Image Central Bank calls for end to IBAN discrimination

The Central Bank of Ireland has issued a statement to firms in a bid to end IBAN discrimination.

If you’ve looked into switching your current account recently, you may have come across the issue of IBAN discrimination. The problem is rife across Europe, as an increasing number of firms aim to provide services on a Europe-wide basis.

The Central Bank of Ireland has called on firms not to discriminate against those who use a current account provider with a non-Irish IBAN.

What is IBAN discrimination?

IBAN (International Bank Account Number) discrimination is when a bank, Government agency, employer or utility provider etc. fails to accept a valid foreign bank account number as a means of payment.

An IBAN is an internationally agreed standard created to uniquely identify the account of a customer at a financial institution. It consists of up to 34 alphanumeric characters, and when you open a bank account, you are issued with an IBAN.

IBAN discrimination has attracted media attention in recent years with the growth of online-only banks, such as Revolut and N26.

Revolut issues a Lithuanian IBAN, while N26 issues a German one for example.

IBAN discrimination is not only an issue in Ireland, but across Europe, and is emerging as more firms offer financial services cross-border. However it is illegal under SEPA rules.

What is SEPA?

SEPA refers to the Single European Payments Area initiative.

SEPA (in theory) allows customers to make payments such as direct debits, standing orders and credit transfers to firms and individuals anywhere within the SEPA area using their IBAN.

The SEPA region consists of 36 European countries, including several countries which are not part of the euro area.

It was fully implemented in 2014 in the euro area (and by 2016 in non-euro area SEPA countries).

So for example, an Irish person with an AIB account should be able to make payments quickly and easily in Germany without having to set up a German bank account, and a German with a German account should be able to do likewise here. However this doesn't always happen even though it is prohibited under SEPA regulations. 

Irish and European consumers are adversely affected by IBAN discrimination, as it raises barriers to competition and the proper functioning of our payment systems.

Central Bank urges companies to end IBAN discrimination

With the issue of IBAN discrimination spiralling, the Central Bank of Ireland has contacted banks, financial services providers, and business representative bodies in Ireland in a bid to end IBAN discrimination.

The Central Bank of Ireland is reminding firms of their obligations under SEPA.

Switching current accounts

The issue of IBAN discrimination has come to a head as hundreds of thousands of customers prepare to switch bank accounts, as KBC and Ulster Bank depart the Irish market

This is because some consumers may opt to switch to a bank that doesn't currently offer an Irish IBAN, such as Revolut. 

Speaking about the problem at hand, William Molloy, Director of Financial Operations at the Central Bank of Ireland said:

Consumers should be able to choose their Payment Service Provider (PSP) free from concerns about encountering problems when using their legitimate payment account details. The SEPA regulations create a single market for consumers which supports choice and facilitates innovation in payments.

As a result of these exits, a large number of customers will be required to relocate their payment accounts to another PSP, and it is important that those customers who choose to use a PSP with a non-Irish IBAN are supported in doing so.

What can I do about IBAN discrimination?

If you live in Ireland and you switch your current account to N26, for example, and your employer or a company says it will only accept an account with an Irish IBAN for a direct debit or credit transfer, there are steps you can take.

The Central Bank of Ireland advises you to: 

  1. Advise the employer/company that they're obliged to accept IBANs from other SEPA countries.
  2. Send a formal written complaint if necessary.
  3. Write a complaint to the relevant competent authority if you don't receive a satisfactory response.

In cases involving consumers and traders, such as a utility provider, the Competition and Consumer Protection Commission (CCPC) is the competent authority to contact in Ireland.

For all other cases, it's the Central Bank of Ireland.

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