I. Transparency and comparability of bank account fees

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1 I. Transparency and comparability of bank account fees Question 1: Do you consider that the information provided by banks on bank account fees is presented to consumers in a sufficiently clear manner and easy to compare between banks? What good practices could you identify? What are the persisting shortcomings? Do you think that amendments to the transparency obligations in the Payment Services Directive (2007/64/EC) could address those shortcomings? The HFSA during its financial consumer protection monitoring activity often finds that the fee structures applied by financial institutions are opaque and difficult to compare. This problem was especially marked in the HFSA s financial consumer risk reports published recently 1. The main problems in the Hungarian market are as follows: Banks use different terminology for the same practice. On the other hand, the fee structures at first sight seem similar, but consumers must meet specific conditions to be able to have better price for the product. These special, detailed conditions are mostly placed as additional information in the footnote. Thus the fee structure became significantly different because of these extra information. If the consumer wants to calculate the exact fees and costs they may find difficulties. Referring to the above, in HFSA s view, generally speaking, fees are not presented to consumers in a sufficiently clear manner and fees and products are not easily comparable. One solution for this could be an obligation for financial institutions to present bank account fees and conditions in a clear, standardised and easy to compare manner. According to the HFSA the amendment of the Payment Service Directive could help to eliminate these shortcomings possibly by stipulating the usage of a standardised information sheet. In the HFSA s viewpoint the amendment should be well-prepared and the involvement of the relevant stakeholders is crucial. Question 2: Do you think that standardising bank account fee terminology could help to provide more transparent and comparable information on fees? If terminology were to be standardised, should that standardisation cover all fees or only some of them? If only some of them, on the basis of which criteria should they be chosen? Should terminology be standardised at national or EU level? HFSA strongly believes the standardisation of bank account fee terminology would help to provide more transparent and comparable information on fees. The standardised terminology should be implemented at least at national level and should cover all the relevant fees. If the standardisation covered only some of the fees for example the most typical fees that can be different in every country it could not provide the transparent and comparable information, because the standardised fees can be different in the different countries or irrelevant in 1 The HFSA s financial consumer risk report, September 2011, p. 27, The HFSA s consumer protection risk report, March 2011, p ,

2 some countries. This situation may be disadvantageous in the international switching between payments account providers. Question 3: Do you think that glossaries of terms and standardised lists of bank fees would facilitate comparability? If so, what format and content should this information have? What body/forum would you consider appropriate to develop such a glossary/standardised list of fees? According to HFSA s opinion glossaries of terms and standardised lists of bank fees would certainly facilitate comparability. The format and the content should have a uniform layout (e.g. it may be similar to the so-called Key Investor Information (KIID) that the investment funds are obliged to use). The HFSA however finds it crucial that the document and its content are well-prepared e.g. all the stakeholders (authorities, consumer groups, financial institutions) are involved in the preparation from the earliest stage. Setting up a special task force for example for preparing the glossary and/or the standardised list of fees would be of great use. The members of the task force could be as mentioned above representatives of service providers, banking associations, authorities and consumer protection associations. Such a task force through its members would have a lot of professional information, experience and the members could take many aspects into account. Question 4: In order to further increase bank account fee transparency and comparability, which of the following tools should be considered: i) comparison websites managed by public authorities ii) standardised cost simulations to be provided by banks iii) standardised representative examples to be provided by banks iv) surveys by consumer organisations/financial ombudsman v) any other tools you consider relevant? Should any of them be made compulsory? What would be the likely costs? In HFSA s viewpoint, the first three options (comparison websites, standardised cost simulations and standardised representative examples) would help to increase the transparency and comparability of the bank account fee and these tools could even help consumers make the correct choice and the responsible decision on switching among bank accounts. HFSA has negative experiences about self-regulations in this field so far; self-regulatory tools are not sufficient enough and are not effective. We believe that the interest of consumers can be protected effectively with strong consumer protection rules which can be enforced. The likely cost of making comparison tools available would be as follows: the development of the comparison websites and the data reporting platforms, operation of comparison websites, data reporting, development of the new brochures, and development of institutional systems for the adequacy of the regulations. Please be advised that the HFSA is currently working on an account package(s) and the related financial services selection tool (comparison tool). The HFSA plans to launch this application on its website by the end of The application will be based on the obligatory data reporting of financial institutions ordered by the President of the HFSA. The HFSA incurs the costs of the development of 2

