REPLY. CONSULTATION PAPER ON ACCESS TO A BASIC PAYMENT ACCOUNT Paper issued on 6 October 2010

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1 REPLY CONSULTATION PAPER ON ACCESS TO A BASIC PAYMENT ACCOUNT Paper issued on 6 October 2010 s from the Department of Finance, Ireland on the measures envisaged by the EU Commission Principle A harmonised framework could be established to guarantee the right of access to a basic payment account to any consumer. This framework would be without prejudice to Community rules, in particular on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing. The Department of Finance agrees with the principle that a basic payment account should be made available to, for example, school children, (say from age 16), students, those on the minimum wage and on low salaries, and on certain Social Protection payments e.g. Old Age Contributory Pensions. If such persons do not already have a bank account, they should be actively encouraged to open a basic payment account and should be educated with regard to its benefits. However, it is a person s own decision, on the basis of appropriate information and awareness of the benefits whether or not to open such an account. They should not be coerced into doing so. The question of how the above mentioned categories (or any person) might have a right to open such a basic payment account and how such entitlement might be enshrined in national law needs careful consideration. This matter should, therefore, be further examined by the Commission. At national level work in ongoing in developing a strategy for promoting financial inclusion. This includes consideration of the basis on which a Basic Bank Account would be made available, consistent with the commitments made by the two main banks as part of the Government s recapitalisation programme. The Guidance Notes for financial institutions under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 aim to provide alternative forms of identification for those who do not possess the usual forms of identification, such as a passport or a driving licence. Evidence of identity may take a number of forms. While passport and driving licences are generally the best forms of identification, it is possible to be reasonably satisfied as to a customer s identity based on other forms of confirmation, including written or otherwise documented assurances from persons or organisations that have dealt with the customer for some time. All customers should, at least, have a birth certificate, and may have a medical, student or free travel card with photo identification. The quantity and quality of evidence required to verify a 1

2 customer s identity is dependent upon the risk category to which the customer has been allocated by the financial institution. Characteristics of a basic payment account List of services and functionalities A basic payment account could consist of the following functionalities: the opening and the closing of a payment account; the means for the consumer to receive, place, transfer and withdraw funds, both physically and electronically; the provision of a debit card allowing for the withdrawal of cash and the carrying out of electronic payments. However, an overdraft facility or overrunning would not be part of a basic payment account. Access to credit would not be considered as a component of or a right related to a basic payment account, whatever the purpose or the form of the credit. Flexibility for adaptations The purpose of the list would be to guarantee a common base throughout the EU and would not per se prevent Member States or payment services providers depending on the national systems from extending the range of services or functionalities offered together with a basic payment account, provided that the latter is also offered on a stand alone basis. In any case, access to a basic payment account could not be made condititional on the purchase of additional services. Setting the characteristics of a basic payment account could require the development of more detailed technical guidance or clarification at a later stage. The services and functionalities mentioned above for inclusion in a basic payment account are correct. Another crucial element is that a basic payment account should be linked to the banks clearing system. This would enable customers to access their money through the ATM machines of different financial institutions and to make payments to accounts in other institutions. To facilitate budgeting by low income groups, the account could also provide the facility for making weekly/monthly payment of general utility bills. The Department agrees, in principle, that there should be no overdraft facilities provided in a basic payment account. However, in certain circumstances depending on the consumer s record of deposits/withdrawals a certain flexibility could be extended to low income consumers to withdraw a limited amount of additional funds than is available, for certain urgent needs (say a family bereavement) but with the prior consent of the financial services provider. However, this facility would only be available to a consumer who has successfully operated a basic account for a defined period of time. It would not be available from the date of opening of the account. Interest rate charges for such extra withdrawal would have to be minimal or nil in the case of a very short period of overdrawal. 2

3 Access to a basic payment account Accessibility Any consumer could have the right to access to a basic payment account, whatever his nationality or the place of his residence in the European Union. Criteria such as the level or regularity of income, employment, credit history, level of indebtness, individual situation regarding bankruptcy or future activity of the account could not be taken into account for the opening of a basic bank account. Possible restrictions to the access to basic payment accounts Access to basic payment accounts could be restricted in the event that the consumer who chooses to open a basic payment account already has one payment account in the same Member State. Access to basic payment accounts would be provided unless such access is contrary to public policy or public security obligations. The principle of access would be without prejudice to the European legislation on the prevention of the use of the financial system for the purposes of money laundering and terrorist financing, in particular regarding due diligence requirements concerning the identity of the client. As mentioned in page 1 of our observations, the Department of Finance believes that further examination of the basis for granting a right to open a basic payment account is needed by the Commission. 1 2 in relation to the Guidance Notes under the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 are relevant here. Issue of Cost Cost for the consumer A basic payment account should be available at a reasonable cost. The notion of reasonable cost could require the development of more detailed technical guidance or clarification, at a later stage The Department agrees that the cost of a basic payment account should be reasonable and affordable. Given varying circumstances in the Member States, this issue could be developed further by each Member State. Consideration could be given, for example, to granting a low rate of interest to consumers who keep a certain minimum balance in their basic payment account. General information concerning basic payment accounts Raising awareness 3

4 Measures to raise awareness among the public about the availability and the features of basic payment accounts could be required, thus contributing to a more effective access to basic payment accounts. General information on basic payment account When choosing to open a payment account, consumers should be given understandable information by payment services providers on, at least: the availability and the features of a basic payment account; the content and the conditions of use of a basic payment account, in particular the fact that the purchase of any additional service is not required on order to obtain a basic payment account; the cost of the payment transactions. Measures on general information should be without prejudice to the requirements laid down by Directive 2007/64/EC concerning These are all reasonable and worthwhile suggestions and the Department of Finance agrees with them. Relevant authorities in Member State such as the National Consumer Agency in Ireland will have a role to play along with the financial services institutions. Monitoring and out-of-court dispute resolution Monitoring Competent authorities would be appointed and rules on penalties should be laid down at national level Out-of-court dispute resolution mechanism Transparent, non-discriminatory, simple and inexpensive out-of-court procedures should be available for dealing impartially with unresolved disputes between consumers and providers, without prejudice of any legal protection afforded by national law. These procedures could not hamper the establishment of complaint offices to facilitate to access dispute resolution by consumers. The Financial Services Ombudsman can investigate, in an impartial and independent manner, complaints from individual customers and small business who have unresolved disputes with financial services providers which are regulated by the Central Bank of Ireland or are subject to the terms of the Consumer Credit Act The Act, under which the Financial Services Ombudsman was created, provides that the Ombudsman must be independent in the execution of functions relating to the adjudication. Decisions of the Ombudsman are only appealable to the High Court. 4

5 The Ombudsman can award compensation of up to 250,000 where a complaint is upheld. The role is therefore a quasi-judicial one and whether a complaint can be upheld or not is determined on the basis of evidence furnished, examined and reviewed. It is not considered necessary to set up a further mechanism to examine disputes involving basic payment accounts. The Financial Services Ombudsman has no jurisdiction over financial services providers in other Member States. However, Ireland is prepared to offer assistance and to co-operate in the resolution of any disputes regarding basic payment accounts that may arise in another Member State. Financial Services Division Department of Finance Merrion Street Dublin 2 Ireland Tel: Fax: any queries to: Joan.Daly@finance.gov.ie 19 November