Consumer groups slam EU ‘basic bank account’ plan

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The European Commission yesterday (18 July) urged EU governments to make available to all consumers a basic payment account to ensure that all sections of the population can fully participate in society. But consumer groups accused the Commission of backing down on past promises to table legislation on the matter. 

Access to a bank account is essential for participating fully in economic and social life in today's European Union, the Commission argues.

The prevalence of in-store or portable card payment systems and the rise of online shopping mean the use of cash is rapidly decreasing, it says.

But despite the growing necessity to hold a bank account in order to play an active role in society, around 30 million Europeans over the age of 18 – some 7% of the EU's consumers – do not have one (see 'Background').

In a bid to address this, the European Commission yesterday called on governments to ensure that banks make basic payment accounts available at a reasonable charge to all consumers, regardless of their EU country of residence or financial situation.  

"It is important to put an end to practices that exclude people from access to such a basic and essential service, and thus enable them to participate fully in the society they live in and to enjoy the benefits of the single market," said EU Internal Market and Services Commissioner Michel Barnier.

Banks often deny potential customers access to personal accounts for failure to fulfill their eligibility conditions, most often related to residency requirements, proof of income, risk assessment or credit history.

Barnier said he expected member states to "take measures" to address the current situation over the next six months.

"My approach here is to encourage people to work with us, provided there is a response," the commissioner told journalists in Brussels yesterday.

The Commission wants member states to determine which payment service providers should be in charge of providing the basic accounts, leaving up to governments to decide whether to open up the task to one, several or all providers, or certain categories.

The suggestion, contained in a recommendation issued by the Commission, is not legally-binding. But the EU executive will evaluate progress in twelve months' time to decide what further action is necessary.

It has not ruled out tabling legislative proposals if the banking industry fails to extend access to affordable bank accounts voluntarily.

Indeed, Commissioner Barnier was in bullish mood yesterday. "Rest assured: I won't hesitate to act. Member states have six months to tell us where they are with their banking sectors. If there is no progress in 12 months, we will legislate. A year isn't that long to wait," he said.

The EU executive justified its decision by insisting that a recommendation would send governments a clear message as to what actions were expected to address market deficiencies while leaving them sufficient flexibility to address them themselves.

Commission's approach 'a waste of time'

However, this was not enough to prevent consumer groups from angrily accusing the Commission of abandoning planned legislative action in favour of a non-binding recommendation.

European consumers' organisation BEUC has long been calling on the EU executive to draft laws giving all Europeans access to a basic payment account.

Hopes were raised when the Commission included the issue in its draft work plan for 2011 and included it in the recently-adopted Single Market Act: hopes that BEUC now accuses the EU executive of dashing.

"Too often we have seen that self-regulation and voluntary measures in the financial sector do not work at all. Going down this route again is a waste of time," said Monique Goyens, BEUC's director-general.

"The snail's pace approach to giving people access to a bank account contradicts the EU's efforts to expand e-commerce," Goyens added, declaring: "It's a matter of fact that without a bank account, shopping and doing business online is virtually impossible."

Representatives of the European banking industry, meanwhile, praised Barnier for opting for a recommendation over hard law.

"The Commission can promote best practice, but issues of financial exclusion are best tackled at local level. National-level dialogue is better because the situation in one country is not the same as in another," Sebastian De Brouwer of the European Banking Federation told EURACTIV.

"In East European countries it's about basic access. They were a long way behind when they joined the EU and will need time to adapt. But the question of access for non-residents has nothing to do with basic bank accounts," he explained.

De Brouwer suggested that the twelve-month deadline set by Commissioner Barnier was too short abd called for more flexibility.

"If progress has been made by then, I think this should be taken into account" before rushing to legislation, he said. 

Other industry representatives, meanwhile, said banks were already working hard to widen access to bank accounts. 

"All the major banks now offer basic bank accounts, and they open more 40,000 every month," said Brian Mairs, in charge of strategic communications at the British Bankers' Association.

"There are now more than eight million basic bank accounts, accessible through branches and post offices and operating alongside the Post Office's own card account. Instant cash access is available to customers of more than 120 million personal accounts at the main high street banks," Mairs added.

The BBA endorsed the Commission's bid to raise public awareness of the availability of basic bank accounts by publishing on its website a full list drawn up by the UK Money Advice Service. 

Andrew Williams

"Access to a basic bank account is one of the priorities of the Single Market Act. It has the potential to improve the lives of millions of Europeans," said EU Internal Market and Services Commissioner Michel Barnier.

Sebastian De Brouwer of the European Banking Federation told EURACTIV that the Commission's recommendation was mixing together social policy and cross-border trade, which were two separate things. "Social exclusion is a domestic issue and should be kept apart from internal market issues," he said.

"In the UK the banking industry is leading the way on ensuring financial services are fully inclusive. The banks have worked hard with the government over the past decade to ensure that as many people as possible can have a bank account if they want one," said Brian Mairs, in charge of strategic communications at the British Bankers' Association.

"As a result they have reduced significantly the number of households without a bank account. As well as halving the number of un-banked UK households from 3.5 million to 1.75 million, the banks also funded the establishment of the Post Office card account service to provide an alternative for customers," Mairs added. 

"The Commission missed a golden opportunity to do something tangible for European citizens. Withdrawing this planned piece of legislation is bad news for millions of Europeans. Having a bank account is a basic right. No bank in the EU should be allowed to turn down a person who wants to open an account," said Monique Goyens, director-general of European consumers' organisation BEUC.

Eurodiaconia, a federation whose member include churches, welfare organisations and NGOs rooted in the Christian faith, said that "due to the current almost universal need for salaries, benefits and any other financial transaction to be paid through the banking system, access to a basic bank account could now be regarded as a service of general interest and all providers should be obliged to offer basic accounts to all citizens and residents throughout the EU".

"Eurodiaconia doesn't think that there will be significant progress through self-regulation and would therefore see an active role of the EU," it added.

In modern societies like the countries of the European Union, daily life is very difficult for those sections of the population that do not have access to a bank account.

Routine activities like receiving income or benefits, paying utility bills or purchasing goods and services are a major challenge for people without bank accounts.

Despite this, around 30 million consumers over the age of 18 do not have a bank account, studies quoted by the European Commission estimate, preventing them from fully benefiting from the EU's single market.

Of these 30 million people, between six and seven million don't have accounts because they have been denied access to one, the EU executive says. 

  • July 2012: Commission to assess situation and decide whether to table legislation.  

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