Draft Payment Accounts (Amendment) (EU Exit) Regulations 2018
(Limited Text - Ministerial Extracts only)
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The Exchequer Secretary to the Treasury (Robert Jenrick)
I beg to move,
That the Committee has considered the draft Payment Accounts (Amendment) (EU Exit) Regulations 2018.
There is no better way to round off the year than with another statutory instrument. As the Committee will be aware, the Treasury has been undertaking a programme of legislation to ensure that if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. This instrument will fix deficiencies in UK law on the regulation of payment accounts. The approach taken in the instrument aligns with that taken in other SIs being laid under the European Union (Withdrawal) Act 2018—providing continuity by maintaining existing legislation at the point of exit, but amending it where necessary to ensure that it works effectively in a no-deal context.
The payment accounts directive had three main objectives: to improve the transparency and comparability of fees related to payment accounts; to facilitate switching of those accounts; and to ensure access to payment accounts with basic features for all EU residents. The Payment Accounts Regulations 2015 transposed that directive into UK law. Colleagues will be familiar with payment accounts—they are the day-to-day bank or building society accounts we all use to make and receive payments and to withdraw and deposit cash. In the UK, the most common form of payment account is of course a current account.
In a no-deal scenario, the UK would be outside the EU’s legal, supervisory and financial regulatory framework. The 2015 regulations therefore need to be updated to ensure that the provisions work appropriately in that scenario. These draft regulations are mostly concerned with removing EU references, so the impact on consumers and businesses will be minimal. However, I will go into a little more detail about the changes governing payment accounts with basic features—“basic bank accounts”, as they are more commonly known in the UK—because the Secondary Legislation Scrutiny Committee and the House of Lords Grand Committee drew particular attention to them.
It is important to emphasise that the draft regulations retain the requirement for the UK’s nine largest current account providers to provide basic bank accounts free of charge, in sterling, to customers legally resident in the UK, regardless of their nationality, if they do not hold a current account at a UK bank or are not eligible for a standard current account. However, as the UK will no longer be part of the EU’s single market in financial services after exit day, the instrument removes the requirement on those nine basic bank account providers to offer those products to customers resident in the EU or to offer EU currency services as a standard feature on any basic bank account.
It will be at the discretion of the nine providers whether to continue to offer basic bank accounts to customers resident in the EU after exit day, or to keep existing basic bank accounts of EU residents open. Although firms will no longer be compelled to provide non-sterling services on basic bank accounts, conversations with the industry suggest that they are very unlikely to withdraw those services.
The SLSC and Members in Grand Committee in the other place asked for reassurances that, should the nine providers choose to close the bank accounts of customers resident in the EU, those customers would not be placed in financial difficulty as a result. There was particular concern that although that might not affect many customers, it could have a significant impact on the small number of individuals affected. Taking into account the comments made in the Lords debate, I will explain briefly why the Government do not expect that these changes will significantly disadvantage customers.
First, the nine providers must give customers at least two months’ written notice if they plan to close an account, which should give customers adequate notice to open another account. Secondly, a customer’s right to a basic bank account is EU-wide, so customers should be able to open another basic bank account in the member state in which they reside. To be clear, the right of access to a basic bank account depends on residency alone, not nationality.
Under the 2014 payment accounts directive, a customer legally resident in the EU, regardless of their nationality, still has the legal right of access to a basic bank account within the EU. What may change is the cross-border right of access to a basic bank account, which under this SI will no longer be mandated on the UK side because the UK will no longer be part of the single market.
The Treasury worked very closely with the Financial Conduct Authority and the Payment Systems Regulator when drafting the regulations. It has engaged the financial services industry and leading consumer groups, and of course it will continue to do so.
In summary, the Government believe that the draft regulations are necessary to ensure that the Payment Accounts Regulations 2015 continue to function appropriately if the UK leaves the EU without a deal or an implementation period. Most importantly, they mean that fee-free basic bank accounts, which are a key financial inclusion product, will remain robustly regulated and available to all eligible customers legally resident in the UK. I hope colleagues will join me in supporting the draft regulations, and I commend them to the Committee.
Robert Jenrick
I am grateful to the hon. Members for Oxford East, and for Glasgow Central, for their comments. I will try to respond to as many as possible.
As we have heard, it is only prudent of the Government to make sensible contingency plans for no deal. Frankly, I would be surprised if any hon. Member did not wish us to do so, given that, although our preference is to leave with a deal, leaving without one is the default position—it is the legal position—and is entirely possible, if not necessarily desirable. In this statutory instrument, we are making modest preparations to ensure that equivalent provisions are in place in the event of no deal.
Sir Paul Beresford (Mole Valley) (Con)
It is interesting; if the Opposition Members who have been protesting actually supported the deal, we would not be in this situation and would not have to worry about this. I must use this opportunity to congratulate and thank the hon. Member for Glasgow Central, because I understood every word she said.
Robert Jenrick
Well, let me answer the questions asked by the hon. Member for Oxford East. She mentioned the gap in reporting between exit day and 2022. That is because the Money Advice Service reports to the Treasury, which then reports to the European Commission, and it is that provision that is deficient. I assure the hon. Lady that there are no changes to the requirement for the Money Advice Service to host a price comparison website—that has already been launched—so to answer the question that she perfectly understably asked, there should not be an issue.
There is no reduction in the requirement for transparency on fees. The only change is that the FCA is taking over responsibility for the regulation of the documents from the European Banking Authority. We have of course worked with the FCA, so I can say in answer to the hon. Member for Glasgow Central that it is willing and ready to take on those responsibilities.
