EU Consultation: Access to a Basic Payment Account. ecdn RESPONSE November 2010

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1 ID-No: The European Consumer Debt Network is a European civil society network built on the experiences and expertise of debt advice organisations, consumer agencies, financial educators, alternative financial service providers and researchers from 19 countries from across Europe. ecdn aims to make the fight against over-indebtedness and financial exclusion more effective and to bring forward a social Europe that promotes and safeguards the financial inclusion and well-being of all its inhabitants. For more information and a list of ecdn members visit Château de Cartier place Albert Ier, Marchienne-au-Pont Belgium President: Dr. Hans W. Grohs ASB Schuldnerberatungen Gmbh Bockgasse 2 b 4020 Linz Austria Tel: Fax: office@ecdn.eu EU Consultation: Access to a Basic Payment Account Vienna, 16/11/2010 ecdn RESPONSE November 2010 General remarks For many years ecdn as a network of debt advice, consumer and social organizations as well as researchers active in the fight against over-indebtedness and financial exclusion has been stressing the need for a legal right to a basic payment account. ecdn thus appreciates and fully supports the Commission's initiative to ensure that every EU citizen or resident shall have access to a basic bank account. As ecdn and its members have repeatedly pointed out, the denial of a bank account is linked to social and financial exclusion and the guaranteed access to a basic bank account also needs to be seen as a central precondition for ensuring the success of debt advice and debt regulation. People without access to a basic account experience multiple forms of discrimination and often have to face exclusion from labour market integration. Without an account there is hardly a chance of getting a job in most of the European countries. As a consequence people lacking a bank account are also more likely to fall into poverty and to Founding Members: > ASB Schuldnerberatungen GMBH > BAG-SB e.v Bundesarbeitsgemeinschaft- Schuldnerberatung > GP Forschungsgruppe > L Observatoire du Crédit et de L Endettement asbl > NIBUD National Institute for budgetinformation > SKEF society for promotion of financial education > Takuu-Säätio (Guarantee Foundation) > SOS Consumer Defence Association ecdn Response, Nov

2 depend on social income. They also have to face disadvantages concerning the access to housing and increased costs for payments. The key principles of access to a basic bank account include the provision of such an account with reasonable costs, including access to a defined list of basic transaction services, and guaranteeing nondiscriminatory access with regards to nationality or the place of residence. This includes the necessity of EU member states to provide the necessary identity documents for all legal residents. Principle Access to a payment account is a precondition to benefit fully from the internal market and contributes to social inclusion. In order to ensure that requests for payment accounts are met in the EU, it is envisaged to establish the right of access to a basic payment account throughout the EU 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 ecdn appreciate and supports the establishment of the right of access to a basic account for all consumers through creating a harmonised framework and also the Commissions target to include all consumers who so far have been (socially and financially) excluded. We however suggest to replace the term basic payment account by simply basic bank account or alternatively basic transaction account to express the fact that such a basic bank account should provide for all basic transactions needed to participate in modern society. Characteristics of a basic payment account While a 'payment account' is defined at Community level, there is no EU-wide definition of what is a 'basic payment account'. Defining the list of functionalities attached to a basic payment account could ensure that the same set of basic payment services are offered throughout the EU and that all consumers are able to operate the essential payment transactions that they need to function in a modern society, improving the quality of their everyday lives and their participation in the internal market. An initiative at EU level should not cover the practical details or the manner in which basic payment ecdn Response, Nov

3 accounts are designed, but could set out a list of essential functions that a basic payment account should fulfill. In this respect, it would be desirable for a basic payment account to enable consumers to deposit cash in and withdraw money from the account and to make essential payment transactions, such as receiving income or benefits, paying bills and taxes and purchasing goods and services. It should also offer the possibility to use physical or electronic means of payment, such as electronic transfers at the branch of the provider, withdrawals at an ATM, etc. 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 basic payment account could not be made conditional 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. ecdn supports the introduction of a basic bank account without overdraft facility or overrunning, allowing however a small buffer zone (of approximately 10 Euro) if needed for practical reasons. As indicated in the proposal, consumers should have the option to receive, place, transfer and withdraw funds (including placing standing orders) and thus have access to the essential payment transactions that are necessary for participating in modern society. This also includes the provision of a debit-card allowing cashless payment and withdrawal of money at cash-points as well as the provision of regular statements The conclusion of a formal and written contract when opening such a bank account - should be compulsory. ecdn also supports the position that access to a basic bank account must not be connected to other compulsory arrangements or to the purchase of any other bank product. This must be also true for the ecdn Response, Nov

