Banks succeed in keeping pace of reform slow

Date: 13/02/1997

By Chris Johnstone

EUROPE'S banks have scored a significant victory in their struggle for a minimalist approach to EU-wide legislation to protect consumers' interests.

Internal Market Commissioner Mario Monti will tell MEPs next week that the institution intends to adopt a softly-softly approach to stepping up consumer protection in the field of financial services, in the short term at least.

The move follows top-level talks in recent weeks to find a middle way between Monti's cautious approach and more ambitious demands from Consumer Affairs Commissioner Emma Bonino.

As a result, Monti is set to outline a minimalist programme of short-term legislation to the European Parliament next Wednesday (19 February) as a follow-up to last year's Green Paper, Financial Services: Meeting Consumer Expectations.

The joint programme sidelines action for the moment on some of Bonino's pet ideas such as imposing universal service obligations on banks.

The Consumer Affairs Commissioner has aired the view that as banking facilities are such a fundamental facet of everyday life, banks should be forced to ensure a minimum level of service for even the poorest citizens.

Although there will no immediate action on this, the universal service concept is still being explored with banks and governments.

Some EU countries, such as Denmark, already impose public service obligations on banks to provide accounts for those with the smallest of savings. One possibility would be for the European banking industry to draw up a code of practice aimed at bringing the others into line.

When he addresses the Parliament next week, Monti is expected to outline immediate action to set out consumer rights on distance selling of financial services, a set of rules for financial intermediaries and measures to ease the plight of drivers who have accidents abroad.

On distance selling, financial services would be brought into line with existing rules on the sale of goods, with customers offered a 'cooling off' period during which they could pull out of agreements. They would also have to be provided with the written terms of any contract.

In addition, consumers would be given rights for the first time when dealing with financial intermediaries, brokers for bank or insurance company products and services. People buying these products currently have no right of redress against firms which fail to meet minimum expectations of service.

The harmonised rules would also aim to make it easier for intermediaries to sell their services across borders in other Union countries.

In addition, Monti is due to propose new rules to facilitate insurance claims following road accidents abroad.

At the moment, drivers face relatively few problems if they are at fault in an accident and are claiming against their own insurance.

However, drivers across Europe have experienced a common unwillingness among insurers to pay up when claims are made against third parties' insurance.

“It is a fairly big problem at the moment, especially with the increase in travel,” said a spokeswoman for one insurer.

“Part of the problem is a lack of local pressure on the company when the driver gets back home. The only choice in some cases is to go through the local legal channels.”

The solution favoured by the European Commission would be for insurance firms to nominate local representatives who could settle claims in the driver's own country.