Central Bank warns on discrimination over non-Irish IBANs

Businesses should be aware that refusing to allow European customers with non-Irish bank account numbers to make cashless payments is prohibited under European law, the Central Bank has underlined.

The regulator has written to all regulated firms, as well as a range of business representative bodies including Ibec, ISME and the Electricity Association of Ireland, reminding businesses of their obligations under the single European payments area (SEPA) initiative. There are 36 members in SEPA, including all 27 EU member states as well as the UK, Switzerland and non-EU Nordic countries Norway and Iceland, among others.

“IBAN [international bank account number] discrimination” refers to the practice of a business — an Irish utility company, for example — refusing to accept a customer’s SEPA IBAN.

Customers of certain digital challenger banks, some of which are registered outside the State, have non-Irish IBANs. For example, Revolut is regulated by the Lithuanian central bank, meaning its Irish and European customers are given a Lithuanian IBAN, while customers of Netherlands-registered payments company Bunq have a Dutch IBAN.

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The Central Bank said the practice of discriminating against customers with non-Irish IBANs is on the rise in Europe and noted a sharp uptick in reported incidents of IBAN discrimination in the first half of 2022. In response to queries, the Central Bank said it has received 42 reports of the practice in the first half of this year, compared with a total of 54 last year and 40 in 2019.

A spokesman for the Central Bank said these figures likely understate the true scale of the issue because they only represent complaints received directly by the regulator. Complaints can also be filed with the Competition and Consumer Protection Commission, the Banking and Payments Federation of Ireland and the European Commission.

IBAN discrimination is a growing problem across Europe, one that raises “barriers to the proper functioning of our payment system”, the regulator said in a statement on Friday. It’s a particular issue at the moment because of the impending exits of Ulster Bank and KBC Bank from the Irish market, said the Central Bank’s director of financial operations William Molloy.

Mr Molloy said that as a result of these exits, “a large number of customers will be required to relocate their payment accounts” to a new service provider. In that context, he said it’s important that those consumers who choose a new payment service provider with a non-Irish IBAN are supported.

“Consumers should be able to choose their payment service provider free from concerns about encountering problems when using their legitimate payment account details,” Mr Molloy said.

“The SEPA regulations create a single market for consumers which supports choice and facilitates innovation in payments. Firms should take any actions required to achieve full compliance with the SEPA regulations, thereby preventing cases of IBAN discrimination from occurring at the outset.”