SUBJECT: Directive 2014/92/EU – the Payment Accounts Directive (“PAD”).
The PAD sets common regulatory standards that member states are required to meet in order to:
- improve the transparency and comparability of fees related to payment accounts that are used for day-to-day payment transactions;
- facilitate switching of those accounts;
- ensure access to bank accounts with basic features.
PAD was published in the Official Journal of the European Union on 28 August 2014 and Malta is required to transpose it by 18 September 2016. The transposition of PAD will require the government to make new secondary legislation in virtue of enabling powers set out in the Banking Act and the Financial Institutions Act.
Below, is an outline of the essential aspects arising from the draft regulations which shall be called ‘Credit and Financial Institutions (Payment Accounts) Regulations, 2016.’
Part 1: Introductory Provisions
Article 1(5) of the Directive allows member states to exempt certain entities, from the application of its provisions. Malta has used this discretion when drafting the regulations and as a result has omitted the Central Bank of Malta from the scope of such, under regulation 2(2) (b). In order to provide more clarity, the regulations comprise a number of definitions which are not provided in the PAD.
Part 2: Comparability of fees connected with payment accounts
Comparison of fees and charges
Malta has already implemented a comparative online database of all bank fees and charges through the MFSA’s MYmoneybox consumer portal in furtherance of the Authority’s function to promote general interests and legitimate expectations of consumers of financial services and to promote fair competition practices.
PAD requires further measures with respect to developing and clarifying the information available to consumers:
- Each member state is to establish a list of the most representative services linked to payment accounts in their territory. This ‘provisional national list’ must consist of between 10 and 20 services that subject to a fee, and contain both terms and definitions. Each Member State has already submitted its list to the European Commission. The EBA is now developing EU standardised terms and definitions in respect of the services that appear on at least a majority of member states’ national lists.
- Some terms and definitions contained in the provisional national list may have to be replaced by standardised terminology following the adoption of the EU terms and definitions by the European Commission.
- EU standardised terms should be use for the compilation of a Fee Information Document given to consumers free of charge.
- An annual Statement of Fees setting out all the fees incurred and interest rates that applied to the account during the previous year is also required to be provided to the customer.
PAD requires that consumers have access to at least one comparison website that is independent and clearly discloses its owners and the criteria on which the comparisons are made. The MFSA’s Mymoneybox portal precisely fulfils this functions. Once the list of standardised terms has been agreed and is in place in Malta, the portal will be updated with these terms accordingly.
Part 3: Switching
Switching of accounts by consumers provides a strong incentive for banks to compete, harness new technology and improve services for their customers. The switching requirements set out in Article 9 to 14 of PAD provide Member States with a blueprint for a basic switching regime which place obligations on the transferring service and the receiving service provides. The timeframe for a switch as set out in PAD is twelve days.
Part 4: Access to Payment Accounts
Payment accounts with basic features
Under PAD, consumers legally resident in the EU have a right to open and use a payment account with basic features irrespective of the consumer’s place of residence. This application should be processed without undue delay and the account should be opened or refused within ten working days after receiving a complete application. PAD sets out the characteristics of a payment account with basic features and a route to challenge banks’ decisions if access to such account is not granted.
Grounds for refusal to open a payment account with basic features or terminate a framework contract for such an account
Member States shall ensure that credit institutions refuse an application for a payment account with basic features, or close an existing accounts, where:
- Opening or allowing it to remain open would infringe domestic laws implementing EU Directive 2005/60/EC on the prevention of money laundering and the countering of terrorist financing;
– The consumer:
- Has deliberately used the account for illegal purposes;
- Has not performed a transaction on the account for more than 24 months;
- Has provided incorrect information in order to obtain the account;
- Is no longer resident in the EU; or
- Has opened a second account with at least the same features as a basic bank account.
Part 5: The Malta Financial Services Authority
This section outlines the monitoring, enforcement and reporting obligations of the MFSA in regard to these draft regulations.
Kindly find a copy of the Consultation here.