Irish Banking Federation (IBF) Response to the European Commission Consultation on Bank Accounts. Interest Representative Register ID:

Transcription

1 Irish Banking Federation (IBF) Response to the European Commission Consultation on Bank Accounts Interest Representative Register ID: Monday, 11 th June 2012

2 Introduction The Irish Banking Federation (IBF) supports the objective of the consultation paper and welcomes the opportunity to respond. At present in Ireland, a number of initiatives are already operational or implementation is ongoing with regard the three areas highlighted in the Commission s Consultation Paper. 1

3 Transparency 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? In Ireland, IBF members provide detailed information leaflets for personal customers on current account fees and charges in a clear and transparent format. Under the statutory Consumer Protection Code, introduced by the Central Bank of Ireland, banks are required to display a schedule of fees and charges, in their public branches, in a manner that is easily accessible to consumers. In addition, before providing a product to a consumer, banks must provide the consumer with a breakdown of all charges which will be passed on to the consumer. Furthermore, existing rules in Ireland under the Consumer Protection Code include those rules relating to payment accounts set out in the Payment Services Directive (PSD) and in some instances those rules go further than the PSD. The Irish National Consumer Agency currently hosts a website called One of its most popular features is its cost comparisons, which include a personal current account comparison. This feature is maintained with live feeds from the banks. There are many different cost structures outlined, including several free banking options, which provide a number of choices available to the customer to choose an account that best suits his/her requirements. The Central Bank of Ireland also conducted a review of personal current account charges in 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? It is our view that standardising bank fee terminology at national level is more realistic than at EU level. However, if standardisation were to be formalised at EU level it should only cover a selection of most commonly used charges. For example, IBF members have contributed to the compilation of a list of 15 common top services as part of ongoing communications with EBIC. 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? Within the Irish market, terminology associated with bank fees is largely standardised and on that basis, it is our view that generic glossaries would not necessarily facilitate comparability. However, if standardised material was required to be developed at domestic or EU level a joint approach between the IBF, as the representative body of the banking sector in Ireland, and the National Consumer Agency would be the appropriate parties to drive out the development of such documentation at a national level. 2

4 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; Yes - reference is made above under Q. 1 to the cost comparison website currently managed by the National Consumer Agency in Ireland. ii. iii. iv. Standardised cost simulations to be provided by banks; Yes, however it is our view that representative examples would be more adequate. Standardised representative examples to be provided by banks; Yes - these can be very helpful. Surveys by consumer organisations/financial ombudsman; Yes - surveys can be beneficial. v. Any other tools you consider relevant? No. Should any of them be made compulsory? What would be the likely costs? It is our view that comparison websites and standardised representative examples should be compulsory - the provision of the former from an external, independent body would be of benefit to the consumer by providing examples of average, medium and high users and the relevant fees attached, while the latter should be provided by the banking sector on the basis of industry-agreed representative scenarios. 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 cross-border basis? Information on fees should summarise the account usage data and should be provided to the customer at the end of each billing cycle, typically on a quarterly basis. We do not believe that providing comparable information on fees paid would necessarily encourage customer mobility. Rather, the information provided by way of the comparison websites and representative examples mentioned above would provide consumers with the information required to inform such a decision. 3

5 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. It is the view of IBF members that other measures or instruments are not required in order to improve the transparency and comparability of bank fees. 4

