Response to consultation on Technical Standards on standardised terminology and disclosure documents under the PAD
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The definition of a service should not be confused with the providers’ pricing policy which sometimes divides a service into several tariff lines. For instance, a cash withdrawal is a single service, regardless of whether some providers have set different fees, which depends on whether the withdrawal is done in the same bank, in another bank or abroad.
Pricing policies also vary over time. In recent years, they have become increasingly complex in some countries, making comparisons between different offers more difficult for consumers. It is therefore important that the definition of a ‘service’ remains stable and is based only on the core elements of the service.
The broad approach is consistent with the EBA guidelines on national provisional lists of services stating that “competent authorities should bear in mind that more than one fee or type of fee might relate to the same service within their Member State. Each fee does not need to be considered as a separate service.”
Option A makes it possible to include more tariff lines in the Fee Information Document (FID), thereby better informing consumers: for example, each provider should, for each service, clearly specify the different fees that apply for this service.
The issue of having a single definition for each service at national level should not be a major obstacle to the implementation of Option A. An arranged (authorized) overdraft remains an arranged overdraft, regardless of how it is billed. It is the same for most services related to a payment account such as a withdrawal, a transfer, or card payments.
While the Directive requires Member States to establish a provisional list that includes at least 10 and a maximum of 20 of the most representative services related to a payment account and subjected to fees, no minimum number of services is required for the list drawn up by the EBA.
However, we are surprised by the low number of representative services reported by national authorities. For example, the Belgian Consumer organisation, Test-Achats has identified between 17-20 items that deserve to be included in the standardised list of the most representative services in Belgium. It is worth remembering that, in terms of bank tariffs, Belgium ranks among the most transparent and cheapest of Member States.
It is obvious that the 8 services selected by EBA on the basis of data provided by national authorities (account maintenance, provision of a debit card with a payment account, provision of a credit card with a payment account, cash withdrawal from a payment account, making a credit transfer of money from a payment account to another account, standing orders from a payment account, direct debits on a payment account, overdraft on a payment account) are widely used by consumers throughout Europe. They must therefore be included in the final list.
However, some services are missing. The Payment Accounts Directive (PAD) defines services linked to a payment account ‘as all services related to the opening and closing of a payment account, including payment services and payment transactions falling within the scope of point (g) of Article 3 of Directive 2007/64/EC, and overdraft facilities and overrunning”. This means that payment services such as direct debit, credit transfer, debit card, but also all kinds of fees and penalties linked to the use of a payment account, such as unauthorised overdraft penalties, fall under the definition.
When shopping around for a payment account, consumers do not consider the level of penalties for unarranged (unauthorised) overdrafts as essential account features, even though many of them end up paying such fees. For instance, two-thirds of French consumers exceed their authorized overdraft at least once a year and this comes at a significant cost to consumers. For example, in the UK banks made over £1.2 billion from unarranged overdraft charges in 2014 alone.
Moreover, Article 3 of the PAD provides that the services which ‘generate the highest cost for consumers, both overall as well as per unit’ should be considered to establish the list of services. Penalties, especially for unauthorised overdrafts, also meet this criterion.
Therefore, the RTS should include an 'unarranged overdraft service' in order to clearly inform consumer of their costs.
The provisions in Recitals of the draft RTS are in line with the approach described by EBA.
As regards the Dutch version, we propose the following changes submitted by Consumentenbond:
- To change ‘rekening’ into ‘betaalrekening’ [English translation: ‘payment account’]. NB: This does not apply for the words ‘(…) naar een andere rekening’ [English translation: ‘(…) to another account.’] as mentioned in the definition of ‘Periodieke betaalopdracht’ [English translation: ‘Standing order’]. This is because standing order payments can also be transferred to, for example, a savings account.
- The term ‘Beheren van de rekening’ [English translation: ‘Maintaining the account’] and its definition is quite unclear to us. We believe the Dutch translation ‘Aanhouden van de betaalrekening’ better matches its English equivalent of “Maintaining the payment account” as compared to ‘Beheren van de betaalrekening’. We therefore propose to change ‘Beheren’ into ‘Aanhouden’ [English translation: ‘Maintaining’ or ‘Holding’]. The definition would then be worded as follows: “De aanbieder van de betaalrekening houdt de betaalrekening voor de klant aan.”.
