Online e-payment account providers should be excluded from account switching rules, say EU Ministers

Providers of online e–payment accounts would be subject to the new Directive if that service forms part of a portfolio of other payment services the provider offers, according to the proposals.

The Council of Ministers has agreed on a compromise text (45-page / 260KB PDF) that contains amendments to the original draft Payment Accounts Directive published by the European Commission earlier this year. The Ministers want to reduce the scope of the Directive from what the Commission had proposed.

"This Directive shall apply to payment service providers located in the Union," according to the compromise text. "Payment service providers that operate solely as online e-payment accounts providers are excluded from the scope of this directive."

MEPs would have to back the Council of Ministers' proposals before they could become law.

Technology and payments expert Angus McFadyen of Pinsent Masons, the law firm behind Out-Law.com, said that the final set of rules must define what is meant by 'online e-payment accounts providers'.

"The proposed exclusion of online e-payment accounts providers will need to be clarified – it would be unreasonable to exclude significant operators that compete directly against multi-channel operators," McFadyen said.

Under the amended proposed Directive, payment service providers (PSPs) would be required to be open about the fees they charge customers and communicate those charges in accordance with standardised "terms and definitions" and in through otherwise "easily understandable words and in clear and comprehensible form". EU member states would be obliged to ensure that there was at least one website that consumers could access to compare fees levied by different PSPs.

Other changes set out under the EU Ministers' plans would see PSPs obliged to operate a "switching service" that would allow customers to transfer their accounts to them from a rival provider. PSPs would be required to transfer, at customers' request, existing direct debit and standing order arrangements that they have set up on their old accounts to their new accounts, under the proposals.

"Although there would be great technical challenges, and there is some resistance within the industry, there seems to be a continued drive to allow individuals to transfer their bank accounts cross-border within the EU," McFadyen said. "Whether this will lead to a genuine increase in competition is questionable, particularly outside of the euro zone."

PSPs subject to the Directive would also have to provide customers in the EU country they are operating in with access to "payment accounts with basic features". Those providers would be unable to offer only packaged accounts for sale and would be prohibited from offering the basic accounts on an online-access only basis.

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.