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MEMO/02/154

Brussels, 27 June 2002

Regulation on cross-border payments in euros to apply from 1 July 2002: frequently asked questions

(see also IP/02/941)

Which means of payment are covered, and from when?

Card payments (either face-to-face or remote) at retail outlets and withdrawals at cash points of up to €12 500 are covered from 1 July 2002, and transfers of up to €12 500 from 1 July 2003. The principle of equal charges does not apply to cheques.

Card payments

Withdrawals at cash pointsTransfersElectronic purse
Up to

€12 500

01/07/2002

01/07/2002

01/07/2003

01/07/2002

From €12 500

to €50 000

01/01/2006

01/01/2006

01/01/2006

01/01/2006

What does the Regulation say?

There are three types of requirement in the Regulation ((EC) No 2560/2001):

  • The Regulation establishes the principle of equal charges for domestic payments and cross-border payments in euros. There should be no difference in the charges applied simply because the payment crosses a border (Articles 1 and 3);

  • It requires banks to inform their customers on the charges they apply for all payment services; among other things, they have to give advance notice of any changes in tariffs before applying them (Article 4);

  • It lays down standards to facilitate the automation of payment systems. Standards such as the International Bank Account Number and the Bank Identifier Code are thus made all but compulsory (Article 5). Banks must indicate them on account statements and companies on their invoices. Likewise, a range of national rules, such as statistical reporting obligations, which make practical distinctions between domestic and cross-border payments will be either eliminated or harmonised (Article 6).

Why 1 July?

The Regulation was proposed by the Commission on 25 July 2001. It was adopted after two readings by Parliament and the Council in less than six months, the procedure having been completed on 19 December 2001. Such rapid adoption for a legislative instrument subject to the codecision procedure is quite exceptional: the work had to be completed in time for the introduction of euro notes and coins.

But the Regulation could not be made to apply from 1 January 2002, chiefly because of the need to modify tariffs and computer systems. All the banks were focusing their efforts on the task of introducing notes and coins and a six-month deferral avoided diverting their attention from that process.

What are the sanctions for non-compliance?

Article 7 states that "compliance with this Regulation shall be guaranteed by effective, proportionate and deterrent sanctions".

Such sanctions are the responsibility of each Member State. This is one of the principles of Community law: each Member State must see to it that infringements of Community law are dealt with in the same way as breaches of national law. The EC Court of Justice recently recalled this principle (judgment of 18 October 2001 in Case C-354/99). At a meeting held in Brussels on 26 June, the Commission invited the national administrations to report on sanctions set in place in their countries.

How should cardholders react if they notice a difference in charges?

Consumers receive a statement indicating the charges applied in respect of each transaction. If they notice that higher charges have been applied to cross-border transactions, they should take the following action:

  • They should first register a complaint with their bank. Written complaints always carry more weight;

  • If they are not satisfied with the bank's response, they can then take the matter to a banking ombudsman belonging to the FIN-NET network (see IP 01/152). A list of ombudsmen for cross-border payments belonging to the FIN-NET network is attached;

  • If appeal to an ombudsman does not produce a satisfactory result they can then refer the case to the national authorities. Different institutions are responsible for applying the Regulation in each Member State.

Consumer associations can also provide valuable assistance, in particular by providing the names and addresses of the competent national authorities.

Why does the Regulation cover the entire territory of the Union although it applies to payments in euros? Shouldn't it have been limited to the euro area only?

The Regulation applies to all payments in euros within the single market because citizens and businesses can and will use the euro even if they are not based inside the euro area. The Regulation therefore applies throughout the Union in order to facilitate the establishment of a single EU payments area.

How does the Regulation apply to transactions with Member States outside the euro area?

A Belgian consumer who withdraws euros from a cash point in France will pay the same charges as for a withdrawal in Belgium. The charges will be debited from his account in Belgium. He will, on the other hand, pay different charges if he withdraws sterling from a cash point in the UK because a foreign exchange transaction is involved.

Doesn't the Regulation interfere with prices and therefore the banks' commercial policy?

No, the Regulation does not set prices; it establishes the principle of non-discrimination between the charges applicable to a domestic and a cross-border payment in euros. The banks remain free to set their charges for each type of transaction. The Regulation merely stipulates that the fact that a payment crosses a border within the Union must not make it subject to a different charge. This is in line with the very definition of the single market as an area without frontiers in which free movement is ensured.

Won't the banks simply increase their charges for domestic transactions?

The Regulation does not ban any increases in existing "domestic" charges. But all the indications are that the banks have decided to react differently and better, by setting up new infrastructures enabling cross-border payments to be handled more efficiently and more economically and by encouraging their customers to switch from manually processed to fully automated means of payment. This is what is happening with cheques, which are gradually being superseded by debit cards.

There are also transparency rules in the Regulation which are designed to prevent abuses. If certain banks were tempted to increase their charges for domestic transactions, the increased transparency and advance notification of tariff changes required by the Regulation would give customers an opportunity to react, for example by changing banks. Competition between banks should consequently limit the risks of unjustified increases in charges for domestic transactions.

