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The European Commission has drafted a regulation designed to force open the market for bank accounts and promote more switching among consumers seeking better deals at other credit institutions.
In draft proposals seen by MLex, the commission lays down rules which would enable a customer to deal exclusively with his new bank of choice while obliging the old bank to provide “all information deemed necessary” to switch accounts.
This could include information on standing orders, direct debits, and regular incoming credit transfers.
The new bank would be obliged to reinstall all the recurrent payments within five working days for individual consumers and within ten working days for small businesses. It would also have to “inform the customer's creditors and debtors [...] of the new account number” within five working days.
The draft regulation, discussed yesterday by member states, also stipulates that switching should be free of charge – a move likely to upset the industry.
The commission's sectoral enquiry completed at the beginning of 2007 first flagged up the competition problems around bank account switching. While antitrust laws were not deemed the correct tools to address the problem, the industry was given time to come forward with a self-regulatory 'code' to aid switching.
It appears that talks with the commission were not extensive enough to quell the commission's fears that banks would fail to commit to the standards laid out in the code, which was slated for submission by 28 June.
DG Internal Market is therefore understood to be proceeding with hard law even before the code's end-June deadline lapses in a last attempt to coerce the banking industry.
There are still questions over which accounts would be included within the scope of the regulation. The commission uses the term 'payment accounts' which some understand to exclude certain kinds of accounts not designed for the direct execution of payment transactions.
The draft regulation also requires member states to “ensure that adequate and effective out-of-court complaint and redress procedures for the settlement of disputes between customers and credit institutions are put in place”.
Throughout 2006 and 2007 the commission hosted expert groups to look into how obstacles to customer mobility could be overcome, producing a final report this time last year. The group provided 37 recommendations on possible action.