Response to consultation on Technical Standards on standardised terminology and disclosure documents under the PAD
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Lack of sufficient regulatory impact analysis
Even though we appreciate and support the effort made to enable the consumer to compare the different banks’ services and fees, and we respect that the EBA could act only in the limits given by the PAD, we feel that a lot of highly significant aspects of the whole regulation haven’t been sufficiently assessed and considered. Moreover, our analysis clearly show that the current regulatory requirements might lead to very negative unintended impacts of the regulation which go strictly against the original aims of the PAD – to ensure comparability and transparency.
Our bold conclusion is based on an extensive work and analysis focused on how our bank can implement the requirements stipulated in the PAD and the draft technical standards. It is based on number of practical examples which on real documents created or amended according to the PAD or technical standards´ rules demonstrate the real impacts of the regulation.
We miss any real impact analysis, namely a concrete example of the FID and SoF compliant with the Draft Technical Standards. The examples given in the Rationale part of the EBA Consultation are at the same moment considerably brief and not based on any real product, and in some points non-compliant with the relevant Draft ITS, which will be demonstrated below.
This non-compliance shows itself namely in using terms “Credit transfer to another account in the country” and “Cash withdrawal” instead of “Making a credit transfer of money from a payment account to another account” and “Cash withdrawal from a payment account”. Moreover, such terms do not arise in any of the “national” versions of the Union standardised terms and definitions for services linked to a payment account that are common to at least a majority of Member States, under Article 3(4) of Directive 2014/92/EU provided in the Annex to the Draft RTS.
Furthermore, the FID example does not state all services from the list of most common services, e.g. “Provision of a credit card with a payment account”.
We feel that had such analysis been performed and such an example prepared (and used for consumer testing), some decisions may have been different. We have prepared a FID example using the current Draft Technical Standards and provide them attached in the Annex to this Response.
No regulatory assessment or guidance on using the standardized terms in the bank´s communication
In the same way, Article 6 (2) of the PAD stipulates that “Payment service providers may use brand names to designate their services in their contractual, commercial and marketing information to consumers, provided that they clearly identify, where applicable, the corresponding standardised terms set out in the final list”.
Unfortunately, we have not seen any impact assessment transparently showing :
1. the potential extreme costs for banks to comply with the obligation or a regulatory guidance on how to deal with the obligation in a practical life. We have to bear in mind that the rule affects almost all communication channels of a bank and that any changes in these channels might require extremely high costs.
2. The real sense and added value for a consumer of using the standardized terms in the communication
We have applied the obligation to selected information documents of a bank and the results are alarming. We would very much advocate for finding a rational solution based on the principle of proportionality respecting the goal of the relevant PAD rule (to ensure that consumer understands what banks say) and to ensure that clients are rather generally advised that if they do not understand they can refer to a glossary with a full explanation of standardized terms. From the perspective of a consumer such approach is more helpful than a standardized term next to the brand name – the standardized term would not tell the consumer that he/she should look into the glossary to find the real meaning. And surely will not help him/her to better understand the banking communication.
2. Unified Terminology
Question 1: Do you agree with the EBA’s decision to take a broad approach to defining ‘service’? Please explain your reasoning.
KB supports the EBF point of view that the broad approach allows to identify a higher number of most common services. From this point of view it is probably the only feasible approach for the EU list of standardized terms.
However, our analysis clearly show that the broad approach is highly dangerous for the national lists of the most representative services. Our prepared FID examples for the major retail product (attached to this document) show critical deficiencies of the FID created using the broad approach comparing to the FID created using the narrow approach. Broad approach means that the FID will be:
• Too long for clients to work with it.
o It should be a tool, not another long burdensome regulatory document.
o Should the FID be usable, it has to have max 2 pages (1 sheet)
• Twice longer (by 2,5 pages) = costs for paper + ecological burden
• Visually incomparable (each bank has a different mix of prices)
• Disadvantageous for bigger banks with a more complex offer of products (bank with longer FID is perceived more negatively)
• Duplicate of the pricelist (but the pricelist has better design and added value), but in an awkward way
• include a lot of superfluous information, as majority of clients do not use all the services included in the pricelist for e.g. credit transfer
The list of the most representative services linked to a payment account will under the broad approach become a list of “almost all” services linked to a payment account.
The results of comparison of the two FIDs are in the following table.
The big difference in terms of length of the FID is shown in the following picture:
The narrow approach will also help to ensure that the communication of a bank will not be so much negatively affected by the obligation to use the standardized terms besides the brand name.
