European Commission Planning IBAN Discrimination Crackdown

February 14, 2024
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Mairead McGuinness, the European commissioner for financial services, has told a conference that her department is set to look into IBAN discrimination, “which really shouldn’t be happening”.

Mairead McGuinness, the European Commissioner for financial services, has told a conference that her department is set to look into IBAN discrimination, “which really shouldn’t be happening”. 

The European Commission’s mandate comes to a close soon, but the work for McGuinness does not seem to be slowing down, with the former member of the European Parliament (MEP) using a speech to call out IBAN discrimination. 

“Nine years after the deadline for SEPA implementation, there are still companies and public administrations refusing to make or receive euro payments involving non-domestic accounts,” she said. “Frankly, I think we all agree that this is unacceptable.”

IBAN, or International Bank Account Number, discrimination is when an employer, tax authority or company refuses to accept a SEPA IBAN for euro payments when the customer’s bank account is located in another member state.

This practice has been prohibited since 2014 when the SEPA Regulation came into effect, but in practice consumers are often turned away when they want to set up a direct debit or recurring payment using a foreign account.

Speaking at the European forum for innovation in payments, McGuinness called out the behaviour as “completely illegal”, telling conference delegates that “it is the very opposite of what SEPA is about”.

“I want to put an end to this illegal practice, once and for all, and preferably before the end of this mandate.”

During her speech, the Irish politician said that IBAN discrimination will be a focus of the European Commission, as it attempts to finally bring it to an end. 

“We are planning a new campaign, coming soon, targeting companies, and sometimes the public sector, to remind them of their obligation not to discriminate when it comes to IBAN numbers,” she said. 

Further, McGuinness has said that a goal is to increase awareness among groups who may be more likely to face IBAN discrimination, noting Erasmus students, expats and international researchers.

Industry reaction

Reacting to the news, TrueLayer’s Andrei Cazacu told Vixio that he was “very pleased with the Commission's approach and focus on IBAN discrimination”.

“It's clear the commissioner and her team want to make a real difference for businesses and consumers by eliminating this illegal practice,” the EU public policy lead said. 

Magali Van Bulck, EMEA policy chief at Wise, agreed, saying that she was “very encouraged” by the speech. 

Wise, TrueLayer and others such as Revolut and SumUp founded the Accept My IBAN campaign in 2021. “We've managed to shine a light on how widespread IBAN discrimination actually is,” said Van Bulck. 

“The unfortunate conclusion is that it's still omnipresent, despite having been illegal for nearly a decade,” she said, echoing McGuinness’ words. 

Van Bulck put this down to issues such as outdated software, a lack of awareness and/or disregard for the rules. 

“We were delighted to see the commissioner take our feedback on board and throw her support behind some of the solutions we put forward to end to this illegal practice.”

“This includes creating better awareness of complaints portals and consolidating those into a single EU portal, amending national rules so they no longer contradict EU rules and having a dedicated forum for national regulators to come together and discuss best practices on enforcement.”

'A stone in our shoes'

Often, the topic has been overlooked by regulators, perhaps as they may feel it does not have a wide enough impact on citizens to warrant investigation. 

However, some have taken steps to prevent the practice from taking place. 

In France, for example, the General Directorate for Competition, Consumption and Fraud Control (DGCCRF) and the National Committee for Cashless Payments (CNPS) declared in 2021 that they would impose financial penalties of up to €75,000 on individuals and €375,000 on legal entities who discriminate against a non-French bank account.

Meanwhile, in 2022, the Central Bank of Ireland wrote to all regulated firms calling for them to ensure full compliance with the SEPA Regulation, reminding them that not accepting non-Irish IBANs is against the law. 

“IBAN discrimination is really a stone in our shoes, and it's certainly a stone in my shoe, which is very uncomfortable,” McGuinness said. 

It has also been a persistent point of contention for fintech firms in particular, which bear the brunt of the practice. 

In October last year, fintechs and challenger banks including Wise, Klarna and Revolut used an open letter to call for "clear rules, concrete actions and cooperation" to bring IBAN discrimination to a halt in the EU.

“We haven't gone far enough to address this problem, so we do need to step up,” said McGuinness. 

However, sources have suggested to Vixio that the problem is not necessarily with the European Commission, and rather with the member states. 

For example, one payment insider was doubtful of "meaningful improvement" due to how little some member states have done so far.

However, McGuinness seems set on this, calling on member states where IBAN discrimination remains prevalent to take even more ambitious action to eradicate this practice.

“Now, of course, none of this is easy, but frankly we have had time to do this, so I'm afraid I'm not going to listen to excuses or reasons why,” she said.

“This should not be happening.”

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