6 Switching The banking industry in Ireland is subject to a statutory Switching Code, compliance with which is monitored by the Central Bank of Ireland. The Code of Conduct on the Switching of Current Accounts with Credit Institutions applies to current accounts held by consumers where a customer wishes to switch his/her current account, together with the active direct debits and standing orders on that account, from one credit institution to another. The success of this Code of Conduct is reflected in the recently published European Commission report on switching. According to the report, mystery shoppers in a number of EU member states including Ireland were more likely than the EU average to receive key information on the process of switching. The report also points to findings that three quarters of mystery shoppers did not have any difficulties finding information on switching and the report references Ireland in particular in this regard, stating that in Ireland the subject of switching was shown as a clear topic heading. In addition, it was reported that Shoppers making their enquiry about switching were most likely to receive step by step information from bank staff in Ireland (83%). 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 statutory Code referred to above is in line with the Common Principles for Bank Account Switching and as per the requirements of the Common Principles, information is provided in a consumer-friendly manner. 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. The switching service removes a lot, but not all obstacles. On some occasions, a difficulty can arise with DD Originators not conducting the necessary actions in a timely manner. DD Originators are a key part of any account switch, but are currently excluded from sanction under the regulations. 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? As set out above, account switching is on a statutory footing in Ireland. On that basis, it is the view that making the Common Principles compulsory at EU level would have limited advantages from our perspective. 5

7 Question 10: Should switching principles/measures also cover cross-border switching of bank accounts? No. Because of the nature of account switching, it is felt that the principles covering it should only apply at national level. This is particularly so in the absence of any data suggesting that there is latent need for such an approach. 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? IBF members are required to comply with the Code of Conduct on the Switching of Current Accounts with Credit Institutions, which includes timelines within which various processes associated with switching must be completed. However, the possibility of misdirected payments is a key risk associated with account switching and a solution to the issue mentioned above in relation to DD Originators would make the process more certain and cohesive. 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? It is our view that any such obstacles faced by account providers are linked to new regulatory regimes and the cost and route/channels required to gain critical scale. In general, it is our view that switching facilities are not an obstacle for account providers in entering new markets. Question 13: What other measures should be considered to improve bank account switching? Please describe. The statutory Code in place in Ireland provides for a consistent process regarding account switching and as such, no further requirements are necessary. 6

8 Basic Bank Accounts On the Financial Inclusion agenda, the Irish Banking Federation (IBF) has been fully engaged in discussions with the Irish Department of Finance over the last number of years. More recently, the recapitalised banks have committed to broaden the provision of basic or introductory bank accounts and in that regard the focus has been on developing a proposition for a Basic Payment Account (BPA). It is hoped this will successfully advance financial inclusion by introducing consumers who do not already have a payment account to basic banking, and to act as a stepping-stone to more advanced financial products such as savings and insurance. A specification for the BPA was formally signed-off with the Department of Finance in December 2011 and development of the product is ongoing in the participating financial institutions. The Pilot Phase of the project is due to launch at the end of June 2012 for a period of 6 months. 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? Currently, a basic bank account is not provided by banks operating in Ireland. Work is ongoing however to engage in a pilot phase at the end of June, with a current plan for national roll-out of a basic bank account in Once the pilot is underway, qualitative analysis will be undertaken to identity any difficulties arising with regard to opening and using the BPA. 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? As above, the Irish Banking Federation (IBF) has been fully engaged in discussions with the Irish Department of Finance over the last number of years. The focus has been on developing a Basic Payment Account (BPA), which is hoped will successfully advance financial inclusion by introducing consumers who do not already have a payment account to basic banking, and to act as a stepping-stone to more advanced financial products such as savings and insurance. Question 16: Do these measures also facilitate access to a basic payment account for non-residents? The specification for the Basic Payment Account is based on availability for Irish residents only. Question 17: If consumers still have difficulties in opening a bank account, what are the reasons for that? As per Q.14 above, a basic bank account is not currently available in Ireland. encountered would be determined post-pilot. Any difficulties 7

9 Generally, it would be our view that customers are not having difficulties in opening a bank account per se - it would rather be the case that many people choose to carry out transactions with cash and not via a bank account. Question 18: If more needs to be done what additional measures should be envisaged? Should the problem be tackled at national or EU level? Once all markets have a basic bank account offering, we do not envisage that any additional measures would be required at EU level. At national level, further to the review of the Pilot Phase of the BPA project, should it be highlighted that further measures are required these will be considered and progressed as appropriate before a national roll-out of the basic bank account. 8