To ensure that the PAD goals are achieved, we believe that it is necessary to add into the RTS a new recital or Article 3.
Article 3 – National lists of the most representative services linked to a payment account and standardised terminology
The integration of the Union standardised terminology for the most common services linked to a payment account to the national lists of the most representative services linked to a payment account and subject to a fee is not regulated, thus the Member States may decide to establish the final list of the most representative services linked to a payment account using various approaches for selecting the services to the national list reflecting the specifics and needs of the local market and at the same time the requirements of Article 3 of Directive 2014/92/EU. It is preferable to select rather a specific type of core service to be ensure that the Fee Information Document does not have more than 20 fees to compare.
Thus, we propose to exclude this service from the list.
Further on, Article 47 of the EBA Consultation paper states that the “Union standardised terminology should use the third person.” Even though we feel that other approaches may be used in the definitions creation, this approach is the most “neutral” and therefore should be acceptable for most languages and cultural contexts in most Member states.
Articles 49 and 50 state that the “definitions should be as brief as possible whilst also containing the most relevant information on the service” and that they should “focus on the service itself rather than on defining precisely what is meant by the constituent elements of the service.” In our opinion, these two principles, if properly used, may also help to achieve the goals of the Directive.
If we look at the definitions presented in the RTS, we have to conclude that they are so simple, that their added value for a consumer is highly questionable. Sometimes, the simplicity is even misleading. We believe that a consumer would welcome e.g. precise information on what kind of cash withdrawals or debit cards is available.
We do not have any real evidence that consumers do not understand those basic terms.
Instructions do not reflect language specifics
Czech language, as opposed to English language, is not based on gerunds (-ing form: e.g. “maintaining the account”, “providing a debit card”). Czech language uses for example relative clauses instead of gerunds. Using gerunds in Czech is unnatural and in combination with adjectives or possessive adjective is not appropriate wording in Czech. The appropriate wording should therefore be used to communicate appropriately to the consumer the necessary information.
Moreover, we find that it would help most consumers to understand better what the term means (i.e. understand better the nature of the service) if standard genus-differentia definition were used instead of what we consider often are more examples of use and providing of a context rather that proper definitions.
In addition to this, we propose two alternations in the terms:
• “Přečerpání” is, in the context of the Czech market, perceived as comprising both authorised and unauthorised overdraft. Since the definition assumes the agreement between the client and the PSP, we propose to use the term “Povolené přečerpání”.
• In similar way, “Inkaso” is perceived rather as the actual transfer of money from the customer to the recipient initiated by the recipient instead of by the customer. We propose to use “Povolení k inkasu” as more convenient to the definition given.
We further support the point that the date of publication should be inserted.
The text of the introductory statement, at least in the Czech context, should contain information that the FID does not represent a contract offer to be fully compliant with the Czech law.
We however support the EBF point of view regarding the requirement set out in point 2 of Article 3.
• Proposition to delete articles 3 to 6 of the ITS for the PAD provides already the relevant criteria within Article 4 paragraph 2 a) to g) and that the EBA approach is too formalistic.
• Date of the FID should be added to the template.
• Possibility to delete the Additional Information table.
• Benefits or remuneration/remunerated fees received by customers – In KB, clients are offered a loyalty programme that enables them to be remunerated the account maintenance fee and the ATM cash withdrawal fees if they meet certain conditions. If those remunerations are not stated in the FID, the client will receive an information that is misleading and incorrect.
• The flow of the information in the FID does not support the comprehensibility. When there is a packaged product with a current account and other payment services, and also a “transaction” package (e.g. unlimited number of credit transfers for a fixed price), the ITS requires that the information on the “transaction” package is in the first place, followed by the main table where the package is communicated under the term “account maintenance”. It is rather confusing. We believe that the consumer should firstly in a separate table get the information about the core product he/she buys (i.e. the package with the account), then in the main table information on the prices for individual services to be compared and then in the last table information on the “transaction” package. The template should be amended to reflect that.
• Possibility to merge information relating to one consumer with several accounts into one SoF. In addition to non-overloading the consumer with too much information, this option would considerably lower implementation and recurring costs for the PSPs, thus fulfilling the condition that the SoF be “easy for PSPs to produce” (article 116 of the EBA Consultation paper.
• Addition of an Introductory statement
• Possibility to include reductions/discounts/fees remunerations (see also response to question 7)
• Possibility to delete irrelevant tables
We however support the EBF point of view regarding the requirement set out in point 2 of Article 3.
• Suppression of the obligation to list all the services included in the package
• The flow of information should go from the core service (package comprising the account maintenance) to individual services and then to additional packages.