- The definition of ‘Aanbieden van een credit card’ [English translation: ‘Providing a credit card’], contains the following sentence: “In een kredietovereenkomst tussen de aanbieder en de klant wordt bepaald of de klant rente in rekening wordt gebracht voor het opnemen van krediet.” [English translation: “A credit agreement between the provider and the customer determines whether interest will be charged to the customer for the borrowing.”]. In the Netherlands such a credit agreement is regarded as a separate product and often not linked with the provision of a regular credit card, of which the total amount of the transactions made using the credit card during an agreed period is in most cases taken in full from the customer’s payment account on an agreed date). Therefore, we recommend EBA to delete the sentence “In een kredietovereenkomst tussen de aanbieder en de klant wordt bepaald of de klant rente in rekening wordt gebracht voor het opnemen van krediet.” in the definition of ‘Aanbieden van een credit card’. When EBA does not agree with our recommendation, we advise EBA to amend this sentence with the underlined text: “In het geval de aanbieder en klant een kredietovereenkomst hebben afgesloten, dan wordt in die overeenkomst bepaald of de klant rente in rekening wordt gebracht voor het opnemen van krediet.” [English translation: “In case the provider and the customer have concluded a credit agreement, then that agreement shall stipulate whether the consumer will be charged interest for the borrowing.”].
- In the definition of ‘Rood staan’ [English translation: ‘Arranged overdraft’], the following is stated: “(…), en of de klant vergoedingen en rente in rekening wordt gebracht.” [English translation: “(…), and whether fees and interest will be charged tot the customer.”]. In the Netherlands interest is charged in case of entering an overdraft, but no fees. Therefore the words ‘vergoedingen en’ [English translation: ‘and interest’] can be deleted in the definition. The definition will be rephrased to: : “(…), en of de klant rente in rekening wordt gebracht.”.
- The term ‘Periodieke betaalopdracht’ [English translation: ‘Standing order’] is not in line with the term ‘Overboeking’ (as stated in the row above ‘Periodieke betaalopdracht’). We believe it is clearer for Dutch consumers to change ‘Periodieke betaalopdracht’) into ‘Periodieke overboeking’ [English translation: ‘Standing order]. Furthermore, we believe that in the definition of ‘Periodieke betaalopdracht’) the word ‘regelmatig’ [English translation: ‘regular’] should be changed into ‘periodiek’ [English translation: ‘periodic’] to be consistent with the corresponding term ‘Periodieke overboeking’.
- We recommend to change the term ‘Automatische overschrijving’ [English translation: ‘Direct debit’] into ‘Automatische afschrijving (incasso)’. This is because the terms ‘Automatische afschrijving’ (and its synonym ‘incasso’) is better known and more often used among Dutch consumers as compared to ‘Automatische overschrijving’, which could lead to misunderstandings. Also the transposed PSD 1 in Dutch national law mentions ‘automatische afschrijving’ when referring to a direct debit, instead of to ‘automatische overschrijving’.
- In the definition of ‘Overboeking’ [English translation: ‘Sending money’], the following is stated: ‘(…) maakt op instructie van de klant (…)’ [English translation: ‘(…) transfers (…) on the instruction of the customer (…)’]. We believe will be easier for Dutch consumers if this is rephrased to: ‘(…) maakt in opdracht van de klant (…)’ [English translation: ‘(…) transfers (…) on behalf of the customer (…)’].
As reported by our German member VZBV, the definition of direct debit should be carefully revised. It conflicts with the legal definition of a direct debit as stated in Article 2.2 of Regulation 260/2012/EU as well as with Article 4.23 of the revised Payment Services Directive (2015/2366/EU). The proposed definition describes a payment that is enacted by the bank account provider of the payer based on the mandate, where the amount may vary. A direct debit is actually a payment that is always enacted by a payee and accepted for execution by the payer’s bank account provider if is in line with the referring mandate. This is clearly stipulated in the PSD 2. See detailed explanation in VZBV’s response to this consultation.
For the service related to providing a credit card, BEUC supports the definition referring to the use of a credit card as a form of money borrowing.
As stated in response to question 2, a definition of penalties related to a payment account should be added to the list.
