On 23 June 2015 HM Treasury issued a consultation on the steps the government proposes to take in transposing PAD in the UK including a draft of the legislation that will be required.
The European Payment Accounts Directive (2014/92/EU) (PAD) was published in the Official Journal of the European Union on 28 August 2014. Broadly, the main objectives of PAD are:
- to help consumers compare payment accounts;
- to establish a procedure that makes it simpler for consumers to switch between accounts; and
- to ensure the right to basic payment accounts.
PAD needs to be implemented into UK law by 18 September 2016.
The consultation will affect payment service providers such as banks, building societies and electronic money institutions. There may be other parties interested in the consultation, as they could be affected by the proposals such as consumers and consumer groups and charities with an interest in banking or financial inclusion.
The consultation sets out the government’s proposed approach to the key elements of PAD and invites responses specifically with regard to:
- the overall implementation strategy and comments on changes to existing legislation;
- the operation of a (payment fees) comparison website by the Money Advice Service;
- the requirements to provide information about costs applicable to packaged accounts;
- payment account switching (i.e. maintaining the Current Account Switch Service (CASS) and ensuring that payment service providers outside CASS are obligated to deliver a basic switching service in line with PAD requirements;
- suggestions on how a ‘genuine interest’ test could be applied to applications for basic bank accounts in the UK;
- whether that are any other criteria, beyond those already proposed, that should allow credit institutions to terminate or refuse a basic bank account; and
- the potential costs and benefits that could arise as a result of implementing the proposals outlined above.
The consultation is open until 3 August 2015. The shortened time frame of six weeks reflects the government’s stated aim of addressing industry concerns by finalising the implementation as soon as possible.
Firms will need to consider their status and whether they operate payment accounts that will be affected by provisions in PAD. Affected firms will need to think about what, if any, changes should be made to existing operations so as to ensure compliance within the implementation timescales. It is likely that the main requirements relating to switching arrangements, the obligation to provide fee information to customers and the right to access basic bank accounts are all likely to require action. The specific actions taken, and the impact on current operations, will depend on existing arrangements, e.g. whether firms are already participants in CASS, and the particular types of payment accounts offered. It is hoped that the government will indicate the precise measures to be implemented well in advance of the 18 September 2016 deadline to allow firms to time to adjust.
At this stage it is important to review the government consultation as well as to assess the extent to which concerned firms fall within the scope of the PAD requirements (e.g. whether clients are operating a “payment account” to which PAD applies).