Opening/switching bank accounts and information on fees
Directive 2014/92/EU — comparable and transparent fees and rules for all payment accounts and payment account switching
It aims to tackle 3 main issues:
access to basic payment accounts*,
transparency and comparability of payment account fees, and
bank account switching.
Access to bank accounts
The law says that anyone residing legally in the European Union has the right to open a payment account with basic features in any EU country. However, a person wishing to open such a bank account should always comply with EU anti-money laundering rules.
A basic bank account includes various services such as cash withdrawals at a bank counter or cash machines and the execution of payment transactions such as direct debits or credit transfers within the EU.
Clear and comparable bank account fees
The law provides for several tools to make fees clearer for consumers. For instance, it requires that in each EU country there is at least one independent website that compares payment account fees that are charged by different banks.
Bank account switching services
The rules establish a quick procedure for consumers who want to switch their account from one bank to another in the same EU country. The switch has to be conducted by the recipient bank. The banks bear the costs of any financial loss in the event of errors made in the process.
When a consumer wants to switch accounts between two EU countries, the bank hosting the account which will be closed must assist in the process.
It has applied since 17 September 2014. EU countries had to incorporate it into national law by 18 September 2016.
BACKGROUND
Not all EU citizens have easy access to a bank account, even though this is essential in modern life. This EU law improves the situation by giving them the right to open a basic payment account anywhere in the EU, and improves the transparency of bank account fees as well as the process of switching accounts.
For more information, see:
Bank accounts (European Commission).
Basic payment account:
under this directive, it includes the following:
services enabling all operations required for opening, operating and closing a payment account;
services enabling funds to be placed on a payment (current) account;
services enabling withdrawals (within the EU) at a bank counter or cash machine;
execution of various payment transactions within the EU, such as direct debits and credit transfers, as well as payments with a payment card.
DOCUMENT
Directive 2014/92/EU of the European Parliament and of the Council of 23 July 2014 on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features (OJ L 257, 28.8.2014, pp. 214–246)
Buying residential property – rules on loans
Directive 2014/17/EU –rules on home loans. Known as ‘the Mortgage Credit Directive’, it aims to ensure that all consumers who take out a mortgage to purchase a property are adequately informed and protected against the risks.It has applied since 20 March 2014. EU countries had to incorporate it in national law by 21 March 2016.
KEY POINTS
The directive applies to all loans made to consumers for the purpose of buying a home, including loans that are guaranteed by a mortgage or by another comparable security.
It provides for better information to consumers on available mortgage products including:
an obligation on lenders to provide consumers with a standardised information sheet (European Standardised Information Sheet – ESIS) which allows them to shop around to identify the right product for them;
inclusion in the ESIS of worst-case scenarios regarding variable interest and foreign currency loans so as to alert consumers of potential interest rate variations;
a guaranteed period of reflection or a right of withdrawal for borrowers prior to being bound by the credit agreement;
new EU-wide standards to assess the credit worthiness of mortgage applicants so as to ensure that borrowers can meet their repayment obligations.
The directive establishes business conduct principles.
These ensure that lenders and credit intermediaries (i.e. persons or companies providing information and assistance to consumers looking for a mortgage loan) act honestly and transparently in the consumer’s interests.
Lenders and intermediaries must ensure that their staff have up-to-date knowledge on loan agreements and that customers are provided with all the necessary information before signing any agreement.
Consumers have a general right to repay their loans early, thus benefiting from a reduction in the total remaining cost of the mortgage. In such cases, EU countries may entitle lenders to fair compensation for any costs directly and exclusively linked to early repayment.
The directive establishes an EU passport regime for credit intermediaries. This means that in principle once authorised in one EU country, a credit intermediary is allowed to provide services throughout the EU.
DOCUMENTS
Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 (OJ L 60, 28.2.2014, pp. 34–85)
Successive amendments to Directive 2014/17/EU have been
Revised rules for payment services in the EU
Directive (EU) 2015/2366 on EU-wide payment services
Directive (EU) 2015/2366 (Payment Service Directive 2 — PSD 2) provides the legal foundation for the further development of a better integrated internal market for electronic payments within the EU.
