Low-cost notarial internet deeds cause quite a stir amongst Dutch notaries

As of 29 October there might be shopping lists that say: ‘bread, handkerchiefs & a last will and testament’.

HEMA, a popular shop with branches all over the Netherlands, famous own branded products at a relatively low price, and their smoked sausages, has started offering notarial deeds. After answering 11 questions on their website and after filling out a form, a notary of your choosing will contact you and set up an appointment for the singing of the deed(s). HEMA offers thus far only a co-habitation agreement and a last will and testament. The prices for these deeds are 125,- EURO per deed, which is, according to a representative of HEMA, roughly half of what you would pay elsewhere. Currently there are 26 Notaries in the Netherlands involved that notarise these HEMA deeds.

Deeds offered by HEMA
Co-habitation agreement
A co-habitation agreement (samenlevingscontract) is a notarial deed specific for partners that do not necessarily want to marry (at this time) or enter into a registered partnership, yet do want to arrange certain matters between the two of them. Matter such as the division of costs for groceries, clothing, and other living costs and also how to divide the household assets upon a separation. Often, a co-habitation agreement is also entered into because of the fiscal benefits attached to it, or in order to receive a partner pension.

The HEMA deed is however limited to only ‘standard’ situations and couples. Therefore, the following situations fall outside the scope of what may be covered by a HEMA deed:

  • If one of the partners owns a house and the other partner helps in the monthly payments;
  • The arranging of a division of assets after a split;
  • Either partner, or both, has savings or assets which they want to arrange a division for in the event of a separation;
  • The partners either save or invest their pension with their employer, and wish to share this in the event of a separation;
  • Arrangements about partner-alimony in the event of a separation. 

Will/Testament
Much like the co-habitation agreement, the will is only suitable for ‘standard’ situations, and not suitable if:

  • One of the partners has a child or children from a previous relationship;
  • One of the partners has a business which requires special arrangements;
  • Either partner lives outside of the Netherlands or has assets like land in another country;
  • One of the partners is rich” and basically wants to make sure they pay the least amount of succession tax;
  • One of the partners is fighting with one of his/her children and wants to make special arrangements;
  • One of the partners does not want his/her children to have access to their share if they reach the age of 18 and both of the partners have passed away.

Furthermore, it is only possible that both partners get a will, HEMA will not arrange for a testament of one partner and have the other partner be left with no will.  If it is arranged, than it has to be arranged ‘properly for both parties’, according to HEMA.

Low price for standard situations
Each deed costs 125 EUR. This includes VAT and the costs for registering in the registry of testaments and/or keeping the particular agreement in the vault of the notary.

That HEMA can offer these deeds at such a low price, is explained by the fact that these deeds cover ‘standard’ situations, with little to no complicating factors such as one of the partners (or both) having quite a bit of capital, and no children from previous relationships. If a couple deviates just a little bit from the standard, then the HEMA deeds will not be suitable for them, and they are quickly looking at a price tag well above the 125 EUR.

This means that in particular young couples, that are about to move in together, or have just done so, preferably in a rental home, with little to no capital of their own, and without children, or with children of the two of them, will be eligible for the low price.

Standardisation of notarial deeds
The Royal Dutch Association of Civil-law Notaries (Koninklijke Notariële Beroepsorganisatie, KNB) has stated that initiatives like these are not new, and mentions that the low price offered by the notaries attached to HEMA for these deeds, is a consequence of the fact that since 1999 the market has been opened up and notaries have since been free to set their own prices for their services.

What is interesting is that with this opening up of the market, the process of standardization has taken flight. We see this also reflected in the deeds required for a transfer of land. Conveyancing of land in the Netherlands requires a notarial deed that is registered in the public land registry. This registry is kept by the Cadastre.

The Cadastre has attempted to facilitate the process of conveyancing with introducing KIK-deeds. In short, these electronic deeds are a way to electronically deliver, in standardized form, deeds of delivery of land or a deed to register a hypothec etc. (for some model deeds click here). The process of drafting up and subsequently registering a notarial deed is simplified and has become speedier by using these KIK-deeds. Because the process is quicker, also on the end of the notary, this automatically diminishes the workload of the notary, and hence the price for such a deed.

