Background

The Payment Accounts Directive (2014/92/EU) (PAD) set common regulatory standards for EU Member States so that:

• there would be greater transparency around the fees attached to payment accounts;
• customers could switch payment accounts more easily; and
• customers could access bank accounts with basic features.

When the UK withdrew from the EU, the UK government retained the PARs and in 2021 it carried out a post-implementation review.

What is the consultation about?

Following the post-implementation review, the government found that the PARs could potentially be revised to be less burdensome for firms and still achieve the objectives outlined above.

Specifically, the government queries whether many of the information requirements (including the related format and content requirements) set out in Part 2 and Schedules 1 and 2 of the PARs – aimed at improving the comparability of fees connected with payment accounts - are either less necessary in a UK context or are too prescriptive. In terms of current PARs requirements, Part 2 of the PARs requires payment service providers to provide customers with a fee information document, statement of fees and a glossary of terms used in the FCA’s linked services list.

The consultation therefore asks for input on the positive and negative impacts of these requirements. For example, the consultation notes that the format requirements in the PARs may limit the flexibility that firms have to provide information in a way that would be more helpful for customers. The consultation also queries whether customers in the UK need the information provided under the PARs because compared to EU countries, UK current accounts generally have fewer fees and charges in relation to normal account usage.

Next steps and the wider context: HM Treasury’s programme for building a ‘smarter financial services framework for the UK’

The consultation will remain open for 10 weeks and will close at 11pm on 17 February 2023. This consultation is just one of the consultations and other initiatives that form part of the UK government’s Edinburgh Reforms which, amongst other things, seek to adapt the financial services regulatory framework post-Brexit. 

The consumer information requirements under the PARs are on the list of financial services items in Tranche 2 of the government’s programme for implementing the comprehensive FSMA model in relation to retained EU law, as set out in the HM Treasury policy statement ‘Building a smarter financial services framework for the UK’, which was also published as part of the Edinburgh Reforms package.

This programme is needed to replace retained EU law in primary and secondary legislation with rules made by the PRA/FCA under an FSMA approach. This has led to the government’s Future Regulatory Framework (FRF) Review and the introduction of the Financial Services and Markets (FSM) Bill to Parliament.

The policy statement states that the government ‘expects to make significant progress on Tranches 1 and 2 [of the implementation programme] by the end of 2023’. Tranche 2 is described by HM Treasury as comprising ‘those areas with the biggest potential benefits to deliver improvements to UK economic growth.’ It will also cover PSD2 ((EU) 2015/2366) and the Electronic Money Directive (2009/110/EC). Alongside the policy statement, HM Treasury also published illustrative draft Statutory Instruments (SIs) to give an indication of how the powers relating to retained EU law in the FSM Bill will be used, and how the relevant SIs may be structured. One of these illustrative draft SIs is the Electronic Money and Payment Services (Amendment) Regulations 2023. It covers giving the FCA rulemaking powers in relation to payments regulation, which  demonstrates  how the FSM Bill might establish powers for the FCA to make rules to replace retained EU law, where it doesn’t already have powers to do so. There is an accompanying explanatory policy note for the draft SI.

For more on the Edinburgh Reforms, take a look at this Engage article: ‘The Edinburgh Reforms: the next chapter for UK financial services regulation’.

If you would like to discuss the consultation or any of the other Edinburgh Reforms, please get in touch with us.

Authored by Roger Tym, Soo Oh, and Virginia Montgomery.