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Do messages sent to an e-banking customer’s mailbox on the bank’s website meet the requirement that information be communicated on a durable medium? David Bowden, consumer credit solicitor and principal of David Bowden Law, comments on what lessons financial services practitioners can learn from the ruling of the Court of Justice of the European Union (CJEU) in BAWAG PSK Bank v Verein für Konsumenteninformation.
BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG v Verein für Konsumenteninformation, Case C-347/15
The CJEU ruled that information transmitted by a bank to its e-banking customers’ mailboxes on its website had been provided on a durable medium only if the website allowed the customers to store the information so they could access and reproduce it unchanged for an adequate period without the bank being able to unilaterally change it, and the bank drew the customers’ attention to the existence of the information if they had to consult the website to acquire it.
The CJEU’s judgment is only half-good news for financial services providers. While the CJEU ruled that a bank’s secure messaging system could amount to a durable medium, it went on to rule that changes to product terms and conditions could not simply be deposited on the messaging system and that active steps had to be taken by a bank to draw these changes to a customer’s attention.
BAWAG is an Austrian bank operating throughout Austria. It offers internet e-banking to its customers. As part of the general terms in such e-banking contracts, the bank includes a contractual term stating that notices of changes will be communicated to the customer through the internal mailbox of its internet e-banking system. Verein für Konsumenteninformation, an Austrian consumer association, considered that such a contractual term did not comply with the duty of providing information in a durable medium set out in the Payment Services Directive 2007/64/EC (PSD).
The association brought an action seeking to prevent the bank from either including or applying the challenged contractual term in all its consumer contracts. It won at first instance and also on first appeal. The bank then appealed to the Supreme Court of Austria, which then stayed the proceedings and referred two questions to the CJEU for a ruling on the interpretation of the PSD.
The CJEU was asked to decide whether information given through the bank’s e-banking mailbox was provided (as opposed to merely being made available) through a durable medium under the PSD.
Advocate-General Bobek in his opinion dated 16 September 2016 looked at this case in the round and considered balancing the minimum requirements of consumer information and protection with technological developments in setting up online and paperless environments for banks to communicate with their customers.
The Advocate-General said that a durable medium, as defined in Article 4(25) of PSD, boiled down to two core components—storability and reproduction—and that the EU had to ‘reconcile the tension between the need to adjust to the evolution of technology which makes commercial transactions more agile via the internet’ and the protection of consumer rights. He opined that the consumer was the more vulnerable party and that the PSD prevented information from being provided in a merely ephemeral manner.
However, he rejected the association’s view that email and internet sites could not be considered a durable medium because they were not capable of constituting a physical instrument of storage. He considered a durable medium to be a functional equivalent to paper and that Article 4(25) of PSD was to be defined in a broad way and was not to exclude any potential modes of communication. He said that a durable medium relied on functional features which fulfilled the requirements of storability and unchanged reproduction. As long as this was fulfilled, then the actual type and shape of a durable medium could change with the evolution of technical possibility. He found that the PSD had ‘arguably reversed the reticent approach towards internet sites’ and that internet-based communications systems were not, per se, excluded from being durable media.
As to information being information provided or made available, the Advocate-General said that what was more important was the effective transmission of the information and that such information had to ‘cross the line from the domain of the service provided in order to enter into the sphere of awareness of the user’. He said information placed in an e-banking mailbox did not leave the particular sphere of the bank to penetrate the domain of the regular communication instruments used by customers.
The CJEU has agreed with its Advocate-General, but has sent the case back to the Austrian courts so that they can decide whether, on the facts of this case, the bank’s e-banking system allows the payment service user to store information addressed personally to that user in a way accessible for future reference for a period of time adequate to the purposes of the information and allows the unchanged reproduction of the information stored. The CJEU also left it for the Austrian court to decide whether the changes to the information and conditions defined in Article 42 of PSD, and the changes to the relevant framework contract as well, could be regarded as having been actively communicated by the payment service provider to the user of those services.
Although this is the first time the CJEU has ruled on the concept of a durable medium as it appears in PSD, that same term appears in many other pieces of EU financial services legislation. On 27 January 2010, the EFTA Court ruled in E-4/09: Inconsult Anstalt v Financial Market Authority of Liechtenstein (Finanzmarktaufsicht) on the concept as it appears in the Insurance Mediation Directive 2002/92/EC. The court held that an internet site could constitute a durable medium if it:
And the court ruled that it was irrelevant whether the customer had expressly consented to the provision of information through the internet.
That ruling has now been expressly endorsed by the CJEU in BAWAG.
The CJEU ruling is quite disappointing and seems to take a quite sceptical view of modern technology. To be a durable medium for the CJEU there must be no possibility of a bank accessing its system to change the data stored there. The Advocate-General said that ‘unchanged reproduction’ meant that it ought to be technically impossible for the payment service provider to unilaterally change or delete information once transmitted to the user and that a mailbox hosted and administered by the payment service provider was unlikely to comply with the requirements of guaranteeing unchanged reproduction since it was technically under the payment service provider’s control. If a payment service provider was to surrender control of its e-banking system to another organisation, then that would cause more problems than it solved.
As to product terms and conditions changes, the CJEU decision means that changes cannot simply be put up in a secure part of a bank’s e-banking system. The CJEU ruled that what was needed was active behaviour by the provider aimed at drawing the user’s attention to the existence and availability of the information on the site. Both the CJEU and the Advocate-General said this could be met by sending a letter or email to an address regularly used by the user. Sending such communications by regular post has a cost. There is no good reason given as to why an e-banking user who is regularly using that facility cannot be given notice of product condition changes on an e-banking platform. This ought to be possible where a message appears on the first screen displayed after log-on. However, this is not what the CJEU has ruled with its consumer-protection-focused interpretation of the PSD.
The Revised Payment Service Directive 2015/2366/EU (PSD2) was adopted on 25 November 2015. It has to be implemented by 13 January 2018, on which date the PSD will be repealed. ‘Durable medium’ is defined in Article 4(35) of PSD2 as meaning:
‘any instrument which enables the payment service user to store information addressed personally to that payment service user in a way accessible for future reference for a period of time adequate to the purposes of the information and which allows the unchanged reproduction of the information stored’
‘Durable medium’ is then referred to in six places in the operative provisions as follows:
Finally, it should be noted that both the CJEU and the Advocate-General agreed with the court’s ruling on a durable medium as that term appears in the Consumer Credit Directive 2008/48/EC. In C-42/15: Home Credit Slovakia AS v Klára Bíróová, the Third Chamber ruled on 9 November 2016 that the durable medium requirements meant that what was relevant for a consumer was that:
David Bowden is the principal of David Bowden Law, a boutique law firm specialising in consumer credit law. He is a solicitor-advocate and one of the few solicitors whose firm is regulated by the Bar Standards Board to provide legal services and conduct litigation.
Interviewed by Robert Matthews.
The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.
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