BEUC is worried that different approaches may be adopted by Member States to integrate the final Union standardised terminology at national level, which may, according to the EBA explanations (see paragraphs 54 to 59), lead some Member States to adopt a shorter final list of services (even less than 10 services).
As the objectives of the Directive are to enhance the transparency and comparability of payment accounts’ fees both at national and cross-border levels, all the terms and definitions adopted in the RTS must be included in all national lists. Obviously this does not preclude any Member State from adding other services to its national list, and/or provide additional information in case a specific service would include several sub-services at national level.
However, unit prices (e.g. direct debit, credit transfer, debit card, credit card, overdraft fees, etc.) should appear at the top of the FID i.e. before packages. This is the best way to inform consumers that they have a choice between ‘à la carte’ services and packages.
Most consumers do not buy services piecemeal but through packages mainly because they are incentivised to do so by their providers. The main issue is that the composition of packages varies from one provider to another. Some packages contain only essential services used by consumers, others contain services rarely or never used. Some packages provide for a maximum number of transactions per year for some services like transfers and cash withdrawals. This number of transactions also varies from one provider to another.
Information on fees for piecemeal services is not sufficient to really inform the consumer about the pricing practices of the different suppliers and to allow him to properly compare the offers. For example, the price of a debit card can be very low when provided separately, and be expensive when it is included in a package, and vice versa.
The only way to cope with the lack of transparency, and give the consumer the opportunity to judge whether the package's fee is reasonable or not, is for the FID to include the obligation to provide a detailed list of services with their respective detailed fees.
The designation “total annual costs” should be avoided as it is misleading and reduced to “annual costs”. After all, the word “total” misleads the reader into assuming that the figure is a genuine all-inclusive price with no additional fees. An alternative would be to sum up both items (as “total annual costs”) and clearly indicate that additional charges are billed for transactions not included in a package.
The “channel” should in any case be added to the list of what service packages include. For instance actual practice in many countries show that price differences can arise particularly for packages depending on how orders are issued or executed. The information that for example 5 credit transfers are included, is – in this context - of no real use because many packages include specifically just electronic transfers but exclude transfers done on paper. The conclusion from the suggested presentation would be that prices of packages cannot be presented correctly at all.
The SoF should also provide the details with regard to the “channel” through which different orders and transactions had been initiated, i.e. online, bank counter, self-service machine/ATM. This addition is essential in order to enable consumers to depict existing account products.
Question 1: Do you agree with the EBA’s decision to take a broad approach to defining ‘service’? Please explain your reasoning.
BEUC supports the broad approach (option A) taken by EBA which best fits consumer needs in services associated with their payment account and best meets the Directive’s aims of transparency and comparability.The definition of a service should not be confused with the providers’ pricing policy which sometimes divides a service into several tariff lines. For instance, a cash withdrawal is a single service, regardless of whether some providers have set different fees, which depends on whether the withdrawal is done in the same bank, in another bank or abroad.
Pricing policies also vary over time. In recent years, they have become increasingly complex in some countries, making comparisons between different offers more difficult for consumers. It is therefore important that the definition of a ‘service’ remains stable and is based only on the core elements of the service.
The broad approach is consistent with the EBA guidelines on national provisional lists of services stating that “competent authorities should bear in mind that more than one fee or type of fee might relate to the same service within their Member State. Each fee does not need to be considered as a separate service.”
Option A makes it possible to include more tariff lines in the Fee Information Document (FID), thereby better informing consumers: for example, each provider should, for each service, clearly specify the different fees that apply for this service.
The issue of having a single definition for each service at national level should not be a major obstacle to the implementation of Option A. An arranged (authorized) overdraft remains an arranged overdraft, regardless of how it is billed. It is the same for most services related to a payment account such as a withdrawal, a transfer, or card payments.
Question 2: Do you consider the services that the EBA has selected for standardised terms and definitions to be suitable to achieve the aims of the Directive? Please explain your reasoning.
BEUC considers that the services selected are suitable, but the list is too limited to achieve the aims of the Directive.While the Directive requires Member States to establish a provisional list that includes at least 10 and a maximum of 20 of the most representative services related to a payment account and subjected to fees, no minimum number of services is required for the list drawn up by the EBA.