Note, this of course does not discharge the notary of his obligations to carefully inform the parties of the juridical consequences of these deeds, which the KNB stressed is a very important task of the notary when it commented on the HEMA deeds, nor does it discharge the notaries of their duty to check the accuracy of the deed, nonetheless it does do away with a some of the ‘paper mill’ that comes with the process of conveyancing land and limited property rights in land.

It is interesting to note that standardization efforts now also take place in the area of wills and co-habitation agreements. This in no-way diminishes the necessity of notaries, which are indispensible for those cases that are not ‘standard’, but for those cases which are ‘standard’ it makes arranging your affairs properly cheaper and hence more accessible.

Therefore, the fact that HEMA has started offering low-cost notarial deeds, aimed at arranging ones affairs vis-à-vis your partner and making sure your children and partner are taken care of in the event you pass away, is a welcoming development. This opens up the market of testaments and co-habitation agreements to those people with a little bit less to spend, and that should be supported. It will remain to be seen whether the standardised and simplified deeds satisfy an actual need in the market.

Criticism of the new service
Not every notary seems happy about HEMA’s new venture. One office of notaries has set up the website www.hema-notarissen.nl where they offer a discount of 125 EUR on their co-habitation agreement and testament, if you bring a warm HEMA smoked sausage. Another office of notaries states: “As HEMA has entered the notarial business, we are going to sell smoked sausages”, taking a jab at one of HEMA’s most well-known products.

Disciplinary court procedure
On 14 November, The Royal Dutch Association of Civil-law Notaries (Koninklijke Notariële BeroepsorganisatieKNB) had put out a press statement in which it announced that is taking the notaries (or some of them, this is unclear as of yet) to the Disciplinary Court for notaries, as the Board of the KNB questions whether or not the notaries attached to the HEMA-deeds live up to the notarial rules and regulations.

Issues of the KNB
In its statement the KNB expresses concerns and questions about the fulfilment of the duty of care exercised by the HEMA-deed notaries. In particular, the brunt of the work is left to the consumer(s) themselves, who supply HEMA (and with it the notaries attached to this project) all the required information by filling out a simple online form that they send via the HEMA website: https://notarisservice.hema.nl. Afterwards, a notary of their choosing will contact the consumer(s) to set up an appointment. It is at this point that the notaries become involved. They will meet with the parties and go over the deed and its (legal) consequences.

To me, this sounds no different from the regular practice of notaries, save for the fact that normally you would have a first meeting in person, via telephone or email by which you request the drafting of a deed and give the necessary information, rather than do all of this via the HEMA website. Hence, only the initial contact with the notary and the data-supply seems different, whereas the practice after first contact seems no different from an ordinary meeting with the notary. The KNB, however, is a bit more wary and has asked the disciplinary court to look into the matter.

Discussion starter
The KNB states that this practice, of taking work from the notaries and giving it to the consumer, could be a danger to the fulfilment of the duty of care the notary has for the legal protection of the consumer. It would therefore like to start a discussion within the ranks of the notaries about how these new societal and digital developments give rise to a possible new interpretation of the duty of care without degrading the legal protection awarded to consumers.

Thus, next to wanting to hear the disciplinary court’s opinion on the HEMA-deeds and the role of the notary, the KNB would also like to start a discussion about the role of the notary in a changing society.

Response of HEMA
When asked for a response, HEMA is stated it was ‘surprised’ by the statement of the KNB. According to a representative of HEMA:”this is not a new phenomenon. There are more websites that offer services like this.” According to her, perhaps the KNB was unpleasantly surprised by the large amount of attention given to the HEMA-deed.

