My Lords, this SI is part of the series providing contingency planning for the no-deal Brexit scenario. The Payment Accounts Regulations 2015 established a right of access to a basic bank account with basic features for customers legally resident in the EU, which were fee-free for services in sterling, with EU currency services provided at a reasonable fee. The Explanatory Memorandum advises that this SI seeks to ensure that those regulations operate effectively in the UK in the event of no deal and continue to deliver the existing three main objectives of, first,
transparency and comparability of fees on day-to-day payment transactions such as cash deposits, withdrawal and card payments; secondly, the facilitation of account-switching; and, thirdly, ensuring access to accounts with basic features for EU residents. Paragraphs 2.2 and 2.12 of the Explanatory Memorandum set out what I have just described.
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However, it is difficult to see how this SI can deliver those three objectives, given that the draft regulations specifically do not only remove references to EU bodies and replace them with UK authorities, they also remove the requirements on banks and payment account providers to facilitate the cross-border opening of accounts. It also gives discretion to UK payment account providers as to whether to continue to offer basic bank accounts to customers legally resident in the EU, or indeed whether to keep existing basic bank accounts open. It changes the residency criteria for customers who will be assured access to a basic bank account, restricting them to UK residency and excluding UK citizens who are legally resident in the EU who may hold or wish to hold a basic bank account with a UK provider. It removes the requirement to offer at reasonable charge non-sterling and EU currency services to customers with bank accounts with basic features, including for customers resident in the UK. Where a customer wants to switch from their UK bank account to an EU account, this SI removes the requirement on banks and payment providers to facilitate such cross-border account opening by, for example, providing information on direct debits or transferring a balance when switching. When one reads the list of things that these draft regulations allow for, it is difficult to see how the assertion in paragraph 2.12 of the Explanatory Memorandum that the intention is to continue the objectives of the original regulations can be met.
I do not believe that all of these changes are necessary to correct deficiencies in the retained EU law in a no-deal situation. Why, after we leave the EU, is it necessary for a UK citizen who may be resident in another EU state and who currently holds a basic bank account with a UK provider to find that the UK provider is to be given the discretion to close their account? I do not believe that such a measure is necessary to ensure that the Payments Accounts Regulations operate effectively if we leave the EU with no deal. The Government’s view is that the impact of these regulations on customers will be minimal, but as the Secondary Legislation Scrutiny Committee observed in its November 2018 report:
“We have been told that a UK citizen who is legally resident in the EU may hold a basic bank account with a UK provider, and that under this instrument a UK provider will be allowed to close their account”.
A few hundred account holders may be described as minimal impact, but it may be anything but minimal to the account holders affected who, as the Secondary Legislation Scrutiny Committee observes,
“may well face a good deal of inconvenience if they find that their designated provider chooses to close their account”.
They may find it difficult to secure a basic bank account from another provider.
The response of the Treasury to the committee’s concerns, that an affected customer should be able to get a basic bank account with an EU-based provider—an argument which has been deployed today by the Minister—was qualified by subsequent information provided. I shall quote from the committee again:
“The effect of leaving the EU on a UK customer’s right to a basic bank account in an EU Member State will depend on how that State has implemented the Directive. If a Member State has specified in its local law that eligibility is based on EU residency … a UK customer legally resident in the UK would no longer be automatically eligible for a basic bank account within the EU, once the UK has left the EU”.
If the UK provider decides to cancel their basic bank account, the idea that they can get a basic bank account in another EU state that they are living in may not apply. They may be left without access to a basic bank account. It may well cause difficulties for UK citizens who may have their basic account closed at the discretion of the provider or the bank, as they will be allowed to do under these regulations. Two months’ notice may not be sufficient to get them out of difficulty, and mitigating any problems by trying to get a basic bank account in another EU state may not be possible because they will not be categorised as an EU citizen.
I come back to the Secondary Legislation Scrutiny Committee’s point and ask the Minister for reassurance that these regulations will not be allowed to cause financial difficulty to those affected. It may be a few hundred people, but I do not believe it is necessary for these regulations to subject them to financial difficulty by allowing their UK bank to cancel their basic bank account.
Can I also ask the Minister whether it would be possible to introduce a provision, in the event that we leave the EU without a deal, so that if a bank decides to exercise its discretion and close an existing customer’s bank account, where that customer is a UK citizen it must notify the FCA so it can monitor the impact of the amendment to these regulations?
Finally, can I ask the Minister for an assurance that under these regulations there will be no weakening of the disclosure of information to customers from banks and payment account providers on matters such as fees and charges, and any other matter on which there are currently disclosure requirements to the customer?