The Payment Accounts Directive (PAD) was published in the Official Journal on 28 August 2014 and it must be transposed into the law of member states by 18 September 2016. It aims to increase competition within the financial industry and provide consumers with greater choice and flexibility. As a result, a package of measures has been created to facilitate (for all EU consumers):
- greater comparability and transparency of fees
- easier account switching
- access to basic bank accounts
The nature of the accounts which PAD will apply to is still open to a certain amount of uncertainty and may be left to individual member states to decide how clear they want to be in this area. This is because the directive does not automatically apply to accounts which are not current accounts save where other accounts are (i) used for day-to-day payment transactions and (ii) have the functionality for customers to place funds, withdraw cash and execute and receive payment transactions to and from third parties, including the execution of credit transfers. This potentially also brings in instant access savings accounts and member states also have the ability to apply the directive to other accounts if they wish to do so.
Chapter II of PAD aims to standardise the most relevant fee terminology at member state level and EU level. It also provides for the creation of templates for the presentation of certain fee information (the fee information document and the statement of fees), which will be used by payment service providers. Chapter III of PAD establishes a harmonised system for account switching. It looks to create a level playing field for the opening of payment accounts across the EU. Chapter IV of the PAD aims to ensure that payment accounts with basic features are available to all consumers in the EU.
From a UK perspective, the government has been consulting on the implementation of the directive for some time and published a consultation document on 23 June 2015. It has now completed that consultation process and published its response on 16 November 2015. In terms of the three key areas highlighted above, the UK has already taken action in these areas, including by:
- a series of measures delivered through government agreement with the banking industry to improve transparency of fees and charges, including annual statements and text message alerts for unarranged overdraft fees
- the creation of the 7-day Current Account Switch Service (CASS) which was launched in the UK in September 2013
- improving UK banks’ existing basic bank account offer, alongside their other retail current accounts
Alongside the consultation, the UK government also published a final version of the corresponding legislation - the Payment Accounts Regulations 2015. After being laid in Parliament, the regulations will be scheduled to come into effect from September 2016. After the regulations have been finalised, the Financial Conduct Authority will consult on any rule changes it considers necessary to give effect to them, and the Payment Systems Regulator will consider the appropriate designation and monitoring process and will provide further information on this in due course.
On the issue of scope of the directive mentioned above, the UK has commented that the requirements will apply to current accounts and accounts that have functionalities directly comparable to those of current accounts. It will be for individual firms to decide whether their products fall into the scope of the regulations. We can provide help with this analysis if required.