Topic Consumer protection Arne Heinrich Huneke, Dr. Frank Gondert, BaFin
Payment Accounts Act: New rights for consumers - basic payment account, account switching help and fee transparency
From 19 June 2016, all consumers in Germany will have the right to a payment account with basic features – irrespective of their credit status. This is the intention of the new Payment Accounts Act (Zahlungskontengesetz – ZKG (only available in German), see BaFin Journal April 2016 (also only available in German), which has implemented the European Payment Accounts Directive in German law.
In addition to the rules for the new so-called basic payment account, the ZKG also includes provisions aimed at increasing transparency in the area of banking fees as well as increasing competition, in particular by making it easier to switch accounts. The provisions for facilitating account switching shall come into force on 18 September 2016, while those which deal with fee information and statements shall come into force in summer 2017.
Basic payment account
From 19 June onwards, all consumers legally resident in the European Union will have a right to a basic payment account pursuant to the ZKG. This includes people with no fixed address, asylum seekers as well as persons with leave to remain, i.e. those without a residence permit, but whose expulsion is impossible for legal or factual reasons.
The objective is to allow all citizens to participate fully in economic and social life. Since cashless payments have largely replaced cash payment, an account with basic features such as the placing of funds, cash withdrawals and executing credit transfers is nowadays an important prerequisite for this.
The law obliges all institutions offering payment accounts for consumers to conclude basic payment account contracts (obligation to contract). Eligible parties who apply for a basic payment account must be set up with one within ten business days.
Institutions must provide the consumer with an application form free of charge. This is prescribed by law and can also be retrieved (only in German) on BaFin's website.
The basic payment account must possess all functions necessary for the use of basic payment services, in other words for cash deposits and withdrawals, credit transfers, direct debits and card payments. Credit business on the other hand is not included, and the bank does not have to accept overdrafts.
The account holder can demand that the bank manage the basic payment account as a garnishment protection account pursuant to section 850k of the German Code of Civil Procedure (Zivilprozessordnung – ZPO). Such accounts enable bank customers affected by an account garnishment on the basis of inadequate creditworthiness to access the non-garnishable portion of their income in an unbureaucratic manner. They can also apply to have the basic payment account opened as a garnishment protection account when making their initial application.
Grounds for rejection and termination
Only under certain conditions may banks terminate a consumer's basic payment account or refuse to open one to begin with. For example, they can refuse to open an account if the consumer already has a basic payment account with another credit institution in Germany. However, this only applies if the consumer can actually use this account.
Credit institutions can terminate an existing basic payment account if the account holder is in default for at least three months and owes the institution more than €100. In addition, it must be feared that keeping the basic payment account will give rise to further claims, the payment of which cannot be ensured. If an institution has justifiably terminated an account on these grounds within the past year, it can refuse to open another account.
The bank can also refuse an application for a basic payment account if the consumer has been convicted of a criminal offence against the bank, one of its employees or one of its customers in the three years prior to making the application. The offence in question must have been an intentional criminal act with a direct connection to the bank. The onus is on the bank to prove that such a criminal offence was committed. Under these conditions, the bank can also terminate an existing basic payment account.
Grounds for rejection also include instances where the institution terminated a consumer's basic payment account because the consumer intentionally used the account for illegal purposes. The same applies if provisions aimed at preventing money laundering and terrorist financing demand that an institution refuse to open the account.
Consumers who have been refused a basic payment account can request a review to see if the decision is lawful.
Alternatively, the consumer can bring an action directly against the institution based on the latter's refusal to open an account or avail themselves of the German Bundesbank's Arbitration Board (Schlichtungsstelle). As long as the arbitration is ongoing, administrative proceedings with BaFin are not possible.
Irrespective of the type of account, the Payment Accounts Act also demands that the institutions provide consumers with information on fees prior to the conclusion of a contract (fee information). For the duration of the contracts too, the institutions must inform consumers at least once per year about the fees levied (breakdown of fees). The new transparency provisions are intended to ensure that consumers are better able to compare the costs of account services.
Since the providers' offers sometimes vary significantly, certain terms used in the information provided will be harmonised throughout Europe. To this end, the European Banking Authority (EBA) will issue a supplementary legislative act. Only then can the provisions on fee transparency come into force – thus presumably in summer 2017.
The ZKG's provisions on comparison websites also fall under the aspect of fee transparency. These are supposed to allow consumers to simply and objectively compare the different offers available. To ensure this, comparison websites will in future be able to have themselves certified by accredited assessment bodies.
Finally, the intention is for banks to facilitate their customers switching accounts in future by transferring standing orders and other services to another provider in an uncomplicated manner upon request of the customer. If a bank violates this obligation, the receiving bank and the transferring bank are jointly and severally liable to the customer. These provisions enter into force on 18 September 2016.
Interview with Silke Deppmeyer: "The basic payment account is a great opportunity for everyone"
Silke Deppmeyer, Head of the BaFin division responsible for the basic payment account
Ms Deppmeyer, the basic payment account is commonly being called the "current account for everybody" (Girokonto für Jedermann). Does it deserve this title?
Yes, because that is precisely what it is. Up to now, it has been difficult – if not downright impossible – for many people to open a current account. Groups affected include the homeless, asylum seekers or people with a poor credit status or an irregular income. Such people were effectively excluded from many areas of social life. Renting an apartment without a bank account is almost impossible. Employers don't know what a pay packet is any more. Paying for your electricity or water supply in cash? Unimaginable for most of us today. The basic payment account is therefore a great opportunity for everybody to be able to execute payment transactions and therefore take part in social life. The decision with which credit institution to apply for a basic payment account is left to the consumer.
For many people, making such an application is not so easy. Where can they get help?
On its website, BaFin has explained all the important information in an easily understood way and has also published examples and forms. This will make it easier for consumers to make an application. Anyone who has questions can also contact BaFin on its consumer helpline.
Consumers who wish to open a basic payment account can also obtain the application from the respective bank. In addition, the institutions must provide the consumers with easily accessible information on the features, fees, costs and conditions of use associated with the basic payment accounts.
How will BaFin monitor the institutions' compliance with the provisions?
BaFin will closely observe implementation by the banking industry because this is part and parcel of a proper system of governance. If a bank unjustifiably rejects an application for a basic payment account, we will order the bank to open the account. In certain circumstances, however, banks can reject an application.
Does this not contradict the concept of a current account for everybody?
No, because refusal is only allowed in the case of a few narrowly defined exceptions. One cannot demand that a bank set up an account for a consumer who previously committed a criminal offence against the bank, for instance. It should also be beyond question that the basic payment account should never be used to facilitate illegal activities like money laundering or terrorist financing.