On the wider question about UK citizens living in the EU27, we expect the number of individuals affected by the measure to be very small. We have had conversations with banks on the arrangements that we will put in place; the hon. Member for Oxford East mentioned the subject. It is worth remembering, as I said in my opening remarks, that any individual legally resident in an EU27 country will have the right, under EU law, to access a basic bank account in that country. If they had been using their basic bank account from the United Kingdom solely, and then no longer had access to that—an unlikely scenario, and one that would affect a very small number of individuals—they could, as of right, open a basic bank account in the country in which they are legally resident. We see no reason why they would not be able to do that.
Anneliese Dodds
I am grateful to the Minister for that explanation, but surely the question is not whether certain people would become completely unbanked as a result of the changes, but whether they could still carry out the kind of transactions that are very difficult to do, in whatever country, unless one has a domestic bank account. If one does not, it can be very difficult to pay certain kinds of bills and make certain kinds of transactions and so on—and there are normally additional charges involved.
Robert Jenrick
Those people would be able to open a bank account in the UK at the commercial discretion of a UK bank. We do not think there will be many, if any, examples of individuals having their bank account withdrawn, but of course it is technically possible that a bank might choose to do that. We think it is unlikely that these individuals would continue to use their UK-based bank account as their sole current account. If, say, a Spanish student came to study in the United Kingdom, opened a UK basic bank account and then returned to Spain, it would be a costly bank account for them to continue to use as their current account, because they would have to pay currency charges whenever they transferred money. The situation that the hon. Lady alludes to would apply only in a limited number of circumstances. I take her point that there could be such circumstances, but we do not think there will be a substantial number.
It is worth remembering that our duty in this instance—I am sure the hon. Lady would support this—is to maintain equivalence, not make policy changes. We are ensuring that any individual resident in the UK will have access to a basic bank account, but we are not making a change to ensure that UK citizens resident in third countries can have access to a UK basic bank account; that would be a policy change, because it would of course be applicable beyond the EU27 to any country in the world in which a UK citizen might choose to reside. I hope that she is reassured that our intention is to act within the confines of the law—not to go beyond it and take action that might apply to a British citizen resident in, for example, Canada or the United States who wished to maintain or open a UK basic bank account.
The hon. Lady also asked a question about consumer organisations and industry consultation. In drafting the statutory instrument, the Treasury engaged confidentially with industry representatives to make them aware of these changes, and to allow them the opportunity to comment on any of them. We have not received any queries or comments on the proposed changes from those groups, or from any consumer groups, since publication, so we can only assume that they are content, but of course we will continue to work, and to be open to comments, should any come forward in the weeks and months ahead.
I think that I have answered most of the questions posed by the—
Anneliese Dodds
The Minister is being very generous with his time. I believe that I asked when the impact assessment would be forthcoming.
Robert Jenrick
The hon. Lady is absolutely right, and I will come on to that as my final comment. First, I will answer what I think was the final comment from the hon. Member for Glasgow Central, in respect of potential discrimination against EU nationals resident in the UK. What she suggests is not the case under this statutory instrument. Any resident of the United Kingdom who is legally resident in the United Kingdom will have access to a basic bank account, just as they would if they were living elsewhere in the EU.
Alison Thewliss
This is the very point that I was making, though. The issue is the “legally resident” part. I have many non-EU national constituents who end up in dispute with the Home Office, and who could fall foul of being not seen to be legally resident. The Government are now throwing EU nationals into that pot as well, and there is every risk that they could be not legally resident in the eyes of the bank or in the eyes of the Home Office. That is the problem with this situation.
Robert Jenrick
With respect, the hon. Lady is not correct. The position under this statutory instrument will be exactly the same as the position today. Anyone legally resident in an EU country and anyone legally resident in the United Kingdom after exit day will have access to a basic bank account, so nobody will be disadvantaged as a result of the SI. The Treasury is working very carefully to ensure, for example, that bank accounts are available to those who are homeless and to ex-offenders as they leave prison. The Government are working carefully with difficult and vulnerable groups to ensure that they have basic bank accounts, but people must be legally resident in the UK. It goes without saying that we cannot legislate for those people who are illegal. We have to work on the premise that this will apply only to those who are legally resident in the UK, just as the existing EU rules do.
The hon. Member for Oxford East asked about the impact assessment. We have prepared an impact assessment, as she would expect, and we hope to publish it shortly. The impact assessment is with the Regulatory Policy Committee for consideration, along with a series of other statutory instruments. Together, they form the second tranche of statutory instruments coming from the Treasury. This is the first one, as I understand it, from that tranche that has come before the House. We will publish the assessment once the committee’s opinion has been received. We have tried to ensure that impact assessments have completed all the usual processes in time to be published before debates, but that has not always been possible, for the reasons that the hon. Lady helpfully gave. The sheer quantity of statutory instruments coming forward is placing pressure not just on the civil service, but on the Regulatory Policy Committee, which is a relatively small organisation. These statutory instruments are being prepared at pace, to ensure that we have a robust stand-alone regime in place before March 2019.
This statutory instrument is needed to ensure that consumers in the UK continue to benefit from the regulation of the payment account market, and that the legislation functions appropriately if the UK leaves the EU without a deal or an implementation period. I hope that the Committee has found this afternoon’s sitting informative and will join me in supporting the regulations.
Question put and agreed to.