Published: 3 July 2018
ESBG supports the concept of the Internal Market as enshrined in EU law. However, we do not support the view that for it to function properly, cross-border activity should be mandatory. This is because as a result of consumers’ demands, retail and savings banks are often entities operating solely locally (retail business is local business). Moreover, crossborder demand of retail financial services is mostly confined to multi-lingual border regions.
With respect to the switching of products, we would like to state that we firmly believe that suppliers should continue to be conferred the freedom to decide where and when they offer their goods or services to customers. The EU consists of multiple independent states with their own languages and cultures, which have also helped shape the financial products offered in the local markets. Therefore, the multi-cultural nature of the EU is not a barrier for trade that should be combatted, but a natural division into a number of markets where the local end-users are receiving the best possible service by local providers with market adapted services on attractive terms and conditions in their natural language.
With respect to the action aimed at lowering charges on non-euro transactions, ESBG has noted the legislative proposals from the European Commission.
We feel that additional endeavours in facilitating the switching of financial products should be the last step on the way to a real European single market. Before any such complex and likely costly system is established, the demand for this should be ascertained and comparable products and services should be available on the market. The Commission correctly observes on page 6 of the Action Plan: "Consumers rarely change their financial service provider […]". This is often because consumers are happy with their current financial service provider. Furthermore, we would like to note that many of the difficulties with switching are not caused by banks. Some service providers (such as telecommunication and electricity providers) require the conclusion of new direct debit SEPA-mandates in such cases. The correspondence in relation to this may take several days or even weeks. In addition to this, IBAN discrimination persists within the EU, indicating that perhaps Art. 9 of the SEPA Regulation (prohibition of specification of the Member State where the payment account is located) is not enforced to a sufficient extent. There is no such discrimination when a contract is not possible because of another characteristic of one of the contracting parties. Lastly, we believe that before switching is attempted to be improved existing legislation should be properly adapted to the most recent digital innovations.
There is a very practical barrier to cross border granting of credit – difficulties to create and enforce a mortgage cross border, in another Member State. Furthermore, the differences in the approaches to creditworthiness assessment differ across Member States because the customers differ as well. Therefore, a locally rooted savings or retail bank is best equipped to assess the creditworthiness of a given customer. As a consequence, it is important that such banks retain some level of discretion in these procedures. We therefore feel that banks should be able to decide by themselves which additional data is needed to assess a consumer’s creditworthiness. For instance, if a bank can obtain the information necessary to make a lending decision by other means (e.g. “know your customer” owing to familiarity with the client), it should in principle be permitted to do so and should not be obliged to obtain it solely from credit databases. We therefore do not support the adoption of a common creditworthiness standard.
We would also like to highlight the link between good creditworthiness assessments and the prevention of the issue of over-indebtedness. Namely, for the consumer, a good creditworthiness-assessment is the most effective tool to prevent future over-indebtedness because it helps to offer a credit which is aligned with the consumer’s repayment capacities. On the other hand, for financial institutions, a better creditworthiness-assessment translates into better business by avoiding insolvencies and write-offs. Better data also helps financial institutions to react at a very early stage in case of errors and payment difficulties.
Furthermore, ESBG feels that over-indebtedness is a very real problem and that in order to combat it financial education is of vital importance. Today there is no shortage in credit offerings in the EU area. More loans are offered than any market can absorb and making it even easier to hand out consumer credit without the local market know-how should not be an EU priority. Furthermore, numerous studies mandated by the European Commission have shown that no direct link exists between over-indebted households and the granting of loans. This is because instances of over-indebtedness are in essence the result of individual factors (life accidents such as death, serious medical issues, unemployment, and divorce) taking place after the granting of loans. As a consequence, it is believed that overindebtedness is not related to irresponsible lending practices. Therefore, it is worth noting that in this respect budget management is of the essence.
Finally, we welcome the Commission’s endeavours in countering Member States’ gold plating practices in the realm of EU consumer protection legislation, while also supporting the actions addressing digital identity checks, which could broaden the scope with respect to permitted methods used in digital on boarding.
Shortly before Christmas 2015, the European Commission published its Green Paper on Retail Financial Services. Its main aims were to facilitate the increase of cross-border shopping for retail financial services and taking full advantage of digitalisation. ESBG issued a response to this document not long thereafter.
Subsequently, on 22 November 2016, the European Parliament adopted an own initiative resolution on the above-mentioned Green Paper. Among other things, this report stresses the value of financial education of consumers acting as a tool of their empowerment and protection. Importantly, the idea behind ESBG’s call, a clear legal framework in respect of the use of big data, respecting also the ownership in an appropriate manner, was taken on board in this report. The adopted text requires both the use of personal data as well as of such big data to be in line with EU data protection legislation. Unfortunately, this report also prioritised the benefits of consumers over the benefits to society as a whole.
Despite the Action Plan being talked about beforehand, various reasons (personnel changes at the head of unit position, translation of the document into all EU languages…) resulted in several postponements. It was finally published on 23 March 2017 under the name Consumer Financial Services Action Plan.