3 the data reporting platform, the development of the user platform and the operation. Institutions incur the cost of data reporting and the development of their in-house IT systems. Question 5: What level of detail should the information on actual fees paid have and how frequently should it be provided to the account holder? Would having comparable information on the fees actually paid encourage consumer mobility, including on a crossborder basis? In our opinion, consumers are sensitive about costs, fees and the standard of services. Thus detailed information on actually paid fees would certainly encourage the switching. The information on actually paid fees should be detailed, for example the statement should include every transaction and their fees. According to the Hungarian legislation which is fully harmonised with the PSD the account holder gets the statement at least yearly over the previous 12 months either on paper or in electronic form as it is required. However the best practices would be if the financial institutions present a monthly statement on the Internet for their consumers having Internet bank service. The monthly information would be more useful for consumers because they usually get their wages or social benefits monthly, pay bills monthly so they could calculate this cost more consciously and make considered decisions. Question 6: What other measures/instruments should be considered in order to improve the transparency and comparability of bank fees? Please describe and indicate at which level (national or EU) you consider they should be taken. HFSA issued a recommendation on general consumer protection ( in which the HFSA stipulated the following as best practice: Financial organisations should offer the possibility for consumers to compare an institution s products provided the institution offers multiple variants of the given product with different conditions. Financial organisations are expected to verbally present the product and its features as comprehensively as possible, and, in written communications, to set out the key comparative features in chart-form or any other clear and easily understandable format. Organisations should preferably avoid behaviour whereby they present their own product as the most favourable without evidence to support the claim (e.g. they should instead offer comparison with another service provider s product). Such behaviour carries the inherent risk of deceiving consumers. These practices could be considered at EU level as well. II. Switching between payments account providers Question 7: Do banks in the Member State where you have a bank account offer a switching service? If yes, is it in line with the Common Principles on bank account switching described above? Is information on the conditions of switching presented in a consumer friendly manner? The Hungarian Banking Association developed a self-regulatory recommendation in connection with bank account switching. About 40% of the financial institutions have joined this recommendation since its issuance in The recommendation stipulates how to offer switching service, what steps the concerned institutions should take, how the consumer should be informed about the steps of switching. The written information practice of the joined financial institutions however is not so consumer friendly since the published information on their webpage is hard to find. The content of this recommendation mostly suits the principles of the Common Principles; nevertheless the 3

4 recommendation does not include all the principles the Common Principles stipulates, e.g. fees or cost of the bank account switching. Question 8: If a switching service in line with the Common Principles is offered by banks in the Member State where you have a bank account, does it remove all obstacles to bank account switching? If not, what obstacles remain? Provide examples of good practices and persisting obstacles encountered. See answer to Q7 above. Question 9: Should the Common Principles remain voluntary? What do you consider are the advantages or disadvantages of making them compulsory at EU level? What would be the likely costs? No, according to our experiences the self-regulations themselves and with the Hungarian Banking Association recommendation on bank account switching self-regulations are not effective enough, and are not consumer friendly. Advantages of making Common Principles compulsory: The interest of consumers can be protected effectively with strong consumer protection rules which can be enforced. The international bank account switching or bank switching will be available or if it has already been accessible it could be done far easier by the common principles at the EU level. Disadvantages of making Common Principles compulsory: The national practices might be different and they need to be synchronised. So it is important that the amendment is well-arranged. The likely cost would be the development of institutional systems and in-house IT systems for the adequacy of the regulations (development of the new brochures). Question 10: Should switching principles/measures also cover cross-border switching of bank accounts? Yes, see Q9 above. Question 11: According to you, how important is the risk of having receipts, bills and payments misdirected when switching bank accounts? What measures could be considered to make the switching process safer? If the rules are obligatory and enforceable, financial institutions aim to follow the requirements of the regulations. This way proper consumer-handling may materialize. The on-going internal control and the prompt and proper handling of the problems could help to make the switching process safer as well. Question 12: What obstacles, if any, are still faced by account providers that are smaller or established in another Member State to expand their client base or to enter new markets? Are these connected to problems with switching facilities? The likely obstacles would be: These institutions usually have smaller budget. The number of their staff is lower or their services are sold only on Internet. Question 13: What other measures should be considered to improve bank account switching? Please describe. 4

5 As other measures the following could be mentioned: HFSA supports the idea of making the number of the bank account portable and it would be desirable to make the process of the administration as simple as possible. III. Access to a basic payment account Question 14: Do you dispose of information on consumers encountering difficulties in access to a basic bank account? What types of obstacles are signalled by the consumers preventing them from having access to a basic bank account? The HFSA does not dispose of direct information on consumers encountering difficulties in access to a basic bank account. In general, HFSA s information and experiences are similar that can be found in the consultation document. Question 15: Are you aware of any measures taken by banks or other institutions in the Member State where you have your residence to facilitate access to a basic payment account? Have these initiatives been successfully enforced? Yes, the Hungarian Banking Association developed a self-regulatory recommendation in connection with basic payment accounts in April Less than 10% of the relevant institutions (only 15) have joined this recommendation since its issuance. This recommendation does not include all the principles that can be found in the Recommendation of the European Commission. HFSA has identified many shortcomings of this recommendation thus the HFSA does not consider this recommendation giving proper guidelines and is not a consumer friendly and efficient enough tool in connection with basic bank account. Question 16: Do these measures also facilitate access to a basic payment account for non-residents? The recommendation mentions non-residents so the financial institutions joined to the recommendation are obliged to offer basic bank account to non-residents however as mentioned above, the recommendation of the Banking Association is only relevant for those who joined. So the non-resident status is still a problem at most banks. 5