However, we are surprised by the low number of representative services reported by national authorities. For example, the Belgian Consumer organisation, Test-Achats has identified between 17-20 items that deserve to be included in the standardised list of the most representative services in Belgium. It is worth remembering that, in terms of bank tariffs, Belgium ranks among the most transparent and cheapest of Member States.
It is obvious that the 8 services selected by EBA on the basis of data provided by national authorities (account maintenance, provision of a debit card with a payment account, provision of a credit card with a payment account, cash withdrawal from a payment account, making a credit transfer of money from a payment account to another account, standing orders from a payment account, direct debits on a payment account, overdraft on a payment account) are widely used by consumers throughout Europe. They must therefore be included in the final list.
However, some services are missing. The Payment Accounts Directive (PAD) defines services linked to a payment account ‘as all services related to the opening and closing of a payment account, including payment services and payment transactions falling within the scope of point (g) of Article 3 of Directive 2007/64/EC, and overdraft facilities and overrunning”. This means that payment services such as direct debit, credit transfer, debit card, but also all kinds of fees and penalties linked to the use of a payment account, such as unauthorised overdraft penalties, fall under the definition.
When shopping around for a payment account, consumers do not consider the level of penalties for unarranged (unauthorised) overdrafts as essential account features, even though many of them end up paying such fees. For instance, two-thirds of French consumers exceed their authorized overdraft at least once a year and this comes at a significant cost to consumers. For example, in the UK banks made over £1.2 billion from unarranged overdraft charges in 2014 alone.
Moreover, Article 3 of the PAD provides that the services which ‘generate the highest cost for consumers, both overall as well as per unit’ should be considered to establish the list of services. Penalties, especially for unauthorised overdrafts, also meet this criterion.
Therefore, the RTS should include an 'unarranged overdraft service' in order to clearly inform consumer of their costs.
Question 3: Do you consider the drafting decisions taken by the EBA for the standardised terms and definitions, and the resultant provisions in Recitals of the draft RTS, to be suitable for achieving the aims of the Directive of enhancing transparency and comparability? Please explain your reasoning.
Because the end-users of the terms and definitions will be consumers, and the overarching aim of the standardised terminology is to enhance the transparency and comparability of fees, BEUC supports the EBA proposal to use language that is accessible to consumers. This means that standardised terms and definitions are drafted in clear, simple, and consumer-oriented language avoiding the use of legal terminology.The provisions in Recitals of the draft RTS are in line with the approach described by EBA.
Question 4: Do you consider the terms and definitions proposed by the EBA in the Annexes to the draft RTS, and the resultant provisions in the Recitals of the draft RTS, to be adequate for achieving the aims of the Directive of enhancing transparency and comparability? If not, please provide alternative terms and definitions and their underlying rationale.
We suggest to have a language check by the relevant stakeholders (financial institutions and consumer organisations) because of national specificities. For example, our Dutch and German members flag the following suggestions on wording that would be better suited to the usual terminology referred to in their market.As regards the Dutch version, we propose the following changes submitted by Consumentenbond:
- To change ‘rekening’ into ‘betaalrekening’ [English translation: ‘payment account’]. NB: This does not apply for the words ‘(…) naar een andere rekening’ [English translation: ‘(…) to another account.’] as mentioned in the definition of ‘Periodieke betaalopdracht’ [English translation: ‘Standing order’]. This is because standing order payments can also be transferred to, for example, a savings account.
- The term ‘Beheren van de rekening’ [English translation: ‘Maintaining the account’] and its definition is quite unclear to us. We believe the Dutch translation ‘Aanhouden van de betaalrekening’ better matches its English equivalent of “Maintaining the payment account” as compared to ‘Beheren van de betaalrekening’. We therefore propose to change ‘Beheren’ into ‘Aanhouden’ [English translation: ‘Maintaining’ or ‘Holding’]. The definition would then be worded as follows: “De aanbieder van de betaalrekening houdt de betaalrekening voor de klant aan.”.
