service to be facilitated and said it would be "resource-intensive" for banks to accommodate. There would have been practical implications such as language differences and differences in currency that would have to have been accounted for if account switching services had to be operated on a cross-border basis, they added.

The agreed wording for the Directive also means that at least a "sufficient number" of 'credit institutions' will need to give customers access to so-called basic payment accounts, according to a statement issued by the European Parliament.

"Member states may, while fully respecting the fundamental rights of customers, require them to show a genuine interest in opening such a bank account in a specific country, without making such a request too difficult or burdensome," the Parliament's statement said in reference to the terms agreed by MEPs and the Council of Ministers.

The credit institutions may be allowed to charge a "reasonable fee" to consumers for access to a basic account if individual member states give such freedom in the way they implement the Directive, it said. Otherwise, access to the accounts may have to be provided for free.

The MEPs and EU ministers also reached agreement on new rules on transparency of account fees and charges.

"Anyone who opens a payment account should be able to understand its fees and interests rates and to compare account offers – this information should be clear and standardised across the EU," the Parliament's statement said. "In each EU member state there should be at least one independent website comparing the fees charged by banks. Member states may also require such a website to compare the levels of service offered, such as the number and location of branches. Banks will also be required to inform their clients that they offer these accounts."

The European Commission said it welcomed the agreement reached on its amended plans.

"Today's agreement is good news for consumers, in particular the vulnerable ones left without a bank account," Commissioner for Consumer Policy Neven Mimica said. "Now everyone will have the right to open an account and reap the benefits for example, from online shopping but also carry out basic operations like receiving state contributions such as pensions or other benefits. Information on the account including on fees will be more transparent and consumers can compare conditions and change their account more easily, avoiding any unnecessary costs."

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