Questions in Dutch Parliament

The discussion has also started in Parliament, where Member of Parliament Jan de Wit asked questions to the Minister of Justice of the Netherlands, about the HEMA initiative. His questions are as follows (my own translation):

  • Question 1
    What is your response to the announcement that HEMA has started a notary’s service?
  • Question 2
    Do you share the opinion that this practice can lead to clients being insufficiently informed about the effects of their choices? If not, why not?
  • Question 3
    Do you think that this practice is desirable and is there enough room for clients and the notary to come to a balanced judgement? If so, why?
  • Question 4
    In which way can it be ascertained, prior to payment having been made and the draft deed made, whether the client: is competent to act, can ascertain the consequences of a last will and testament or a co-habitation agreement, or that the client has not been pressured by a third party?
  • Question 5
    Are you going to take action against this notary’s service to ensure to prevent that clients, in the final execution of the deed, are confronted with unwanted situations which lead to an increase in (legal) procedures? If so, what actions are you going to take exactly? If not, why not and how are you going to prevent that this will apply to multiple legal areas?

Answers by Deputy Minister

Which brings us to this week. On 2 December, the Deputy Minister Fred Teeven, answered the questions. In brief, the Deputy Minister answered the following:

“The HEMA initiative shows entrepreneurship by notaries. (…) It is good that the notarial profession plays into the changing digital reality and also offers their services by using non-classical channels. A digital route can supplement the more traditional route, and could be useful for those people that know what they want and also understand the legal consequences of their actions. Whether there is a permanent and growing market for this, will have to be seen.”

Furthermore, the Deputy Minister states that:

“if the accessible initiative leads to people making use of the notarial services that would not have done so were it not for this initiative, then this means that, on balance, more people think about the effects of certain life choices.”

Additionally, the Deputy Minister does not currently see any reasons why he should intervene in these practices or prevent that this initiative spreads to other areas of the law. That latter point is very interesting, as HEMA has recently started offering a low-cost health insurance, and the CEO of HEMA, Ronald van Zetten, has said that while they are currently not working on it, they might in the future start offering mortgages as well.

While the Deputy Minister appears to be in favour, he was also keen to stress on numerous occasions in his answer, that of course these types of initiatives should stay within the limits of the law. Hence, he supported the fact that these practices were put before the Disciplinary Court. The Deputy Minister considers the question to be first and foremost one that requires the attention of the professionals themselves and is of the opinion that the Royal Dutch Association of Civil-law Notaries and its members together should set the professional standards and find the proper balance.

Therefore, it appears that the Deputy Minister seems to be in favour of the HEMA deeds, provided they are properly structured and fit within the rules and standards that come with the profession of civil law notary in the Netherlands. As the Deputy Minister reiterates that the HEMA deed notaries see their clients at least once, and talk to them on the phone also once, to me it seems perfectly logical that there should be no impediment to upholding the high standard that a notary has to fulfil in order to safeguard their clients’ interests. As I mentioned earlier, indeed the way to get to the notary is different, but the procedure when you are there is no different.  We’ll see what the disciplinary court says.

 

Final note: this post is a summary of posts on the author’s own website.

 

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Consumers are (Not) Dumb and Weak: An Advertisement for Collaborative Consumer Protection

The prevailing notion in the field of consumer protection law is that the consumers are weak vis-à-vis the businesses. Consumers generally lack bargaining power and often do not have sufficient knowledge to determine if they are getting ripped off or what legal remedies they are entitled to when they do (aside from simply returning the item and not forgetting to bring the receipt). This gap in the bargaining powers and the level of knowledge between the two parties can render situations where consumers end up agreeing to terms more favorable to businesses without the ability to actually influence the content of their contracts. [See also, Eurobarometer #342 on Consumer Empowerment and the identification of disadvantageous and vulnerable consumers.]

Thus, the legislatures at the Member State level and also at the EU level are continuously attempting to protect the consumers “better” through various consumer protection measures like the new Consumer Rights Directive 2011/83/EU, which will start applying to contracts entered after 13 June 2014. The national courts and the CJEU are keenly aware of this fact as well as evidenced by cases such as Pereničova, Mostaza Claro, Asturcom Telecomunicaciones and many others, where they explicitly made references to the fact that the consumers need added protection to safeguard them from the “big bad businesses”.

