Payment Accounts Directive (PAD)

The Payment Accounts Directive (PAD), formally Directive 2014/92/EU, is a European Union law that sets common rules for consumer payment accounts, the everyday current accounts used to receive income and make payments. It has three main aims: making account fees easier to understand and compare, making it easier to switch accounts between providers, and giving every consumer legally resident in the EU the right to open a payment account with basic features.

The directive was adopted in July 2014 and had to be transposed into national law by September 2016. It complements the Second Payment Services Directive, which governs how payments are made, and the Single Euro Payments Area rules on euro transfers and direct debits. It applies to banks and other payment service providers that offer accounts to consumers, though member states may exempt some providers from the basic account obligation.

Before the directive, comparing bank accounts across Europe was like comparing mobile phone plans with no common terms: one bank called a service "account maintenance", another "monthly package", and fees were buried in long brochures. Moving banks could mean weeks of chasing salary payers and billers. Some people, such as recent migrants or people without a fixed address, could not open an account at all.

The directive tackled each problem. Banks must describe fees using the same words and documents, must help customers move their accounts, and must offer a simple account to anyone legally living in the EU.

European Commission studies in the early 2010s found that tens of millions of adults in the EU had no bank account, that fee structures were opaque, and that few consumers switched banks despite large price differences. A 2011 Commission recommendation on access to a basic payment account had limited effect, so the Commission proposed binding legislation in 2013. Lack of an account was seen as a barrier to financial inclusion, employment and the single market, since many services require a local bank account.

• Standardised terminology. Each member state publishes a list of the most representative account services, and providers must use the standard EU terms for them, set out in Commission regulations adopted in 2018.
• Fee documents. Before a consumer opens an account, providers must give a fee information document in a standard format, and at least once a year a statement of fees showing all charges and interest actually incurred.
• Comparison websites. Consumers must have free access to at least one independent website comparing account fees in each member state.
• Switching service. Providers must offer a service to move standing orders, recurring incoming transfers and direct debit mandates from an old account to a new one in the same currency within the same country, within fixed deadlines, as described under payment account switching.
• Basic payment account. Consumers legally resident in the EU, including people with no fixed address and asylum seekers, have the right to an account allowing deposits, cash withdrawals, direct debits, card payments and transfers, free of charge or for a reasonable fee.

Providers may refuse a basic account only on limited grounds, such as a breach of anti-money laundering rules, or where the consumer already holds a suitable account in the same country. Providers may not make the account conditional on buying other services, such as insurance.

National authorities, usually the central bank or financial regulator, supervise compliance and can impose penalties. Implementation varies: member states decide how to define a "reasonable" fee, which providers must offer basic accounts, and how switching works in detail. The United Kingdom implemented the directive through its Payment Accounts Regulations 2015, requiring the largest current account providers to offer fee-free basic accounts, and kept the rules after Brexit. The unbanked population in the EU has fallen since 2016, though many factors besides the directive contributed.

Consumer groups have argued that awareness of basic accounts remains low, that some providers discourage applicants or apply anti-money laundering checks too strictly, and that people who are debanked after a closure still struggle to reopen accounts. The switching rules cover only domestic switches in one currency and do not include account number portability, which some see as the real barrier, discussed under bank account portability. Fee transparency documents have been criticised as formal exercises that few consumers read. The European Commission has reviewed the directive's application and considered whether further changes are needed, including for digital-only providers and cross-border switching.

• Directive 2014/92/EU (EUR-Lex)