French banks criticised for excessive fees for bounced payments

The charges applied by banks in the case of a bounced direct debit payment are 17 times higher in France than in Germany (€1.20), eight times higher than in Italy (€2.50) and must be reduced, a leading consumer group has said.

UFC-Que Choisir described these fees as “a scandalous bank cost of €1.8billion being drained from consumer budgets.”

The consumer organisation also called in a statement for the government to “rein in bank excesses in terms of bounced payment fees,” through its upcoming bill on public spending power.

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In France, when someone attempts to make a direct debit and it is rejected because they have insufficient funds in their bank account, known as an incident de paiement, fees will be applied. These are capped at €20 by law so as to prevent abusive practices.

UFC-Que Choisir stated that this €20 limit is systematically applied by banks when direct debits are rejected, including an €8 charge for administrative costs (commission d’intervention).

However, the organisation calculated that the average employee intervention with regards to rejected payments takes less than one minute and thirty seconds, putting the bank’s profit margins on these procedures at 86%.

When an account already has a balance of less than its agreed overdraft limit but the payment is approved, only the administrative costs are applied.

However, UFC-Que Choisir noted that “one in four banks (24%) – all members of the Banques populaires-Caisse d’épargne – like nothing better than increasing the charge by sending their customers an ‘information’ letter at an average cost of €10.70.”

The consumer group is now calling for the fees to be limited to €8 instead of €20, stating: “When competition is not working, public powers are – we think – within their rights to intervene and regulate the market.”

It estimates that consumers could gain more than €1billion if this cap were imposed.

UFC-Que Choisir is also demanding greater transparency with regards to charges which are repeated when funds are not paid into an account before a second direct debit attempt.

Essentially, if you have one direct debit rejected you will have a €20 fee, but the direct debit will generally be repeated 4 to 10 days after the first one, which means you may be debited another €20. UFC-Que Chosir estimates that this second fee generates €400million to French banks each year.

By law a client can ask for a reimbursement of this second fee. However, banks do not always inform their clients of this.

Only two banks – Banque postale and Bred – currently automatically cancel the second bounced payment fee in this case.

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