In today’s world a basic bank account helps us to fully participate in society. Bank accounts have become tantamount to living an everyday life which permits European Union (EU) citizens to make and receive payments, pay various bills including utility bills and also shop online. The decrease in the use of cash has to be taken into consideration too which makes the relevance of bank accounts even more significant.

Recent studies have shown that consumers still find barriers when it comes to comparing offers and prices for payment accounts from different service providers. Even when the comparison is possible, it is still unreliable and difficult to switch from their bank account to another. In addition, there have been EU consumers who were not allowed to open a payment account in a member state which they were not resident in.

To address these and other related issues, the European Commission has published, in May 2013, a Proposal for a Directive on the transparency and comparability of payment account fees, payment account switching and access to a basic payment account. This Proposal, which aims to reduce barriers in the retail banking sector in order to increase consumer mobility, was endorsed by the European Parliament in April 2014 and adopted by the EU Council of Ministers last July.

Single market law allows banks to operate throughout the EU and offer their services across borders; however this is not mirrored towards EU citizens. There are instances where the latter are unable to open a bank account in another member state or switch easily from one bank to another. Consumers are also charged exorbitant amounts for services received from banks and these same fees are rarely clear.

The proposed Directive addresses three areas:

1.         Transparency of payment account fees

The proposed Directive establishes that all payment service providers must provide consumers with the following set of documents:

i)     a fee information document listing the most common services provided and the fees charged for each of them;

ii)   a statement of fees charged by the payment service provider during the previous 12 months for the services provided on the payment account;

iii) a glossary of terms used in relation to payment accounts upon request.

These documents must be drafted using standardised terminology and standard formats, to facilitate comparison between the offers of different payment service providers.

Finally, the proposed Directive requires that there should be at least one independent comparison website in each member state, collecting information on the fees charged by payment service providers. This will allow consumers to easily compare prices and conditions for payment accounts offered on the market.

2.         Payment account switching

The proposed Directive will also facilitate the process involved in switching bank accounts. When a consumer requests the transfer of all or part of the recurring payment orders (such as credit transfers or direct debits) established on his account to another account, payment service providers must deal with all the steps involved in the switch. Customers can also request the transfer of the remaining balance on the old account and its closure.

Payment service providers must complete this procedure within 15 days (30 days if the switch is made between providers located in different EU countries) and the service must be provided free of charge.

Finally, payment service providers will be required to provide consumers with adequate information on their rights to switch bank accounts and the process involved.

3.         Access to payment accounts

The proposed Directive will allow consumers in Europe to open a payment account with any payment service provider in the EU, even where they are not residents of the country in which the provider is located.

Furthermore, consumers will be entitled to have access to a payment account with basic features; whatever their place of residence in the EU or their personal financial situation. Member states must ensure that at least one payment service provider offers a payment account with basic features in their territory and they should inform the public about the availability of these payment accounts. The payment services provider cannot use the financial situation of the person as a reason to refuse an account.

The Directive lists the essential services to be provided with this account, which include withdrawals, bank transfers and a debit card. Overdrafts or credit facilities will not be permitted on basic accounts.

The Directive will now be signed by the European Parliament and published in the Official Journal of the EU. Member states will then have two years after its entry into force to implement the Directive into their national law.