4 conclusion of any kind of insurance which in practice often is made a precondition for opening a payment account. Where national regulation provides for a minimum income protection against garnishment or seizure, this protection should be maintained for a basic bank account. Member states without such national regulation should be encouraged to introduce such a minimum income protection regulation together with a basic bank account in order to ensure its full use as an instrument to avoid and fight poverty, social and financial exclusion. Access to a basic payment account In order to facilitate access to payment accounts for those who cannot qualify for regular payment accounts and promote financial inclusion while avoiding stigmatisation, the right of consumers to access at least one payment account in the EU could be achieved by requiring the accessibility of basic payment accounts in each Member State. The conditions for opening a basic payment account could not contain any discriminatory provisions 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 indebtedness, individual situation regarding bankruptcy or future activity of the account could not be taken into account for the opening a basic payment 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 purpose of money laundering and terrorist financing, in particular regarding duediligence requirements concerning the identity of the client ecdn supports the establishment of the right to access to a basic account as described in the Commission s proposal. As we have been repeatedly expressing access to a basic bank account should be considered as a service of general interest. Experiences with voluntary codes of conducts of banks have proved to be non-sufficient. A legal solution to guarantee access and avoid discrimination has been recommended by us for many years. In order ecdn Response, Nov

5 to guarantee the full implementation of the right to access to a bank account, appropriate sanctions need to be imposed in case of noncompliance. We also fully agree that that the level of income and employment, credit history, level of indebtedness or bankruptcy must not lead to deny the opening of a basic bank account. These are the barriers that financially excluded and over-indebted people repeatedly have to deal with and in many cases cannot be overcome at present. We thus appreciate the initiative of the Commission to seize on this problem. Issue of cost In order to ensure effective access to basic payment accounts, such accounts should beprovided at a reasonable cost, which would enable consumers to monitor and controltheir expenditure, depending on the specificities of the national banking sector. 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. ecdn agrees with the proposal that basic bank accounts don t have to be offered for free. Offering basic bank accounts at similar costs as other bank accounts can thereby also be regarded as a contribution to avoid stigmatisation. Furthermore and according to the experiences of debt advice centres and financial education organizations a certain cost awareness is essential with regards to a proper handling of financial products. It is however important, that basic bank accounts are affordable also to people living in or at risk of poverty. A calculation of adequate costs should be based on a mixed-calculation of the totality of all bank accounts in order to ensure that no overpriced products will be offered for problematic groups and basic payment accounts thus must not be offered at a higher price than a standard bank account General information concerning basic payment accounts On the demand side, some consumers may be deterred from accessing and using payment services for a range of psychological, cultural and educational reasons, including lack of understanding of banking products and not knowing of what kind of products could suit their needs and personal circumstances. ecdn Response, Nov

6 Raising awareness 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 in 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 the provision of information to consumers. ecdn certainly will support measures to raise awareness in order to promote the access to basic bank accounts. Experiences in France and Belgium have shown that in order to ensure the full use of the introduction of the right to a basic bank account a well designed public campaign will need to be launched with the introduction of such an account to spread the information of the existence of basic bank accounts. Experience has also proved that it will be important to provide customers with clear and understandable information when opening such an account. This needs to include the information that no purchase of any other product will be required. Comprehensive information delivered by trained staff will be especially needed for people who have never had a bank account before. General awareness raising activities need to highlight the advantages of basic bank accounts for everybody who needs them as well as for the whole of society and also counteract possible stigmatization of those holding such an account.. Monitoring and out-of-court dispute resolution Rules on monitoring and out-of-court dispute resolution mechanisms should be provided in order to ensure compliance with the initiative aimed at guaranteeing access to a basic payment account. 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 ecdn Response, Nov

7 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 access to dispute resolution by consumers. In case such disputes involve parties in different Member States, Member States should coordinate their efforts. ecdn supports the proposal to appoint appropriate monitoring mechanisms and to introduce transparent, non-discriminatory, simple, inexpensive and particularly timesaving out-of-court dispute resolution mechanisms for dealing impartially with unresolved disputes. The establishment and/or maintenance of complaint offices and ombudsmen, which have proved to help customers to claim their rights, however, will remain to be useful and needs to be supported as an additional way to encourage out-of-court dispute resolutions. November 2010 For further information please contact: Michaela Moser ecdn Network Coordinator ecdn Response, Nov