• Benefits or remuneration/remunerated fees received by customers – In KB, clients are offered a loyalty programme that enables them to be remunerated the account maintenance fee and the ATM cash withdrawal fees if they meet certain conditions. If those remunerations are not stated in the SoF, the client will receive an information that is misleading and incorrect.
Question 1: Do you agree with the EBA’s decision to take a broad approach to defining ‘service’? Please explain your reasoning.
1. General remarksLack of sufficient regulatory impact analysis
Even though we appreciate and support the effort made to enable the consumer to compare the different banks’ services and fees, and we respect that the EBA could act only in the limits given by the PAD, we feel that a lot of highly significant aspects of the whole regulation haven’t been sufficiently assessed and considered. Moreover, our analysis clearly show that the current regulatory requirements might lead to very negative unintended impacts of the regulation which go strictly against the original aims of the PAD – to ensure comparability and transparency.
Our bold conclusion is based on an extensive work and analysis focused on how our bank can implement the requirements stipulated in the PAD and the draft technical standards. It is based on number of practical examples which on real documents created or amended according to the PAD or technical standards´ rules demonstrate the real impacts of the regulation.
We miss any real impact analysis, namely a concrete example of the FID and SoF compliant with the Draft Technical Standards. The examples given in the Rationale part of the EBA Consultation are at the same moment considerably brief and not based on any real product, and in some points non-compliant with the relevant Draft ITS, which will be demonstrated below.
This non-compliance shows itself namely in using terms “Credit transfer to another account in the country” and “Cash withdrawal” instead of “Making a credit transfer of money from a payment account to another account” and “Cash withdrawal from a payment account”. Moreover, such terms do not arise in any of the “national” versions of the Union standardised terms and definitions for services linked to a payment account that are common to at least a majority of Member States, under Article 3(4) of Directive 2014/92/EU provided in the Annex to the Draft RTS.
Furthermore, the FID example does not state all services from the list of most common services, e.g. “Provision of a credit card with a payment account”.
We feel that had such analysis been performed and such an example prepared (and used for consumer testing), some decisions may have been different. We have prepared a FID example using the current Draft Technical Standards and provide them attached in the Annex to this Response.
No regulatory assessment or guidance on using the standardized terms in the bank´s communication
In the same way, Article 6 (2) of the PAD stipulates that “Payment service providers may use brand names to designate their services in their contractual, commercial and marketing information to consumers, provided that they clearly identify, where applicable, the corresponding standardised terms set out in the final list”.
Unfortunately, we have not seen any impact assessment transparently showing :
1. the potential extreme costs for banks to comply with the obligation or a regulatory guidance on how to deal with the obligation in a practical life. We have to bear in mind that the rule affects almost all communication channels of a bank and that any changes in these channels might require extremely high costs.
2. The real sense and added value for a consumer of using the standardized terms in the communication
We have applied the obligation to selected information documents of a bank and the results are alarming. We would very much advocate for finding a rational solution based on the principle of proportionality respecting the goal of the relevant PAD rule (to ensure that consumer understands what banks say) and to ensure that clients are rather generally advised that if they do not understand they can refer to a glossary with a full explanation of standardized terms. From the perspective of a consumer such approach is more helpful than a standardized term next to the brand name – the standardized term would not tell the consumer that he/she should look into the glossary to find the real meaning. And surely will not help him/her to better understand the banking communication.
2. Unified Terminology
Question 1: Do you agree with the EBA’s decision to take a broad approach to defining ‘service’? Please explain your reasoning.
KB supports the EBF point of view that the broad approach allows to identify a higher number of most common services. From this point of view it is probably the only feasible approach for the EU list of standardized terms.
However, our analysis clearly show that the broad approach is highly dangerous for the national lists of the most representative services. Our prepared FID examples for the major retail product (attached to this document) show critical deficiencies of the FID created using the broad approach comparing to the FID created using the narrow approach. Broad approach means that the FID will be:
• Too long for clients to work with it.
o It should be a tool, not another long burdensome regulatory document.
o Should the FID be usable, it has to have max 2 pages (1 sheet)
• Twice longer (by 2,5 pages) = costs for paper + ecological burden
• Visually incomparable (each bank has a different mix of prices)
• Disadvantageous for bigger banks with a more complex offer of products (bank with longer FID is perceived more negatively)
• Duplicate of the pricelist (but the pricelist has better design and added value), but in an awkward way
• include a lot of superfluous information, as majority of clients do not use all the services included in the pricelist for e.g. credit transfer
The list of the most representative services linked to a payment account will under the broad approach become a list of “almost all” services linked to a payment account.
