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eu commission consults on basic payment accounts October 6, 2010

Posted by Bradley in : consultation, consumers , trackback

The Commission has published a consultation document inviting stakeholders to comment on the idea of EU rules for basic payment accounts. The closing date for submissions is 17 November, and the consultation period is stated to be short because of a broader consultation last year. Some comments last year suggested that this was an issue self-regulation could not fix because those who are excluded from establishing bank accounts may not fit within banks’ economic models (see, e.g., comments of The Financial Inclusion Centre and Community Development Finance Association; Pour la Solidarité; Which?). In contrast, the Austrian Federal Economic Chamber argued that:

Forcing providers to offer a product by law is a tremendous interference with their private autonomy. Therefore, such an obligation must be rejected. Beyond that, a “one-size-fits-all” solution is not the appropriate approach for the issue at stake. The degrees of financial exclusion and the reasons for this exclusion vary significantly among the Member States. The appropriate response to the problem of financial exclusion can and must be found at the national level.

In the Consultation Document, and without noting that there was some noticeable opposition, the Commission states that the 2009 consultation:

revealed broad support for some EU action which could promote access to basic bank accounts throughout the Community.

Some action perhaps, but what should it look like? How to fix this issue through regulation? In order to ensure accessibility (but subject to the need to act to prevent money laundering and terrorist financing):

Criteria such as the level or regularity of income, employment, credit history, level of indebtedness, individual situation regarding bankruptcy or future activity of the account could not be taken into account for the opening a basic payment account.

The document suggests that the cost of basic accounts should be “reasonable”. This term is so far undefined, although the document suggests it may be defined later. The problem of charges for basic accounts was raised last year and could have merited some more detailed thought already, so this is disappointing. In thinking about the question of how to define “reasonable” charges for basic accounts one might focus on the comments of Which? that:

Banks are not charitable institutions but charging consumers fees for basic bank accounts would undermine the basis of BBAs: to achieve the aim of universal banking for all EU citizens.

On the other hand, the Irish Banking Federation argued that it would be inappropriate to regulate charges:

Although yet to crystallise in an official capacity, the features of a basic bank account being mooted in Ireland include no account-keeping fees, and no or low-cost transaction fees. However it would be
inappropriate for providers to be instructed as to the basis upon which they should construct their business
model as this is clearly a business decision.

So the Commission’s choice to use an indeterminate term such as “reasonable” looks like an attempt to postpone the arguments over charges to a point in time after the basic idea of EU rules on basic bank accounts has been agreed.

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