It puts in place comprehensive rules for payment services*, with the goal of making international payments (within the EU) as easy, efficient and secure as payments within a single country.
It seeks to open up payment markets to new entrants leading to more competition, greater choice and better prices for consumers.
It also provides the necessary legal platform for the Single Euro Payments Area (SEPA).
It repealed Directive 2007/64/EC (PSD) from 13 January 2018.It has applied since 12 January 2016. EU countries had to incorporate it into national law by 13 January 2018.
KEY POINTS
The directive seeks to improve the existing EU rules for electronic payments. It takes into account emerging and innovative payment services, such as internet and mobile payments.
The directive sets out rules concerning:
strict security requirements for electronic payments and the protection of consumers’ financial data, guaranteeing safe authentication and reducing the risk of fraud;
the transparency of conditions and information requirements for payment services;
the rights and obligations of users and providers of payment services.
The directive is complemented by Regulation (EU) 2015/751 which puts a cap on interchange fees charged between banks for card-based transactions. This is expected to drive down the costs for merchants in accepting consumer debit and credit cards.
Towards a better integrated EU payments market
The directive establishes a clear and comprehensive set of rules that will apply to existing and new providers of innovative payment services. These rules seek to ensure that these players can compete on equal terms, leading to greater efficiency, choice and transparency of payment services, while strengthening consumers’ trust in a harmonised payments market.
Opening up the EU market to new services and providers
The directive also aims to open up the EU payment market to companies offering consumer- or business-oriented payment services based on access to information about the payment account, particularly:
account information services which allow a payment service user to have an overview of their financial situation at any time, allowing users to better manage their personal finances;
payment initiation services which are services to initiate an order at the request of the payment service user with respect to a payment account held at another payment service provider.
Consumer rights
Consumer rights are enhanced, including:
reduced liability for non-authorised payments from €150 to €50;
unconditional refund right for direct debits in euro for a period of 8 weeks;
removal of surcharges for the use of a consumer credit or debit card.
The European Commission was to produce a ‘user-friendly’ electronic leaflet by early 2018 listing consumers’ rights under the directive and related EU law.
Authorisation of payment institutions
The directive does not substantially change the conditions for granting authorisation as payment institutions, although payment institutions offering payment initiation services or account information services will be required to have professional indemnity insurance as a condition of authorisation or respectively registration. The directive also contains rules on the supervision of authorised payment institutions, as well as measures in case of non-compliance.
Role of European Banking Authority (EBA)
The role of the EBA is strengthened to:
develop a publicly accessible central register of authorised payment institutions, which shall be kept up to date by the national authorities;
assist in resolving disputes between national authorities;
develop regulatory technical standards on strong customer authentication and secure communication channels with which all payment service providers must comply;
develop regulatory technical standards for cooperation and information exchange between supervisory authorities.
The Commission has adopted the following implementing and delegated acts:
Regulation (EU) 2017/2055 on regulatory technical standards for the cooperation and exchange of information between competent authorities relating to the exercise of the right of establishment and the freedom to provide services of payment institutions;
Regulation (EU) 2018/389 on regulatory technical standards for strong customer authentication and common and secure open standards of communication;
Regulation (EU) 2019/410 laying down implementing technical standards with regard to the details and structure of the information to be notified, in the field of payment services, by competent authorities to the EBA;
Regulation (EU) 2019/411 on regulatory technical standards setting technical requirements on development, operation and maintenance of the electronic central register within the field of payment services and on access to the information contained therein.
DOCUMENTS
Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ L 337, 23.12.2015, pp. 35-127)
Successive amendments to Directive (EU) 2015/2366 have been incorporated into the original document. This consolidated version is of documentary value only.
