New EU payment account laws may not usurp existing Current Account Switch Service in UK

The Council of Ministers and European Parliament last month reached an informal agreement on new account switching rules under the proposed new Payment Accounts Directive (109-page / 542KB PDF). Now the General Secretariat to the Council has published details of the agreed text and initiated a procedure which, if followed, would see the Council formally support the new Directive if the Parliament votes to approve it first. 

Under the Directive banks across the EU would be obliged to operate a switching service to allow customers to move their accounts over to another provider. 

Under the proposed text, 'switching' is defined as "transferring from one payment service provider to another either the information about all or some standing orders for credit transfers, recurring direct debits and recurring incoming credit transfers executed on a payment account, or transferring any positive account balance from one payment account to the other, or both, with or without closing the former account" at customers' request. 

Consumers would have a right to make use of the switching services where they wish to transfer a payment account to another provider located in the same country as their existing bank providing the accounts are "held in the same currency". Separate rules apply for cross border account switching. 

However, the draft Directive makes clear that banks would not need to establish a new account switching service if, subject to certain conditions, existing account switching schemes guarantee comparable rights to consumers. 

"Member states should be allowed, with regard to switching where both payment service providers are located in their territory, to establish or maintain arrangements that differ from those provided for in this Directive if this is clearly in the interests of the consumer," the proposals state. 

Last September a number of UK banks and building societies launched a new standardised switching service that allows current account holders to switch more easily between providers of those accounts. The service offers a guarantee to users that they will not face any charges or interest on their old or new accounts due to failings in the switching process if they inform their new current account provider of such mistakes. 

A spokesman for the UK's Payments Council, which launched the Current Account Switch Service (CASS) amongst 33 of its members, told Out-Law.com that they do not expect banks signed up to CASS to have to adapt to a new switching service to comply with the new Directive as CASS is "one of the best switching services in the world". 

The draft Directive would, however, lay out a number of new rules for banks to follow to help consumers open new payment accounts in other EU member states. Banks would not be required to provide a full account switching service across the EU, but would need to facilitate cross border switching by consumers. 

Part of the process would require banks, at customers' request, to provide those individuals with a free copy of a list detailing "all the currently active standing orders for credit transfers and debtor driven direct debit mandates where available and of recurrent incoming credit transfers and creditor driven direct debits executed on the consumer's account in the previous 13 months". 

Banks would also have to help facilitate cross border switching by transferring any positive balance consumers have on their accounts to the new provider and close the old accounts. Compliance with the facilitation process should, generally, be adhered to within six days of receiving consumers' requests.