The Payment Accounts Directive aims to improve the transparency and comparability of fee information about payment accounts (including current accounts), help people switch payment accounts, and ensure every EU resident has access to a basic bank account.
Payment Accounts Directive
The EU Payment Accounts Directive (PAD) was adopted in July 2014. Its main aim is to help the EU internal market for payment accounts work well.
It seeks to improve:
- transparency and comparability of fee information about payment accounts to make consumers more aware of the fees and charges applied by account providers. It will also make it easier to compare account offerings, which may lead to more competition and better deals for consumers.
- switching of payment accounts by establishing minimum standards, to make switching more attractive to consumers and promote competition.
- access to basic bank accounts to ensure that all consumers legally resident in the EU have access to basic banking services, whatever their financial situation, to reduce financial and social exclusion.
This contributes to our objectives of ensuring an appropriate level of consumer protection and promoting effective competition in the interests of consumers.
Payment Accounts Regulations
The government has implemented PAD by means of the Payment Accounts Regulations 2015 (PARs). In line with the Directive, the provisions of the PARs on packaged accounts, switching and basic bank accounts took effect in the UK on 18 September 2016.
Most of the provisions on transparency and comparability of fee information come into force at a later date. At the present time, we anticipate this will be in 2018. The precise date is dependent on the date of entry into force of a European Commission delegated act.
Who this affects
The parts of the PARs relating to fee information and switching benefit consumers who have a current account or other type of payment account (including packaged accounts), or are considering opening one.
The provisions on basic bank accounts ensure all consumers can access basic banking services throughout the EU, regardless of their nationality or place of residence.
Further information about access to basic bank accounts can be found on the Money Advice Service website.
The provisions of the PARs on fee information and switching are to be applied by payment service providers (including banks and building societies) in respect of the payment accounts they offer to consumers. The PARs cover accounts that provide consumers with certain functionalities:
- placing funds in the account
- withdrawing cash from the account
- executing payment transactions to third parties, including credit transfers
- receiving payment transactions from third parties
All payment service providers should consider whether they offer accounts that fall within the scope of the PARs. To assist providers with this task, we have issued guidance on the definition of a 'payment account' in the PARs.
The obligation to offer basic bank accounts (also called 'payment accounts with basic features') applies only to credit institutions designated by HM Treasury under the PARs. For information on the designated institutions, see the HM Treasury website.
A payment account with basic features must provide the functionalities set out in the PARs and be available free of charge. Designated credit institutions must provide these accounts to at least the consumers meeting the eligibility criteria defined in the PARs.
The FCA and PAD
Handbook changes and guidance
The PARs required some changes to our Handbook. In March 2016 we published a Consultation Paper on the PARs.
Having considered respondents' feedback, we published a Policy Statement on the PARs, the final Handbook changes and finalised guidance on 1 August 2016.
In summary, we have:
- issued guidance on the definition of a ‘payment account’ under the PARs
- issued guidance on the implementation of the PARs provisions on packaged accounts
- introduced new regulatory reporting requirements in relation to switching and payment accounts with basic features
- made minor Handbook changes in order to take account of the provisions in the PARs on packaged accounts and switching
- updated our Decision Procedures and Penalties Manual (DEPP) and Enforcement Guide (EG) to reflect the powers of enforcement we have been given under the PARs
Standardising terms and definitions
PAD also introduces a requirement to standardise terms and definitions to describe the key services that are linked to payment accounts and subject to a fee. This process has a number of stages, some of which are performed at national level, others at EU level.
As part of this process, we are required to develop a list of the key services linked to payment accounts in the UK. We published a Call for Input in June 2015 asking for views on the services we propose to include on the list, and terms and definitions to describe them.
We published a Feedback Statement in September 2015 in which we summarise the feedback we received to our Call for Input and explain how we have used it to finalise the provisional UK list of services, terms and definitions.
As required by PAD, we submitted the provisional UK list to the European Commission and the European Banking Authority (EBA) in September 2015.
Handbook changes and guidance: what you need to do
The provisions of the PARs on packaged accounts, switching and payment accounts with basic features came into force on 18 September 2016. Our Handbook changes came into effect on the same day.
Payment service providers that offer, or are planning to offer, payment accounts within the meaning of the PARs should ensure they comply with the PARs and Handbook changes. They may also find it helpful to familiarise themselves with our guidance:
- guidance on the definition of a 'payment account' under the PARs
- guidance on the implementation of the PARs provisions on packaged accounts
Standardising terms and definitions
Each EU Member State submitted a provisional list of 10 to 20 terms and definitions to the EBA in September 2015. Following a public consultation, the EBA will standardise the terms and definitions for the services that appear on the lists of at least a majority of EU Member States. The EBA will then submit these to the European Commission as draft regulatory technical standards (RTS). The Commission will then adopt the RTS as a delegated act.
The final step in the process will be for us to integrate the EU standardised terminology into the provisional UK list and publish the resulting final list. We are required by the PARs to publish the final list at the latest within 3 months of the entry into force of the delegated act.
Payment service providers will have to use the terms on the final list 6 months after we publish the final list. They will also have to provide consumers with a pre-contractual fee information document and an annual statement of fees. We currently anticipate this will be in 2018.