As the world grows increasingly inclusive and tolerant there’s one area where discrimination is still rife. Nope, we’re not talking about race, religion or gender, but banking. More specifically IBAN discrimination.

Although the UK has now left the European Union, it is still a member of the Single Euro Payments Area and many of us still have links within the EU. Refusing to accept payments from a SEPA member’s IBAN is a direct violation of EU rules. But as some are finding out, this discrimination is all too common. And it’s not just British expats that face the problem it’s an issue for other account holders in the EU too.

Before we delve deeper into the issue, it’s worth just clarifying what an IBAN actually is, how it’s used and what the rules in the Single Euro Payments Area.

What is an IBAN?

An IBAN is an International Bank Account Number unique to your account. It starts with a two digit country code. GB in the case of UK banks like Starling, or DE in the case of German banks such as N26. The next two digits are a check code followed by a bank identifier, sort code and account number.

An example IBAN might be: GB 12 SRLG 400515 12345678

What is the Single Euro Payments Area?

The Single Euro Payments Area, or SEPA is it’s more commonly known is an initiative to launched by the European Payments Council with the aim of making all euro cross border payments as simple as making national payments.

It’s designed to allow customers, businesses and government organisations to make and receive credit card payments, direct debits, and transfers as easily as domestic transactions. It covers the whole of the EU as well a number of none EU countries, such as the UK, Monaco, Iceland, Norway etc…

What is IBAN discrimination?

Is when an institution be it a bank, business, or government organisation rejects or refuses your bank details due to your IBAN. This could be passive for example a payment form where the country code part of the IBAN is pre-filled thus preventing you from adding your, or active where the organisation comes right out and says it will not accept your IBAN, often when dealing with online payments and accounts.

Here are a couple of all too common examples:

Jim has a utility bill he needs to pay on his French residence. The utility supplier refuses his IBAN and BIC from his UK based Euro account because they only accept French IBANs. 

Brenda is a freelance designer working in Spain. She’s registered as self employed and must pay Spanish income tax and social security. She has an N26 account with a Spanish IBAN. The Spanish tax authorities refuse to accept her IBAN because although it is Spanish i.e starts ES the bank identifier shows that the bank itself is German. 

How do I fight back against IBAN discrimination?

Under Article 9 of the SEPA Regulation an organisation is breaking the law if it refuses to accept accept or make, process payments to/from an account with an IBAN in the EU. Unfortunately many European countries pick and choose which EU laws they want to follow, despite pressure form the commission, others are in the process of updating antiquated systems making it difficult for them to use non national IBANS.

If you believe you are a victim of IBAN discrimination you have three main avenues of attack. first and foremost you should contact the business or organisation involved and politely advise them they are legally obliged to accept your IBAN.

If that does not work, you should write a formal letter of complaint. (we’ve created a template letter for this below)

Finally, If you are unhappy with the outcome from the formal complaint, you can take your case to the relevant governing authority. Here you can find a complete list of bodies responsible for ensuring compliance with the SEPA regulation.

There are no guarantees that your complaint will be successful, the more people that complain the more seriously the issue will be taken. Digital banks such as Starling, Revolut and N26 are well aware of the problem and have even raised their concerns with the EU commission and regulators are taking note. In July 2020 Italian telecommunications firm TIM was fined €500 000 by the national regulator AGCM for its refusal to accept non-Italian IBANs.

Unfortunately COVID-19 has shifted the focus away from seemingly less important matters, but with an increasing number of people holding accounts and making payments outside of their country of residence, issue of SEPA compliance is one that will be addresses sooner or later.

Template letter for formal IBAN discrimination complaints

Dear [insert name or salutation],

On [insert date], I attempted to make a [insert payment method] for the amount of [insert amount] in relation to [insert invoice or bill details].  Unfortunately this transaction was declined because [insert reason you were given].

My IBAN [insert your IBAN number] is a valid account that supports SEPA payments.

Refusal to accept this IBAN is discrimination and a direct violation of Article 9 of the SEPA Regulation.

Please authorise my details in your system and in doing so ensure that this payment, and any future payments, settle successfully.

Any refusal to comply with SEPA regulation will be reported to [enter the relevant competent authority].

Yours sincerely,

[Your name]

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