- The definition of ‘Aanbieden van een credit card’ [English translation: ‘Providing a credit card’], contains the following sentence: “In een kredietovereenkomst tussen de aanbieder en de klant wordt bepaald of de klant rente in rekening wordt gebracht voor het opnemen van krediet.” [English translation: “A credit agreement between the provider and the customer determines whether interest will be charged to the customer for the borrowing.”]. In the Netherlands such a credit agreement is regarded as a separate product and often not linked with the provision of a regular credit card, of which the total amount of the transactions made using the credit card during an agreed period is in most cases taken in full from the customer’s payment account on an agreed date). Therefore, we recommend EBA to delete the sentence “In een kredietovereenkomst tussen de aanbieder en de klant wordt bepaald of de klant rente in rekening wordt gebracht voor het opnemen van krediet.” in the definition of ‘Aanbieden van een credit card’. When EBA does not agree with our recommendation, we advise EBA to amend this sentence with the underlined text: “In het geval de aanbieder en klant een kredietovereenkomst hebben afgesloten, dan wordt in die overeenkomst bepaald of de klant rente in rekening wordt gebracht voor het opnemen van krediet.” [English translation: “In case the provider and the customer have concluded a credit agreement, then that agreement shall stipulate whether the consumer will be charged interest for the borrowing.”].
- In the definition of ‘Rood staan’ [English translation: ‘Arranged overdraft’], the following is stated: “(…), en of de klant vergoedingen en rente in rekening wordt gebracht.” [English translation: “(…), and whether fees and interest will be charged tot the customer.”]. In the Netherlands interest is charged in case of entering an overdraft, but no fees. Therefore the words ‘vergoedingen en’ [English translation: ‘and interest’] can be deleted in the definition. The definition will be rephrased to: : “(…), en of de klant rente in rekening wordt gebracht.”.
- The term ‘Periodieke betaalopdracht’ [English translation: ‘Standing order’] is not in line with the term ‘Overboeking’ (as stated in the row above ‘Periodieke betaalopdracht’). We believe it is clearer for Dutch consumers to change ‘Periodieke betaalopdracht’) into ‘Periodieke overboeking’ [English translation: ‘Standing order]. Furthermore, we believe that in the definition of ‘Periodieke betaalopdracht’) the word ‘regelmatig’ [English translation: ‘regular’] should be changed into ‘periodiek’ [English translation: ‘periodic’] to be consistent with the corresponding term ‘Periodieke overboeking’.
- We recommend to change the term ‘Automatische overschrijving’ [English translation: ‘Direct debit’] into ‘Automatische afschrijving (incasso)’. This is because the terms ‘Automatische afschrijving’ (and its synonym ‘incasso’) is better known and more often used among Dutch consumers as compared to ‘Automatische overschrijving’, which could lead to misunderstandings. Also the transposed PSD 1 in Dutch national law mentions ‘automatische afschrijving’ when referring to a direct debit, instead of to ‘automatische overschrijving’.
- In the definition of ‘Overboeking’ [English translation: ‘Sending money’], the following is stated: ‘(…) maakt op instructie van de klant (…)’ [English translation: ‘(…) transfers (…) on the instruction of the customer (…)’]. We believe will be easier for Dutch consumers if this is rephrased to: ‘(…) maakt in opdracht van de klant (…)’ [English translation: ‘(…) transfers (…) on behalf of the customer (…)’].
As reported by our German member VZBV, the definition of direct debit should be carefully revised. It conflicts with the legal definition of a direct debit as stated in Article 2.2 of Regulation 260/2012/EU as well as with Article 4.23 of the revised Payment Services Directive (2015/2366/EU). The proposed definition describes a payment that is enacted by the bank account provider of the payer based on the mandate, where the amount may vary. A direct debit is actually a payment that is always enacted by a payee and accepted for execution by the payer’s bank account provider if is in line with the referring mandate. This is clearly stipulated in the PSD 2. See detailed explanation in VZBV’s response to this consultation.
For the service related to providing a credit card, BEUC supports the definition referring to the use of a credit card as a form of money borrowing.
As stated in response to question 2, a definition of penalties related to a payment account should be added to the list.
BEUC is worried that different approaches may be adopted by Member States to integrate the final Union standardised terminology at national level, which may, according to the EBA explanations (see paragraphs 54 to 59), lead some Member States to adopt a shorter final list of services (even less than 10 services).
