Fight looms over cross-border payments

Date: 19/10/1995

By Tim Jones and Fiona McHugh

THE maximum refund for customers whose money is lost by banks in cross-border transfers could be increased if Euro MPs get their way.

Next week's meeting of the European Parliament's influential economic and monetary committee is to discuss the proposed directive, which sets a six-day deadline and insists on full disclosure of costs for trans-frontier payments.

EU finance ministers approved the new rules last month, but only after the European Commission lowered the ceiling on the size of the payments affected by the law and established a maximum 10,000-ecu guaranteed refund for customers whose payments were lost in transit. That set the stage for a likely confrontation with the Parliament, which had called for the directive to cover payments up to 50,000 ecu.

Ministers, keen to limit the directive to small-scale transfers, instead set a limit of 25,000 - increasing to 30,000 after two years.

“There is no point starting with a 25,000-ecu ceiling and then jumping to 30,000 two years later. If we cannot get the 50,000 limit, then I think we should start with the 30,000-ecu limit immediately,” said Dutch Christian Democrat Karla Peijs, who guided the directive through its first reading in Strasbourg.

The decision to set the maximum guaranteed refund at 10,000 ecu is also likely to run into opposition in the Parliament, which called for it to be as high as 50,000 ecu.

Peijs had anticipated that finance ministers would refuse to sanction such a high refund ceiling and urged the Parliament to accept a 10,000-ecu limit in her original report .

But the Parliament went against her advice, voting instead for a 50,000-ecu guarantee.

Peijs believes a compromise can be found. “There's room for negotiation. I hope we will agree on 20,000,” she said.

Another sticking point is likely to be the implementation of the directive. According to the Council, member states should be given up to 30 months to transpose it into national law. That, according to Peijs, is too long. “It is a disgrace that the directive might only be put into force two and a half years after it is adopted. We will insist on a reasonable time-scale like six months or a year.”

The proposal, put forward in October last year, was designed to force the banks to speed up and reduce the cost of small-scale cross-border payments following the publication of a Commission study revealing the average time it took to transfer money was 4.15 days, at an average cost of 25&percent; of the payment.

Money transfers, usually made by banks sending money to corresponding banks in the destination country to be credited to the correct account via automated clearing systems, vary hugely in quality and cost.

The study also found evidence of systematic double-charging, where both the recipient and the sender of the cash were charged for the same transaction, and of poor-quality information on banks' transfer services.

After spending three years trying to persuade banks to change their ways, the Commission lost patience. A proposal emerged following an internal dispute between the then Single Market Commissioner Raniero Vanni D'Archirafi and Christiane Scrivener, his colleague responsible for consumer affairs, who pressed for a voluntary code of conduct rather than a binding directive.

The banks also pressed for an optional arrangement, arguing that small transfers of up to 10,000 ecu only accounted for a tiny part of total payments and companies were able to negotiate advantageous deals with their banks.

The committee will vote on the proposal before it heads for its second reading, probably during the January plenary session in Strasbourg.