New rules aimed at improving the transparency and comparability of payment account fees are currently expected to become effective in the summer of 2018. Payment service providers will then have to use a range of predefined terms and give consumers standardised information that must also be clear, comprehensible and easily accessible. This is intended to allow consumers to quickly identify which providers offer which services and at what price.

Part 2 of the German Payment Accounts Act (Zahlungskontengesetz – ZKG) forms the basis of this and makes the corresponding provisions of the Payment Accounts Directive legally binding. It will enter into force nine months after the European Commission has adopted the relevant delegated act, which is expected to happen shortly. The Payment Accounts Directive is aimed at promoting an integrated market in the retail banking sector and increasing competition in this way. On the German market, too, the difficulties involved when comparing the price and product features of payment account services may significantly discourage consumers from switching accounts.

Standardised terms and definitions

The specific information obligations under the German Payment Accounts Act apply to all payment accounts, i.e. not just basic payment accounts under the German Payment Accounts Act. These obligations relate to "significant payment account services". BaFin will publish a list, in accordance with section 47 of the German Payment Accounts Act, setting out the services concerned. In accordance with Article 3 (2) of the Directive, this list will include the services most commonly used by consumers in relation to their payment accounts and those that generate high costs for consumers.

A uniform description of these services across Europe is key to ensure that consumers are actually able to compare fees. The Commission delegated act (see below) will therefore set out standardised terminology for the eight services most commonly used in the EU. EU Member States will use this terminology in their respective national lists. However, these lists will also take into account the specificities of the local market and may comprise additional services as a result.

New disclosure documents

In future, payment service providers will be required to provide information, using separate documents that are clear and easy to understand, on both the fees to be expected before entering into a contract (fee information document) and the actual costs incurred over the duration of the contract and when the contractual relationship ends (statement of fees). Provided that they use the templates that BaFin will prepare in accordance with section 47 of the German Payment Accounts Act on the basis of a standardised presentation format set out in the delegated act, the legal requirements for drawing up disclosure documents are deemed to be fulfilled. Payment service providers will also be required to use the standardised terminology in the documents they provide.

The fee information document is to contain general information on the costs associated with a payment account. In addition, consumers are to be given the fee information document in good time before entering into a contract so that they can compare the costs on the market and find the provider that represents the best value for them.

The statement of fees is to provide information on all the actual fees incurred by each customer over the duration of their contract. This statement must be provided to the customer at least once a year and when the contract ends.

General information obligations and administrative fines

In addition to the introduction of the two disclosure documents above, sections 14 and 15 of the German Payment Accounts Act also specify other rules as to how payment service providers are to structure and provide information to consumers in addition to when they must use the applicable standardised terminology. This also includes a glossary that must contain at least all significant payment services and the related definitions. BaFin will also publish a template for this document in accordance with section 47 (2) of the German Payment Accounts Act.

The significance of these new information obligations is highlighted by the fact that BaFin will have the power to impose administrative fines if these obligations are not met or are not met in full or in good time, or if the standardised terminology has not been used.

What next?

EU Member States shall publish a list of the most representative services linked to a payment account at the latest within three months after the delegated act has entered into force. The information obligations will become effective six months later.

BaFin is currently working on the list and templates to be used for the standardised explanatory disclosure documents and the glossary, all on the basis of the standards set by the European Banking Authority (EBA), which serve as the basis for the Commission delegated act. By cooperating with the Federal Ministry of Finance (Bundesministerium der Finanzen) and banking associations, this should ensure that payment service providers are able to prepare for these extensive and detailed adjustments in good time.

The new rules will significantly improve the conditions for consumers to be able to make informed decisions with a reasonable amount of effort. But it remains to be seen how the rise in transparency will ultimately impact consumer behaviour and thus price and product features on the market.

Interview: "Transparency is required to make informed decisions"

Ms Deppmeyer, aren't banks already required to inform their customers of the cost of their current account?

Yes, they have to make this information available, of course. But there are many different price models and a wide range of account names. In addition, this information often needs to be gathered from a list of prices and services that not all institutions have on their websites. As a result, it is very difficult or even impossible to compare the actual cost of payment accounts in practice. This, in turn, goes against the idea behind switching services, so it comes as no surprise that they have been used only little so far.

How do you mean?

Switching services alone are not very useful if the conditions allowing consumers to make informed decisions are not also in place. How are they supposed to find the most suitable payment account if they cannot get an overview of the market? We have already seen this on the telecommunications market and the energy market. Now that individual providers can be compared easily, consumers are willing to switch providers.

This is why fee transparency is a highly important part of the German Payment Accounts Act, without which switching services would not work in practice. Consumers should be able to make informed decisions as to which services are the most suitable for their needs and represent the best value for them, all with a reasonable amount of effort.

How does the German Payment Accounts Act improve transparency for consumers?

The Act lays down exactly for which services and in what form providers must publish price information in addition to the format and terms that must be used. This information must be succinct, clear and easy to understand. With the fee information document that institutions will also have to provide on their websites, consumers will be able to compare prices on the market more easily, allowing them to find the right offer for them. In addition, banks will have to regularly provide consumers with a statement on the actual costs that apply. There will also be certified comparison websites offering an overview of providers and their services, which should all help to improve transparency for consumers.