As the objectives of the Directive are to enhance the transparency and comparability of payment accounts’ fees both at national and cross-border levels, all the terms and definitions adopted in the RTS must be included in all national lists. Obviously this does not preclude any Member State from adding other services to its national list, and/or provide additional information in case a specific service would include several sub-services at national level.
Question 5: Do you consider the FID template that is being proposed in the draft ITS and its Annex to be suitable to achieve the aims of the Directive? Please explain your reasoning.
BEUC has no specific comment to make on what has been tested with a representative panel of consumers, particularly the font size, use of color, page numbering and the proposed common symbol to identify the FID.However, unit prices (e.g. direct debit, credit transfer, debit card, credit card, overdraft fees, etc.) should appear at the top of the FID i.e. before packages. This is the best way to inform consumers that they have a choice between ‘à la carte’ services and packages.
Most consumers do not buy services piecemeal but through packages mainly because they are incentivised to do so by their providers. The main issue is that the composition of packages varies from one provider to another. Some packages contain only essential services used by consumers, others contain services rarely or never used. Some packages provide for a maximum number of transactions per year for some services like transfers and cash withdrawals. This number of transactions also varies from one provider to another.
Information on fees for piecemeal services is not sufficient to really inform the consumer about the pricing practices of the different suppliers and to allow him to properly compare the offers. For example, the price of a debit card can be very low when provided separately, and be expensive when it is included in a package, and vice versa.
The only way to cope with the lack of transparency, and give the consumer the opportunity to judge whether the package's fee is reasonable or not, is for the FID to include the obligation to provide a detailed list of services with their respective detailed fees.
Question 6: Do you consider the common symbol in the FID template that is being proposed in the draft ITS and its Annex suitable to achieve the aims of the Directive? Please explain your reasoning.
See response to question 5.Question 7: Do you consider the proposed instructions for the completion of the FID template contained in Articles 2 to 11 of the draft ITS, to be suitable to achieve the aims of the Directive? Please explain your reasoning.
The standard form filled out in the consultation paper is not clear, partly because of the same price of EUR 120. It is not clear as to why EUR 120 have to be paid twice. Consumers not familiar with packages of this kind might understand this information to mean that the annual costs total EUR 120.The designation “total annual costs” should be avoided as it is misleading and reduced to “annual costs”. After all, the word “total” misleads the reader into assuming that the figure is a genuine all-inclusive price with no additional fees. An alternative would be to sum up both items (as “total annual costs”) and clearly indicate that additional charges are billed for transactions not included in a package.
The “channel” should in any case be added to the list of what service packages include. For instance actual practice in many countries show that price differences can arise particularly for packages depending on how orders are issued or executed. The information that for example 5 credit transfers are included, is – in this context - of no real use because many packages include specifically just electronic transfers but exclude transfers done on paper. The conclusion from the suggested presentation would be that prices of packages cannot be presented correctly at all.
Question 8: Do you consider the proposed instructions for the completion of the FID template contained in Articles 2 to 11 of the draft ITS, to be clear and easy to follow? Please explain your reasoning.
In our view, it is unclear what exactly falls under “Additional Information”.Question 9: Do you consider the SoF template that is being proposed in draft ITS and its Annex to be suitable to achieve the aims of the Directive? Please explain your reasoning.
The SoF fulfills the objectives set out in the Directive.Question 10: Do you consider the common symbol that is being proposed in the draft ITS and its Annex to be suitable to achieve the aims of the Directive? Please explain your reasoning.
The SoF fulfills the objectives set out in the Directive.Question 11: Do you consider the proposed instructions for payment services providers on how to complete the SoF template contained in Articles 2 to 16 of the draft ITS, to be suitable to achieve the aims of the Directive? Please explain your reasoning.
We advocate for the sum of the annual costs (fees and interest) to be provided on the first page of the Statement of Fees (SoF). Unlike the pre-contractual Fee Information Document (FID), it is possible to indicate the actual overall costs here. That means the comprehensive cost indicator (for Member States availing themselves of the directive option) can be eliminated at this spot and the annual total price is provided for in the SoF in all Member States.The SoF should also provide the details with regard to the “channel” through which different orders and transactions had been initiated, i.e. online, bank counter, self-service machine/ATM. This addition is essential in order to enable consumers to depict existing account products.