“Right for Payment Account” as Instrument to Strengthen Consumers’ Protection
With effect from 1 March 2017, Czech Act No. 284/2009 Coll. on Payment System (the Act) has been amended in accordance with the Directive No. 2014/92/EU on the comparability of fees related to payment accounts, payment account switching and access to payment accounts with basic features (the Directive).
One of the purposes of the Directive is to provide consumers with non-discriminatory access to payment accounts in any EU member state. According to European Commission, there are more than 3 million people in the EU to whom opening of the payment account has been denied. Moreover, more than 20 million people in the EU would be interested in opening the payment account but do not even attempt to do so, since they are afraid it would be connected with high costs.
In this article, I will describe one of the most significant innovations introduced by the amended Act: the payment account with basic futures (the Basic Account).
Opening Basic Account Under Czech Law
The Basic Account is defined as a set of specified services that a Czech bank or a branch of a foreign bank (the Bank) is obliged to offer consumers legally residing in the EU in case it offers these services to its other customers under a payment account other than the Basic Account. These services include:
Opening and operating of Basic Account
Service allowing deposits of funds on Basic Account
Service allowing withdrawals of funds from Basic Account
Credit transfer, including credit transfer based on a standing order
Outgoing direct debit
Transfer of funds ordered by means of debit card
Issuance and maintenance of debit card and a possibility to control Basic Account through the internet
The Services shall be provided in the extent and in the way in which they are provided to customers of the Bank using payment accounts other than the Basic Account. Therefore, Services may vary based on the overall offer of services provided by each Bank.
The Agreement on Payment Account With Basic Features
The Bank is obliged to provide the consumer with a draft of terms and conditions of the Agreement on Payment Account with Basic Features (the Agreement) within 10 days from consumer´s request to open the Basic Account. Upon the provision of the terms and conditions, the consumer has five days to conclude the Agreement with the Bank. During this five-day period, the Bank may not in any way change the terms and conditions of the Agreement or withdraw from the Agreement.
Should the consumer decide to enter into the Agreement, the Bank is obliged to conclude the Agreement with the consumer without undue delay. The Bank is entitled to refuse the conclusion of the Agreement only for two reasons:
The consumer is already an owner of a payment account maintained by the Bank or another Bank in the Czech Republic and this payment account allows it to use Services, or
The Bank has a negative experience with the consumer, meaning it has terminated the Agreement with this consumer within last 12 months or the Bank has withdrawn from the Agreement for certain reasons stipulated by the Act
The Agreement may not include a contractual penalty with respect to breach of consumers’ obligations arising thereof. The only exception is a contractual penalty arranged in connection with overdraft or overrunning of funds.
The Act also sets certain restrictions on bundling. Therefore, it is prohibited for the Bank to oblige the consumer to conclude the Agreement together with agreement on any other service provided by the Bank.
In case the Bank refuses consumer´s request to open the Basic Account, a penalty of up to CZK 10,000,000 (approx. €370,000) may be imposed on the Bank.
Charges Connected With the Basic Account
The Act sets specific rules in respect to fees that may be charged by the Bank for Services. In accordance with the Act, the Bank is entitled to charge only usual market price for the Services. This means that in practice, it will be very hard for Czech regulator to supervise whether the price connected with the Services is appropriate.
Furthermore, since the extent of provided Services may vary, fees in respect to the Basic Account may also vary based on the extent of Services provided to consumers by each Bank.
Duration of the Agreement
The consumer is protected not only during the conclusion of the Agreement, but also during its duration.
The Agreement may be terminated by notice by the Bank for certain reasons only (for example, in case the consumer does not execute a single transaction through the Basic Account in more than 24 months) and only within three months from the day on which the Bank found out about the reason for its termination.
The Bank is also entitled to withdraw from the Agreement for certain reasons stipulated in the Act (for example, in case the consumer breaches the Agreement in a substantial way).
Strengthening of Consumers’ Protection?
Since 1 March 2017, Banks in the Czech Republic are no longer eligible to choose their clients who want to open payment accounts allowing them to use specific payment services. One could see this as yet another step for strengthening of consumers’ protection. However, it remains to be seen in what extent consumers in the Czech Republic will make use of this new opportunity, given that payment accounts in the Czech Republic are already offered free of charge or at very low rates by most of the banks.