The PAD is designed to allow consumers to compare fees for payment accounts from different providers, switch payment accounts easily and open basic payment accounts where it might otherwise have been difficult to do so - traditionally, vulnerable ‘unbanked’ individuals, those with no fixed address and asylum seekers have found it more difficult to access payment accounts with a basic range of services.
It is important to note that while certain provision of the PAD relating to access and account switching are now in force, the obligations to provide certain types of standard documents and to use standard terms will not apply for at least another 12 months.
Click here to view table.
This Briefing summarises the following key aspects of the PAD:
- the development of standard terms
- comparing fees
- switching accounts
- access to payment accounts
1. STANDARD TERMS: THE FIRST STEP
The EBA’s work:
The first significant step taken in connection with the implementation of the PAD across the EU was the development of standard terms.
Each Member State was asked to send a list to the European Banking Authority (EBA) of between 10 and 20 of the most representative services linked to payment accounts offered in that Member State, with related terminology and definitions. The EBA was then mandated to develop standard terms for those services. The EBA is consulting on those standard terms at the moment (the consultation will close on 22 December 2016). The regulation setting out the final set of standard terms is likely to be published in the Official Journal of the EU in early/mid 2017 (the Standard Terms Regulation).
The standard terms proposed for use in Ireland are at page 53 of the Consultation Paper, and are: “maintaining the account”, “providing a debit card”, “providing a credit card”, “overdraft”, “credit transfer”, “standing order”, “direct debit” and “cash withdrawal”.
Use of standard terms/branding:
Once those standard terms are finalised, PSPs must not only use them in the documents that they are required to develop under the PAD (see below), but must also use them in their contracts and their marketing documents. While PSPs will be allowed to use brand names for their products and services, they must identify (where relevant) the standard term to which that brand name relates.
2. COMPARING FEES
Fee Information Document and Glossary:
Before a consumer opens a payment account, the PSP must provide:
- a Fee Information Document; and
- a Glossary,
on paper or another durable medium to the consumer. Those documents must also be available on the PSP’s website and in its branches (if any).
Each is a stand-alone document, but can be provided to the consumer at the same time as other documents.
PSPs will be required to use a standard format for the Fee Information Document. The EBA is consulting on that format at the moment (see pages 75-84 of this Consultation Paper).
PSPs must also give consumers, at least annually and free of charge, a statement of fees for the services linked to the consumer’s payment account.
Information on overdraft interest rates and credit interest rates must also be included. The statement can be provided more often if a PSP opts to do so and, while it must be a stand-alone document, it can be provided at the same time as other information.
The EBA is developing a standardised format for the Fee Statement (see pages 85-96 of this Consultation Paper).
Price Comparison Website:
The Competition and Consumer Protection Commission (CCPC) must set up and manage a price comparison website, comparing fees charged by PSPs for the provision of the services linked to payment accounts that are set out in the Standard Terms Regulation (once it comes into force).
If a payment account is offered as part of a package with another product or service that is not linked to that account, and if it is possible for a consumer to avail of the payment account on its own, the PSP must inform consumers of this, and give a breakdown of the costs and fees associated with each part of the package that can be purchased separately.
3. SWITCHING ACCOUNTS
PSPs must allow consumers switch between payment accounts held in the same currency in the same Member State, and must also assist any consumer who wishes to switch to a payment account with a PSP in another Member State.
PSPs must also make available information on the switching service in their branches and on their website. They must also give that information to consumers on request.
The PAD sets out a detailed process for account switching, including specific timelines that must be adhered to. The switching process must be initiated by the PSP with whom the new payment account is to be opened.
The Central Bank has published its revised Code of Conduct on the Switching of Payment Accounts with Payment Service Providers to take account of the PAD’s requirements (its previous Code of Conduct dated from October 2010).
4. ACCESS TO PAYMENT ACCOUNTS
In Ireland, this obligation applies only to banks, and is aimed at ensuring that consumers who currently find it difficult to open payment accounts are able to do so. As mentioned above, this provision is targeted at vulnerable ‘unbanked’ individuals, those with no fixed address and asylum seekers.
What type of payment account must be available?
The consumer must be able to lodge funds to the account, make withdrawals at an ATM or in-branch, use a debit card, set up direct debits and make credit transfers. In Ireland, these basic payment accounts will not include overdraft facilities.
Banks must ensure that they do not discriminate against these types of consumer and must open the payment account within 10 business days of receiving a completed application unless the consumer already has such a payment account, or if the opening of the account would breach the Third Money Laundering Directive as implemented in Ireland.
The fees charged must be reasonable however, in most cases no fees can be charged for the first 12 months. After 12 months, the bank can charge a reasonable fee if the amounts being lodged to that account exceed a particular amount (linked to the minimum wage). Otherwise, the bank may not charge a fee, reasonable or otherwise, for the first 5 years.
The bank may only close the account in very limited circumstances (e.g. it is being used for illegal purposes, it has not been used for 24 consecutive months, the consumer provided incorrect information at account-opening stage or the consumer is no longer EU-resident). Subject to the foregoing, the PSD will govern the bank-consumer relationship in relation to that account.
One account only
A consumer may only have one such type of payment account in a Member State.
Disputes between consumers and PSPs in relation to the PAD will be heard by the Financial Services Ombudsman.
Click here to view table.