This common assumption, however, begs the question of whether consumers are really weak and whether they actually need the legislatures and the courts to look after them. Though some consumers may be better off than others, the answer to the later question seems to be a rather obvious yes, especially given the incredible amount of influence that multinational corporations are already exerting over our daily lives from what we eat, what we wear, what we see on the news and basically, what we want. [For more on this particular issue, check out “Network of Global Corporate Control”, which is a fascinating study conducted by the Swiss Federal Institute of Technology that claims 147 companies (including the likes of Barclays, JP Morgan & Chase, UBS, etc.) control almost 40% of the global economic value of transnational corporations.]

This reality renders valid concerns over whether businesses still cater to consumer demands or whether consumer demands are actually being shaped and manipulated by businesses and their marketing departments for their benefit. For example, if I want a chocolate cake, is it because I really want one intrinsically or is it because I just saw an advertisement for a divine, melted-chocolate cake with extra warm fudge drizzling over some whipped cream on the TV and that created a demand where there was no demand before? The truth probably lies somewhere in the middle, but this goes to show that businesses are capable of not only exploiting consumers through contracts that limit their freedom to contract, but that they are also capable of manipulating consumer demands, or at least that is the assumption being made here.

So while  overarching consumer protection measures seem very necessary to protect the consumers from lopsided contracts or possibly even unwanted intrusions into our psyche, perhaps the existing protection is not enough. This leads us to the following question: What more can the consumers do to reclaim some autonomy, control and responsibility to improve their chances against the encroaching business interests? In other words, how can the consumers better protect themselves?

“Collaborative Consumer Protection”

This question was one of the main topics of discussion in the article “Adjusting EU Consumer Protection Mechanisms to the Needs of Private Actors: Collaborative Consumer Protection and the Ex Ante Avoidance of Conflict”.[1] Collaborative consumer protection is a term forged by borrowing ideas from Rachel Botsman and Roo Rogers’ “What’s Mine is Yours”, which is about the emergence of collaborative consumption. Collaborative consumer protection on the other hand is a mechanism, where consumers – empowered by technological advances and the ever-expanding network of online social platforms – can actively avoid, ex ante, purchasing from “bad” sellers by relying on digitized word-of-mouth recommendations by other, more experienced consumers. Essentially, collaborative consumer protection is the crowdsourcing of consumer protection, where consumers can share their knowledge with one another at a C2C level in order to enhance their consumer experiences at the B2C level.

This mechanism is obviously not without its flaws, ranging from free-rider concerns to the online anonymity problem that allows conniving businesses to post comments masquerading as a consumer, but even with its flaws, this grassroots mechanism compliments the existing framework of top-down consumer protection to offer extra protection for consumers willing to partake in it. This mechanism has the possibility to return some of the autonomy, control and responsibility back into the hands of the consumers and is worthy of consideration by those seeking to shift the paradigm from prioritizing what the businesses want back to focusing on what the consumers really want.

Shameless Plug

The aforementioned ERPL article continues to discuss further benefits and the feasibility of the collaborative consumer protection mechanism by paying homage to Botsman & Rogers and by addressing various components of the mechanism including, but not limited to: 1) role of social norms; 2) mutualism, signaling & strength of weak ties; 3) power of a decentralized system and collective wisdom; and 4) reputational capital and how these factors can create positive incentives for businesses to buy into this framework. The article also includes a discussion of how the EU and the European Consumer Centre Network can benefit from and also enhance this mechanism by using the CJEU ruling from Invitel as a case study to illustrate this point.

To reemphasize, this mechanism is not without its flaws and there are good reasons to be suspect of its benefits and feasibility. Therefore, in moving forward with this conception and its pragmatic applications, I solicit any and all comments, concerns and most welcomingly, skepticism. The ultimate goal of this blog entry, however, was to create demand (for you to read the full article), where there was no demand before. With that in mind, as always, thanks for reading!