The results of comparison of the two FIDs are in the following table.
The big difference in terms of length of the FID is shown in the following picture:
The narrow approach will also help to ensure that the communication of a bank will not be so much negatively affected by the obligation to use the standardized terms besides the brand name.
To ensure that the PAD goals are achieved, we believe that it is necessary to add into the RTS a new recital or Article 3.
Article 3 – National lists of the most representative services linked to a payment account and standardised terminology
The integration of the Union standardised terminology for the most common services linked to a payment account to the national lists of the most representative services linked to a payment account and subject to a fee is not regulated, thus the Member States may decide to establish the final list of the most representative services linked to a payment account using various approaches for selecting the services to the national list reflecting the specifics and needs of the local market and at the same time the requirements of Article 3 of Directive 2014/92/EU. It is preferable to select rather a specific type of core service to be ensure that the Fee Information Document does not have more than 20 fees to compare.
Question 2: Do you consider the services that the EBA has selected for standardised terms and definitions to be suitable to achieve the aims of the Directive? Please explain your reasoning.
Overall, we find the list of services as suitable for the EU list. The only exception is the term “Provision of a credit card with a payment account”. This service, at least in the context of the Czech market, is not linked with the payment account (it is rather a form of credit) and its provision to the client does not even require the client to have a payment account with the same bank. A very important argument against the credit card in the RTS list is that the fee for provision of a credit card is not the most relevant aspect for a consumer when he makes a decision whether to buy a credit card from bank A or bank B. More important is the length of a grace period, interest rate, APCR, conditions for repayment etc.). So why to have the credit card in the FID – it would be rather misleading?.Thus, we propose to exclude this service from the list.
Question 3: Do you consider the drafting decisions taken by the EBA for the standardised terms and definitions, and the resultant provisions in Recitals of the draft RTS, to be suitable for achieving the aims of the Directive of enhancing transparency and comparability? Please explain your reasoning.
Article 45 of the EBA Consultation paper states that the “language used must be accessible to consumers. This means that, as far as possible, the Union standardised terms and definitions should be drafted in clear, simple, and consumer-oriented language which avoids the use of legal terminology.” We consider that this approach is suitable for achieving the aims of the Directive.Further on, Article 47 of the EBA Consultation paper states that the “Union standardised terminology should use the third person.” Even though we feel that other approaches may be used in the definitions creation, this approach is the most “neutral” and therefore should be acceptable for most languages and cultural contexts in most Member states.
Articles 49 and 50 state that the “definitions should be as brief as possible whilst also containing the most relevant information on the service” and that they should “focus on the service itself rather than on defining precisely what is meant by the constituent elements of the service.” In our opinion, these two principles, if properly used, may also help to achieve the goals of the Directive.
Question 4: Do you consider the terms and definitions proposed by the EBA in the Annexes to the draft RTS, and the resultant provisions in the Recitals of the draft RTS, to be adequate for achieving the aims of the Directive of enhancing transparency and comparability? If not, please provide alternative terms and definitions and their underlying rationale.
Questionable quality of definitionsIf we look at the definitions presented in the RTS, we have to conclude that they are so simple, that their added value for a consumer is highly questionable. Sometimes, the simplicity is even misleading. We believe that a consumer would welcome e.g. precise information on what kind of cash withdrawals or debit cards is available.
We do not have any real evidence that consumers do not understand those basic terms.
Instructions do not reflect language specifics
Czech language, as opposed to English language, is not based on gerunds (-ing form: e.g. “maintaining the account”, “providing a debit card”). Czech language uses for example relative clauses instead of gerunds. Using gerunds in Czech is unnatural and in combination with adjectives or possessive adjective is not appropriate wording in Czech. The appropriate wording should therefore be used to communicate appropriately to the consumer the necessary information.
Moreover, we find that it would help most consumers to understand better what the term means (i.e. understand better the nature of the service) if standard genus-differentia definition were used instead of what we consider often are more examples of use and providing of a context rather that proper definitions.
In addition to this, we propose two alternations in the terms:
• “Přečerpání” is, in the context of the Czech market, perceived as comprising both authorised and unauthorised overdraft. Since the definition assumes the agreement between the client and the PSP, we propose to use the term “Povolené přečerpání”.
• In similar way, “Inkaso” is perceived rather as the actual transfer of money from the customer to the recipient initiated by the recipient instead of by the customer. We propose to use “Povolení k inkasu” as more convenient to the definition given.
