What's News in the EU: EC welcomes new rules on switching bank accounts

The new rules have been developed in response to an invitation from the Commission announced in the "Single Market for 21st Century Europe" package.

By ARI SYRQUIN
eu flag 88 (photo credit: )
eu flag 88
(photo credit: )
The European Commission this week welcomed the European Banking Industry Committee's (EBIC) adoption of a set of "Common Principles for Bank Account Switching," which will make it easier for consumers to switch their current account from one bank to another within their own member state. The Commission said this represents a tangible benefit for consumers and should help to boost competition on the European retail banking market. The new rules have been developed in response to an invitation from the Commission announced in the "Single Market for 21st Century Europe" package. The principles will apply in each member state starting November 1, 2009. According to the principles, if a consumer wishes to change banks, the new bank will act as the primary contact point and offer its assistance throughout the switching process. It will deal with the old bank, ensuring that the transfer of the consumer's recurrent payments, such as direct debits and standing orders, is done smoothly and rapidly. The new bank will also either help the consumer to inform the relevant third parties, such as utilities providers, about the new bank-account details or do that itself. Finally, the new bank will assist the consumer in closing the old account and transferring the remaining balance to the new account. The old bank will generally not charge the consumer for providing standard information about the consumer's recurrent payments. The Commission expects that, combined with competitive market forces, this principle will lead to a situation where the whole switching process generally will be free of charge for the consumer. Monitoring by national banking associations and third-party evaluation is also included in the principles. Main features of the new rules Banks are required by the new common principles to provide consumers with a switching guide, which will explain to them what steps need to be taken in the switching process, by whom and within which time frame. Consumers who want to switch their bank account will be permitted to choose the new bank as a primary contact point, which means that the new bank will act as an intermediary between the consumer and his/her old bank, as well as some creditors. In particular, the new bank will get the necessary information about the consumer's recurrent payments from the old bank and ask the old bank to terminate these payments on the old account. It will reinstall these recurrent payments on the new account and will either inform the third parties about the consumer's new account details or assist him/her in doing so. It will also assist the consumer in requesting the old bank to close the old account and transfer the remaining balance. The common principles set clear deadlines for the old and new bank. The old bank has to provide all the available information about the consumer's recurrent payments within seven banking days upon receiving the request either from the new bank or from the consumer. The new bank has to set up recurrent payments on the new account within seven days of receiving the necessary information. Within the same seven days the new bank will either inform third parties about the consumer's new account details or assist him/her in doing so. The provision of information on recurrent payments by the old bank to the consumer and to the new bank will generally be free of charge. The closure of the old account generally will be free of charge, in line with the payment-services directive. Fees, if any, for other switching-related services will be appropriate and in line with costs. Compliance with the principles will be monitored by the national banking associations. There will also be an evaluation process conducted by either a body involving national consumer associations or an independent body. The EBIC said it would undertake a review process one year after the entry into force of the principles at national level and will regularly inform the Commission and consumer associations about their operation. syrquin@013.net Ari Syrquin is the head of the International Department at GSCB Law Firm.