Ultimately, the banks need to keep their customers and protect their image among members of the public, who are likely, if they are satisfied with the banking services they are offered, to buy all sorts of financial products from banks throughout their lifetime. It is therefore not in the interests of banks to increase their prices where alternative solutions are open to them.

The Commission is to report to the Council and Parliament in July 2004 on trends in charges for domestic payment transactions.

Are there any other rules which apply from 1 July 2002?

Another extremely important provision which applies from 1 July 2002 is the abolition of systematic statistical reporting obligations for cross-border payments of up to €12 500 (Article 6). The consequence of this is that a bank which makes a transfer between France and Belgium is no longer required to report the transaction to its national central bank. A cross-border transaction in euros is thus treated in the same way as a purely domestic transaction.

How does the principle of equal charges apply in the case of a card payment where the cardholder pays charges as well as the trader?

Let us take the example of a Spanish trader who receives a card payment from a Belgian cardholder. The trader will pay the same charges as if the cardholder was Spanish and the cardholder will pay the same charges as if the trader was Belgian.

Which are the countries covered by the Regulation?

The countries in which the euro is in circulation should not be confused with the countries covered by the Regulation. The Regulation applies in all the Member States of the European Union, but not for example in the Vatican or Kosovo, even if cash points there distribute euros.

COUNTRIES

EURO COINS AND NOTESREGULATION 2560/2001 ON CROSS-BORDER PAYMENTS
Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, Netherlands, Austria, Portugal, Finland

YES

YES

United Kingdom, Sweden, DenmarkNOYES for the euro

Optional (Article 9) for national currencies

Monaco, Vatican, San MarinoYES (special coins)NO
Montenegro, Kosovo, AndorraYESNO
French overseas departments (Guadeloupe, Martinique, Réunion, French Guiana)YESYES
Azores, Madeira, Canary IslandsYESYES
Overseas territories (listed in Annex II to the EC Treaty)Depends on decisions in country to which they are attachedNO
Norway, Iceland, LiechtensteinNOProbably

What is the single payment area?

It means applying to payments the principle of removing borders. The basic idea is to treat transactions carried out in the same currency - the euro - as domestic ones, even if they involve crossing a border. Ways will therefore have to be found of gradually bringing the cost and payment times of cross-border transactions into line with those of domestic transactions.

In each of the twelve existing national payment areas in the euro zone, transaction costs are the same whether the payment is made across the same street in the capital city or from one remote village to another. The same principle of a single payment area must be introduced for the euro zone. This means merging twelve national payment areas into one domestic euro payment area.

Plans must also be laid for making a similar improvement in cross-border payments involving the three national currencies which have not yet joined the euro. The cost of cross-border payments prevents consumers from reaping the benefits of the single market. All consumer transactions are two-sided: a product or service is transferred from the producer to the consumer and in return a sum of money is transferred from the consumer to the producer. If a product is cheaper in another country, the consumer may be interested in buying it there, provided that the charges for payment do not swallow up the benefits of the transaction.

Is this Regulation technically realistic?

National payment systems are like motorways. Today these motorways have to stop at the border. The banking world is therefore going to build motorways which can be used to cross borders. Indeed this is the whole aim of the Regulation: to encourage banks to set up a system of cross-border payments that is as efficient as national payment systems. In March 2002 the banks announced the creation of the SEPA (single euro payment area) - a work programme extending over eight years. One of the first decisions taken was to set up a European automated clearing house. On 17 June the banks announced that a European Payment Council (EPC) is to be set up to direct and coordinate all the work needed to get the SEPA up and running.

The banking world uses the term SEPA (single euro payment area), while the Commission talks about an SPA (single payment area). Is there a difference?

The efforts of the banking world are concentrated exclusively on the euro. But the single market is bigger than the euro zone. The Commission believes that the single payment area must have the same geographical scope as the internal market. At the moment there are still three currencies outside the euro. There will be even more after enlargement.

Why are cheques excluded from the principle of equal charges?

Cheques are a means of payment that is subject to very different legal rules from one country to another, even though they are in theory governed by the 1931 Geneva Convention. The use of cheques varies considerably from one country to another: they are virtually unknown in Sweden and Finland, but account for more than 40% of non-cash payments in France. In a number of countries there has been a considerable decline in their use since 1 January 2002.

Cheques are not suitable as an automated means of cross-border payment, since, by their very nature, they cannot be processed as efficiently as other means of payment, in particular electronic payments.

The banking world will not develop any infrastructure for handling cross-border cheques. However, the general rules on transparency will apply: banks must inform cheque-book holders of the charges they will incur if they use cheques for cross-border payments.

Since these charges are generally high (more than the cost of transfers), consumers are strongly advised not to use cheques for cross-border payments.

The Regulation does, however, apply the principle of transparent charges to cheques.

