Savings banks have welcomed initial European Parliament support for only a gradual phase-out of the charges that banks levy on each other for direct-debit payments. The view, in an influential draft report, is in striking contrast to a European Commission proposal for an immediate ban on these so-called ‘hidden fees’.
The European Savings Bank Group (ESBG) strongly opposes the Commission’s plan for an outright ban, arguing that the payments, known as multilateral interchange fees, are vital to cover the cost of transactions. It warns that a ban could result in charges being passed on to consumers.
The Parliament’s economic and monetary affairs committee is due to vote on the proposals on 27 June. Sari Essayah, a Finnish centre-right MEP who is leading the Parliament’s work on the issue, calls for the fees to be phased out gradually over seven years, to give banks time to adapt.
The fee is a standard levy in Belgium, France, Italy, Portugal, Spain and Sweden – which, the ESBG says, account for 76% of EU direct- debit transactions by volume.
At the moment, the bank from which money is transferred by direct debit is remunerated by the credited bank, at a rate of up to 8.8 cents for cross-border direct debits. Under Essayah’s approach, this maximum cap would decrease by 2.2 cents every two years.
The ESBG says that a review should take place once fees have been reduced to 2.2 cents, while some banks, in exceptional circumstances, should be allowed to retain the 8.8 cents level until then.
The Commission sees the fees as a restriction on competition between banks and a barrier to cross-border direct-debit payments.
Norbert Bielefeld, a payments expert at the ESBG, said the Commission was taking a “doctrinal stance” and that there was no evidence that such fees were anti-competitive.
He argued that the Commission’s proposal to allow the continuation of fees when a transaction fails to go through automatically was “contradictory”.
“On the one hand, the Commission proposal accepts the logic of interchange in these circumstances, but it rejects in the same piece of legislation [payments when the transaction is successful]. But in both cases there is a service being rendered and there are costs,” Bielefeld said.
Last December, the Commission proposed binding deadlines for the total replacement of national payment systems, one of the cornerstones of the Single Euro Payments Area (SEPA); 2012 for credit transfers and 2013 for direct debits (although this depends on when the legislation is adopted). On this broader aspect of the reforms, Essayah’s draft report recommends a single deadline of 2014.
Member states are also expected to come to agreement on the issue before the summer. Germany has raised concerns about the speed of the transition, with one senior official recommending that the deadline for migration to pan-eurozone payments should be 2016.
The Commission expects economic growth worth €300 billion in the first six years after the shift to the pan-eurozone method of direct-debit payments and the abolition of interchange fees.
Retail and consumer groups generally back the Commission’s approach. EuroCommerce, which represents retailers, shares the view that interchange fees impede the development of a single-payments area by restricting competition between banks through keeping entry costs high for new market entrants.
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