[1] M.T. Kawakami, “Adjusting EU Consumer Protection Mechanisms to the Needs of Private Actors: Collaborative Consumer Protection and the Ex Ante Avoidance of Conflict”, European Review of Private Law 5/6 (2013). Available at: http://www.kluwerlawonline.com/abstract.php?area=Journals&id=ERPL2013076

* The draft version of this article was presented at the Hertie School of Governance in Berlin during the Jean Monnet Conference on “One for all and all for one? The role of collective actors in enforcing European Law” in May 2013.

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I want everything: the full harmonization of unfair commercial practices as seen in Citroën Belux NV v. Federatie voor Verzekerings- en Financiële Tussenpersonen (FvF))

On 18 July 2013, the Court of Justice of the European Union (CJEU) delivered its judgment in Citroën Belux NV v. Federatie voor Verzekerings- en Financiële Tussenpersonen (FvF)), a case surrounding Directive 2005/29/EC on unfair commercial practices (UCPD) and Art. 56 TFEU.

In 2010, car manufacturer Citroën initiated a campaign offering interested purchasers of a new car six months’ worth of free comprehensive car insurance. The Federation for Insurance and Financial Intermediaries (FvF) considered such offer to constitute a prohibited combined offer in the understanding of Belgian legislation; Art. 72 of the Law of 6 April on market practices and consumer protection (Wet van 6 april 2010 betreffende marktpraktijken en consumentenbescherming/Loi du 6 avril 2010 relative aux pratiques du marché et à la protection du consommateur) prohibits (with certain exceptions) any combined offer to the consumer which has at least one finance service component. The Rechtbank van koophandel te Brussel agreed with the Federation, and Citroën subsequently lodged an appeal with the Hof van beroep te Brussel. It was the latter Court that decided to submit a question to the CJEU for a preliminary ruling in relation to Article 3(9) UCPD:

“Must Article 3(9) of Directive 2005/29 be interpreted as precluding a provision, such as Article 72 [of the Law of 6 April 2010], which generally prohibits – save in the cases exhaustively listed by the statute – any combined offer to the consumer where at least one component is a financial service?”

The CJEU answered in the negative.

It was not the first time that the CJEU was analyzing combined offers. On several other occasions, including in 2009 in the VTB-VAB NV and Galatea joint cases, as well as in 2010 in Zentrale zur Bekämpfung unlauteren Wettbewerbs eV, the Court stated that the UCPD precludes national prohibitions of commercial offers whereby the availability of certain services is linked to the purchase of goods, since they were not listed in the Directive’s black list. Given the list is set in stone and can only be modified by modifying the Directive itself, Member States cannot add to it. Nevertheless, it was the first time when combined offers involved financial services, which are as such outside the boundaries of the process of fully harmonizing unfair commercial practices.

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A Single Euro Payments Area but no free movement of bank-accounts

As of 1 February 2014 people in the European Union will have to use a lot more ink to fill out bank-account numbers. The International Bank Account Number (IBAN), formerly reserved for cross-border transfer of money, will be the new standard for everyone wanting to transfer money from one account to another, irrespective of a cross-border element. This means that some people in Europe will have to remember up to 31 characters (though the average of the IBAN numbers is closer to 20 characters). For your trouble you may rejoice in the fact that we should then be “one step closer to a proper functioning of the internal market” (Regulation No. 260/2012). A step closer, but a small one at best.

BACKGROUND

Making IBAN the standard for all accounts with European banks follows from EU Regulation No. 260/2012, which aims at advancing towards a Single Euro Payments Area (SEPA). In this area citizens, businesses and public authorities can make and receive payments in euro under the same basic conditions, rights and obligations, regardless of their location. The objective of SEPA is to increase efficiency and competition so that high-quality and competitively priced electronic payment products shall exist throughout the whole of the area.

Interestingly enough, the initiative of SEPA lies not with any of the EU institutions, but with the European Banking Industry, albeit with strong support of the European Commission and the European Central Bank. The SEPA project’s first success was the Direct Debit scheme, which enables consumers to make cross-border direct debit payments throughout all the SEPA countries. This provided consumers with easy payment of bills in other SEPA countries, from their home country by direct debit.