[Graphic in PDF & Word format]

Austria:

Arbeitskreis "Ombudsstellen der österreichischen Kreditwirtschaft" Wirtschaftskammer Österreich Wiedner Haupstrasse 63 A-1045 Wien Tel. +43.1.501.05.31.32 Fax. +43.1.501.05.272 e-mail: BSBV@WKOESK.WK.OR.AT

Belgium:

Association Belge des Banques (ABB) Rue Ravenstein, 36, bte 5 B - 1000 Bruxelles/Brussel Tel. +32.2.507.68.11 Fax +32.2.507.69.79 email: ombudsman@abb.bvb.be

Médiateur auprès de la Poste Dienst Ombudsman De Post W.T.C. Tour II Chaussée d'Anvers/Antwerpsesteenweg 59 B - 1000 Bruxelles/Brussel Tel. +32.2.204.81.00 (FR) Tel. +32.2.204.82.00 (NL) Tel. +32.2.204.83.00 (DE) Fax +32.2.204.84.00

Denmark:

Pengeinstitutankenævnet Østerbrogade 64, 4 DK - 2100 København Ø Tel. +45.35.43.63.33 Fax +45.35.43.71.04

Finland:

Advisory Office for Bank Consumers Museokatu 8 A 7 FIN - 00100 Helsinki Tel. +358.9.4056.1230 Fax +358.9.4056.1235 e-mail: pankkialan.asiakasneuvonta@rahoitusalankl.fi

Internet: http://www.pankkiasiakas.net

Consumer Complaint Board Box 306 Kaikukatu 3 FIN - 00531 Helsinki Tel. +358.9.7726.7900 Fax +358.9.753.4880 e-mail: kirjaamo@kuluttajavl.fi

France:

Each individual bank normally has its own ombudsman. Otherwise you may turn to the Association Française des Banques: Association Française des Banques 18 rue La Fayette 75009 Paris Tel: +33.1.48.00.52.52 Fax: +33.1.42.46.76.40

Germany:

Deutsche Bundesbank Schlichtungsstelle Postfach 10 06 02 D - 60006 Frankfurt am Main Tel. +49.69.9566-40.50 Fax +49.69.9566-40.56 e-mail: schlichtung@bundesbank.de

Bundesverband Deutscher Banken Ombudsmann Postfach 040307 D - 10062 Berlin Tel: +49 30 16633161 (or 62) Fax: +49 30 16633169 e-mail: ombudsmann@bdb.de

Greece:

Commission for the protection of customers of enterprises and public bodies chaired by the Secretary-General for Commerce 20, Kaningos Street GR - 101 81 Athens Tel: + 301 383.79.82 Tel. + 301 384.17.73 Fax: + 301 382.96.40

Hellenic Banking Ombudsman 12-14 Karagiorgi Servias Street GR - 105 52 Athens Tel. +30.1.33.76.700 Fax +30.1.32.38.821 e-mail: contact@bank-omb.gr

Internet: http://www.bank-omb.gr/

Ireland:

The Ombudsman for the Credit Institutions 8 Adelaide Court IRL - Dublin 8 Tel. +353.1.478.37.55 Fax +353.1.478.01.57

Italy:

Ombudsman Bancario Via delle Botteghe Oscure 46 I - 00186 Roma Tel. +39.06.67.67.353 Fax +39.06.67.67.400 e-mail: om@abi.it

Luxembourg:

Commission de Surveillance du Secteur Financier (CSSF) 110, Route d'Arlon L - 2991 Luxembourg Tel. +352.26.251.226 Tel. +352.26.251.234 Fax +352.26.251.603 Fax: +352.26.251.601 e-mail: banques@cssf.lu , directioncssf@cssf.lu

Netherlands:

Stichting Geschillencommissie Bankzaken Surinamstraat 24 NL - 2585 GJ 's Gravenhage Tel. +31.70.310.53.10 Fax +31.70.365.88.14

Portugal:

Centro de Arbitragem de Conflitos de Consumo Mercado Chão de Loureiro (1st floor) Largo do Chão do Loureiro P - 1100 Lisboa Tel. +351.1.888.36.23 Fax +351.1.888.37.67 e-mail: lis-arbitragem@ip.pt

Spain:

Banco de España Servicio Jurídico / Sevicio de Reclamaciones Alcalá, 50 E - 28014 Madrid Tel. +34.91.338.57.58 Fax +34.91.338.65.22

Sweden:

The National Board for Consumer Complaints P.O. Box 174 S - 101 23 Stockholm Tel. +46.8.783.17.00 Fax +46.8.783.17.01 e-mail: staffan.lind@arn.se

United Kingdom:

Financial Ombudsman Service South Quay Plaza 183, Marsh Wall London E14 9SR Tel. +44.207.964.1000 Fax +44.207.964.1001 e-mail: enquiries@financial-ombudsman.org.uk

Internet: http://www.financial-ombudsman.org.uk/


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