Commission Implementing Regulation (EU) 2019/410 of 29 November 2018 laying down implementing technical standards with regard to the details and structure of the information to be notified, in the field of payment services, by competent authorities to the European Banking Authority pursuant to Directive (EU) 2015/2366 of the European Parliament and of the Council (OJ L 73, 15.3.2019, pp. 20-83)
Commission Delegated Regulation (EU) 2019/411 of 29 November 2018 supplementing Directive (EU) 2015/2366 of the European Parliament and of the Council with regard to regulatory technical standards setting technical requirements on development, operation and maintenance of the electronic central register within the field of payment services and on access to the information contained therein (OJ L 73, 15.3.2019, pp. 84-92)
Commission Delegated Regulation (EU) 2018/389 of 27 November 2017 supplementing Directive (EU) 2015/2366 of the European Parliament and of the Council with regard to regulatory technical standards for strong customer authentication and common and secure open standards of communication (OJ L 69, 13.3.2018, pp. 23-43)
Commission Delegated Regulation (EU) 2017/2055 of 23 June 2017 supplementing Directive (EU) 2015/2366 of the European Parliament and of the Council with regard to regulatory technical standards for the cooperation and exchange of information between competent authorities relating to the exercise of the right of establishment and the freedom to provide services of payment institutions (OJ L 294, 11.11.2017, pp. 1-25)
Regulation (EU) 2015/751 of the European Parliament and of the Council of 29 April 2015 on interchange fees for card-based payment transactions (OJ L 123, 19.5.2015, pp. 1-15)
Cross-border payments in euros
The aim of the single euro payments area (SEPA) is to ensure that making electronic payments throughout the entire euro area is as easy as making cash payments and that there are no extra charges when making an electronic payment in euros in another European (EU) country.
Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the Community and repealing Regulation (EC) No 2560/2001.
The aim of the single euro payments area (SEPA) is to ensure that making electronic payments throughout the entire euro area is as easy as making cash payments and that there are no extra charges when making an electronic payment in euros in another European (EU) country.
The rules require banks to levy the same charges for electronic payment transactions in euros conducted cross-border, between two European countries, and for corresponding electronic payment transactions* in euros conducted nationally, within the same European country.
KEY POINTS
Electronic payment transactions include credit transfers, direct debits, withdrawals from automatic teller machines, payments by debit and credit cards, as well as cash transfers.
The payments concerned are to be made in euros or in the national currency of EU countries wishing to apply the regulation. Thus, following a request from Sweden, the principle of equality of charges also applies to payments made in Swedish kronor.
In practical terms, banks have to provide their clients with an international bank account number (IBAN) to be used when making cross-border electronic payment transactions. Banks also have to give them a bank identifier code (BIC). These transfers therefore cost no more than transfers made within the same country.
Compliance with obligations
If a bank does not comply with the charging rules, its customers or any interested party may submit a complaint to the national authority.
To guarantee that disputes arising between banks and customers are settled, EU countries must establish effective out-of-court complaint and redress procedures. Penalties can be handed out in case of infringements.
REFERENCES
Regulation (EC) No 924/2009
Regulation (EU) No 260/2012
Regulation (EU) No 248/2014
OJ L 84, 20.3.2014, pp. 1-3
Settlement finality in payment and securities settlement systems
Transfers and payments of financial products must be regulated to avoid major risks, especially those linked to the insolvency of participants – in the transaction. This EU law lays down rules to minimise such risks.
Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems.It guarantees that financial product transfer and payment orders can be finalised, mainly by mitigating problems arising from a participant’s insolvency. These participants may be:
financial institutions, e.g. banks;
systems operators, such as central securities depositories.
KEY POINTS
Transfer orders are irrevocable
Transfer orders of financial products are contractually enforceable. This is also applicable to any associated payment netting, situations where debt and claims are offset between participants.
The rules apply even when a participant is subject to insolvency proceedings, as long as the transfer order was underway before the proceedings started. The rules may also apply up to 24 hours afterwards to cover situations where transactions are entered into at times when relevant records are unavailable, for instance overnight.
Uniform rules
The directive seeks to ensure that uniform rules are applied where multiple settlement and payment systems are in operation from the moment the transactions are entered into in order to avoid difficulties arising from incompatible regulations.
Guarantees in insolvency situations
The existence of insolvency proceedings against a participant does not retroactively affect the rights and obligations of other participants nor their access to the normal financial guarantees inherent in a transaction.
REFERENCES
Directive 98/26/EC
Directive 2009/44/EC
Directive 2010/78/EU
Regulation (EU) No 648/2012
Regulation (EU) No 909/2014
Successive amendments and corrections to Directive 98/26/EC have been incorporated in the basic text. This consolidated version is for reference purposes only.