After this initial success, the European Commission did not consider the developments. The Commission also noted that not  all stakeholders were taken into account:

“In particular consumer and other user interests have not been taken into account in a sufficient and transparent way. The voice of all relevant stakeholders should be heard.”

The Commission thus took over, which led to Regulation No. 260/2012, which amended the earlier Regulation 924/2009 on cross-border payments in the Community.

Using IBAN as the standard, is considered to be “necessary for the proper functioning of the internal market” and will further that goal by increasing competition for (mainly) banks. This, as is often stated in favour of SEPA, will inevitably set a consolidation process in motion, with the resulting economies of scale leading to a lower cost price for payments. Which would be beneficial for consumers and businesses alike.

MY TWO QUESTIONS & CENTS

There are two things I do not understand about the upcoming change: (1) IBAN numbers were already in existence for those who wanted to make use of cross-border debits or credits, why would we need these for domestic debits and credits as well? (2) If advancing competition is the goal, then why no bank account number portability?

1. USE OF IBAN FOR DOMESTIC AND CROSS-BORDER TRANSFERS ALIKE

When the question came up whether the BIC, the Bank Identifier or SWIFT Code which locates the specific bank and helps the translation from IBAN to domestic bank, required in current cross-border transactions, should also come into play, it was specifically stated that:

“BIC is required only in a very small, residual number of cases. It seems unjustified and excessively burdensome to oblige all payers and payees throughout the Union always to provide BIC in addition to IBAN for the small number of cases where this is currently necessary.”

Whilst I understand that cross-border transactions which make use of IBAN without BIC are frequented more than those that do require such a code, one wonders why the movement towards a SEPA requires the sole use of IBAN. There is no reason to assume that for domestic transfers (within a single country) the IBAN ought to be used. Does this not also put an obligation to all payers and payees throughout the Union that is not necessary?

For cross-border transfers the IBAN is already used. Why not implement all that SEPA wishes to implement but leave out the necessity of going to IBAN for all transfers, including purely domestic ones? Removing hurdles for cross-border transfers is fine. I applaud the effort, but see no reason to extend it to purely domestic transfers. A 2012 Eurobarometer survey showed that 79% of people say they have not bought goods or services of any kind in another EU country over the past year. I suspect, that of the 21% that did, not an awful large part of all their payments was made up of those cross-border transfers, let alone direct credit/debit transfers, more-often a credit card will be used.

Inferences are drawn that a Single Euro Payments Area wishes to extinguish the difference between domestic and cross-border transfers, and therefore adheres to a single standard, that of IBAN. Such is closely tied to the competition argument, which brings me to my second question.

2. IF ADVANCING COMPETITION IS THE GOAL, WHY NOT INTRODUCE NUMBER PORTABILITY; A TRUE FREE MOVEMENT OF BANK-ACCOUNTS?

Had SEPA really wanted to make a step towards an increased competition, then the hurdles for setting up a bank account with another bank should be tackled as well, preferably by the ability to take your account number with you, to whichever bank you see fit, ie. number portability.

The Netherlands (and other Member States) have attempted to make the switching of bank accounts easier with introducing a 13-month switching period, in which you keep two accounts, your old and your new. You then have enough time to change your automatic credits and debits as well as inform all that need to know of your change of bank account. When the discussions in Dutch Parliament turned to the options available, the cheaper 13-month switching period was preferred over introducing number portability with its EUR 300-500 million price tag.

Part of the reason for these high costs was the fact that we had introduced IBAN not too long before that. Introducing number portability is not compatible with the IBAN system; as the latter is a number that is partly constructed by using the bank code. Number portability is therefore incompatible with IBAN. The Dutch Finance Minister at the time nevertheless was in favour of number portability. Yet, because the SEPA progress had already been in progress and EU involvement was present, the Minister considered this to be a matter of EU law, but stated he would do his best to bring number portability back on the table.

In Europe on the other hand, the lack of a Dutch implementation of number portability was an argument used by banking experts to oppose the introduction of EU-wide number portability. A somewhat circular reasoning if you ask me. From that same report is became clear that the banking sector is not in favour of number portability, due to the fact that their systems are designed for IBAN use, and a complete overhaul would cost an awful lot. Basically, had we wanted number portability we should have done it 20 years ago. Moreover, such a change would in their view still make it a burden for consumers (and companies) to change banks.