Question 5: Do you consider the FID template that is being proposed in the draft ITS and its Annex to be suitable to achieve the aims of the Directive? Please explain your reasoning.
KB supports the EBF point of view that while in some points (such as font size, colour shade, columns width) the Draft ITS are overly binding, they don’t touch several important aspects. Overall, we consider that 2 pages (1 sheet) is the maximum length that the consumers would use for comparison of service fees between banks. Thus, the length arising from use of the broad approach in defining services entering into the FID is our biggest concern, as we show in our prepared FID example and in our response to question 1.We further support the point that the date of publication should be inserted.
The text of the introductory statement, at least in the Czech context, should contain information that the FID does not represent a contract offer to be fully compliant with the Czech law.
Question 6: Do you consider the common symbol in the FID template that is being proposed in the draft ITS and its Annex suitable to achieve the aims of the Directive? Please explain your reasoning.
We consider that if the FID common symbol is sufficiently wide-known amongst the consumers, it may be suitable to achieve the Directive’s aims. In that case, the actual form of the symbol is secondary.We however support the EBF point of view regarding the requirement set out in point 2 of Article 3.
Question 7: Do you consider the proposed instructions for the completion of the FID template contained in Articles 2 to 11 of the draft ITS, to be suitable to achieve the aims of the Directive? Please explain your reasoning.
In general, we support the EBF point of view, namely the following:• Proposition to delete articles 3 to 6 of the ITS for the PAD provides already the relevant criteria within Article 4 paragraph 2 a) to g) and that the EBA approach is too formalistic.
• Date of the FID should be added to the template.
• Possibility to delete the Additional Information table.
• Benefits or remuneration/remunerated fees received by customers – In KB, clients are offered a loyalty programme that enables them to be remunerated the account maintenance fee and the ATM cash withdrawal fees if they meet certain conditions. If those remunerations are not stated in the FID, the client will receive an information that is misleading and incorrect.
• The flow of the information in the FID does not support the comprehensibility. When there is a packaged product with a current account and other payment services, and also a “transaction” package (e.g. unlimited number of credit transfers for a fixed price), the ITS requires that the information on the “transaction” package is in the first place, followed by the main table where the package is communicated under the term “account maintenance”. It is rather confusing. We believe that the consumer should firstly in a separate table get the information about the core product he/she buys (i.e. the package with the account), then in the main table information on the prices for individual services to be compared and then in the last table information on the “transaction” package. The template should be amended to reflect that.
Question 8: Do you consider the proposed instructions for the completion of the FID template contained in Articles 2 to 11 of the draft ITS, to be clear and easy to follow? Please explain your reasoning.
Most of the instructions are clear and relatively easy to follow, however we refer to our responses to questions 5 and 7.Question 9: Do you consider the SoF template that is being proposed in draft ITS and its Annex to be suitable to achieve the aims of the Directive? Please explain your reasoning.
In general, we consider the template to be suitable to achieve the aims of the Directive, however we support namely several of the EBF comments:• Possibility to merge information relating to one consumer with several accounts into one SoF. In addition to non-overloading the consumer with too much information, this option would considerably lower implementation and recurring costs for the PSPs, thus fulfilling the condition that the SoF be “easy for PSPs to produce” (article 116 of the EBA Consultation paper.
• Addition of an Introductory statement
• Possibility to include reductions/discounts/fees remunerations (see also response to question 7)
• Possibility to delete irrelevant tables
Question 10: Do you consider the common symbol that is being proposed in the draft ITS and its Annex to be suitable to achieve the aims of the Directive? Please explain your reasoning.
We consider that if the SoF common symbol is sufficiently wide-known amongst the consumers, it may be suitable to achieve the Directive’s aims. In that case, the actual form of the symbol is secondary.We however support the EBF point of view regarding the requirement set out in point 2 of Article 3.
Question 11: Do you consider the proposed instructions for payment services providers on how to complete the SoF template contained in Articles 2 to 16 of the draft ITS, to be suitable to achieve the aims of the Directive? Please explain your reasoning.
In general, we support the EBF point of view, namely the following:• Suppression of the obligation to list all the services included in the package
• The flow of information should go from the core service (package comprising the account maintenance) to individual services and then to additional packages.
• Benefits or remuneration/remunerated fees received by customers – In KB, clients are offered a loyalty programme that enables them to be remunerated the account maintenance fee and the ATM cash withdrawal fees if they meet certain conditions. If those remunerations are not stated in the SoF, the client will receive an information that is misleading and incorrect.