Despite the 2014 Single Euro Payments Area (SEPA) Regulation banning geographical discrimination based on bank account locations, EU consumers continue to face challenges from ‘IBAN discrimination,’ according to a new report by the European Court of Auditors (ECA).
From February 2021 to September 2023, nearly 3,500 instances of alleged IBAN discrimination were reported via the ‘Accept My IBAN platform,’ with the majority of cases occurring in France and Spain, which accounted for 31% and 21% of the total, respectively.
IBAN discrimination occurs when businesses or institutions refuse to accept SEPA payments because the IBAN originates from a different EU/EEA country than the bank or company’s location. This issue is particularly frustrating for consumers, forcing them to open multiple bank accounts or preventing them from using innovative fintech services.
“IBAN discrimination can be very annoying for consumers as it might force you to open multiple bank accounts when you live in different EU member states or prevents you to use newer banking services offered by Fintechs,” said Anna Martin, Head of financial services at the European consumer organization BEUC.
The ECA report also highlights that regulatory loopholes and inconsistent penalties for IBAN discrimination hinder efforts to resolve the issue. Fines vary significantly, from €250 to €10,000 minimum and from €3,500 to €10 million plus up to 10% of a company’s annual turnover in maximum penalties. The rise in virtual IBANs, which the European Banking Authority (EBA) warns could lead to risks involving money laundering and consumer protection, has also been linked to IBAN discrimination.
“Virtual IBANs cannot be the solution to IBAN discrimination as it makes fraud prevention and resolution more difficult and creates confusion for consumers about their legal protections, such as refund rights in case of fraud or the protection of their deposit in case of bankruptcy,” Martin noted.
While the EU Commission acknowledges the ongoing issue, it claims that IBAN discrimination is not a widespread EU problem. However, reports from the ‘Accept My IBAN’ initiative show the highest number of cases in Germany, Spain, France, and Italy, though the figures may underestimate the problem, as other complaint channels exist.
Enforcement gaps persist, with stakeholders like the European Fintech Association (EFA) and the European Third Party Provider Association (ETPPA) calling for stronger, more uniform penalties and proactive enforcement across EU member states. The EFA has also suggested a unified EU IBAN system to reduce fragmentation and simplify business within the single market.
The EU Commission has agreed with these recommendations but emphasized that the success of its efforts largely depends on the commitment of national authorities to effectively implement and enforce the regulations.