“Also, banks would still need to carry out money laundering checks on new customers and branded products such as debit card and chequebooks would still need to be re-issued by the new bank, and debit cards would need to be re-issued in any case because they carry the International bank identifier number. Finally, account portability would remove the one-to-one relationship between a bank and a sort code, which is important, for example to identify which branch a cheque needs to be sent, and a ‘number portability’ remedy would increase the risk of fraud. “

Consumers and companies do not, however, encounter difficulties with having to change a bank card in their wallet or throw out their old chequebook and replace it with a new one. No, the issue lies with having to inform all your debtors and creditors of the changed account. This is not mentioned by the banking experts, but is touched upon by the consumer experts.

In the summary of the public consultation on Bank Accounts, carried out by the Commission, one of the questions was particularly directed at switching bank accounts. It was asked:

What other measures [other than those directed at preventing misdirection of payment, AB] should be considered to improve bank account switching? Please describe.
Consumers and civil society
The majority of the stakeholders that replied to this question indicated that the introduction of bank account number portability offers the best solution, as it would eliminate the risk of misdirection of payments as well as most of the complications for consumers and third parties and would require only the banks concerned to make changes. As an intermediate solution, consumer organisations proposed to introduce a rerouting system, like the one currently in place in the Netherlands and in course of adoption in the UK. Stakeholders indicated that any long-term measure should focus on the portability of bank account numbers or the portability of customer account numbers linked to the underlying bank account numbers (like in the Swedish ‘Bankgiro’ system). Respondents also addressed the importance of ensuring compatibility between account number portability and the SEPA and IBAN frameworks, and called on the European Commission to launch an in-depth feasibility study on this topic. “ (emphasis added, AB)

By maintaining the bank-code in the IBAN number enhanced competition is intrinsically hindered by the administrative hurdles of actually switching to competing bank. By opting for the  IBAN-number a step towards a Single Euro Payments Area has been made, but one that will not necessarily be followed (easily) by consumers or companies. In the 2012 Euro Barometer, a mere 5% of the respondents would consider switching to a bank in another country, as opposed to 7% six years earlier. The number has only decreased. Perhaps 1 February 2014 will change the tide, but I expect number portability would do more to that number than switching to IBAN for all transfers would.

One final thought, should competition soar, and people in large numbers change accounts from (traditional) domestic to banks in other countries, the effects of this large scale movement of bank accounts might require another inspection of the Deposit Guarantee System. In volatile economies, banks might not survive, and consumers could lose their deposits with the banks. EU regulation in this area exits, but perhaps requires a recalibration should large scale switching of bank accounts in EU take place.

Future outlook

A Single European Payments Area has not been achieved yet as several areas have been left out of the scope of the Regulation. This leaves room for hope that in future legislation a truly competitive market will be achieved by implementing something of a free movement of bank-account numbers, which has been hinted at. Though, do not expect this in the upcoming 10 years. Nevertheless, I look forward to future developments in this area. For now, you have roughly 10 months to get used to your (new) account number.

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Consumer Protection & Online Shopping (Part II)

Picking up on my previous post (7 Dec), a summary (factual background excerpt from the official press release, which can be found here) and some brief comments on the joined cases  Pammer and Hotel Alpenhof (C-585/05 and C-144/09) whose judgments were released yesterday.
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Consumer Protection & Online Shopping (Part I)

Most of us probably don’t even think about it, but for those of us who do, we tend to assume (not unreasonably) that if we buy stuff from a Dutch or German website, the transactions concluded at these sites are governed respectively by Dutch or German law. A year ago, while writing a piece on how consumers (don’t) think about consumer protection (though not specifically regarding online shopping), I decided to conduct some amateurish checks to see whether this was indeed true. Our household buys a lot of books from Amazon’s UK site, so their general terms and conditions (usually the last clause) seemed a natural place to start.
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