The chairman of the Oireachtas joint finance committee, John McGuinness, has taken aim at some of the State's largest utilities groups for turning down invitations to discuss concerns around direct debit arrangements across the banking system as hundreds of thousands of Ulster Bank and KBC Bank Ireland customers are forced to change banks.
Mr McGuinness noted on Wednesday that his team wrote to Electric Ireland, Energia, Bord Gáis and Prepay Power to ask them to make submissions by May 9th and attend a committee meeting on May 13th to discuss potential problems surrounding widespread direct debt account changes as the two banks exit.
None availed of the opportunity, though some have subsequently said they will provide the committee with written information, and Energia has indicated that it may make a representative available, he said.
“I find that absolutely appalling from utility companies, who have the wherewithal to deal with the issues upfront with the banks, with their customers and with this committee, and they’ve chosen not to,” he said at the meeting, attended by top executives from the departing banks and the three continuing retail lenders in the State.
One million Ulster Bank and KBC Bank Ireland current and deposit accounts are affected by the exits. Ulster Bank started writing to customers last month on a phased, rolling basis, giving them six months' notice to move accounts to another financial provider. All customers will have received letters by the end of September, Ulster Bank chief executive Jane Howard told the meeting, meaning that final account closures are scheduled for next March.
KBC plans to start issuing notices from June.
While the three remaining Irish banks – AIB, Bank of Ireland and Permanent TSB – say they are currently deploying hundreds of staff to help manage an expected surge in account openings, a major concern has emerged around the handling of direct debits, standing orders and regular payments.
Even in cases where existing direct debit arrangements can, in theory, move under a Central Bank switching code, many direct debit originators and receivers will only take instructions directly from their customers, according to banking industry officials.
Ulster Bank executives told the meeting that only 10 per cent of its customers who had moved so far had used the switcher process.
The big concern is that direct debit originators will become overburdened later in the year amid a spike in customers seeking to change their banking details.
“Without an ecosystem of support and all parties prepared for this unprecedented challenge, there is a significant risk for customers and for wider society,” Permanent TSB chief executive Eamonn Crowley told the meeting. “It is imperative that we all work together to ensure the safe passage of hundreds of thousands of customer loans, accounts and long-standing banking relationships.
Banking and Payments Federation Ireland (BPFI) chief executive Brian Hayes said that while the switching process will work well for customers with few direct debit and recurring card payments, it is not a great option for those with large numbers of automatic monthly payments and those setting up new bank accounts digitally. Executives from the remaining banks told the meeting that about 70 per cent of new account openings are currently coming through the digital channel.
The BPFI has organised three virtual meetings with representatives of 25 direct debit originators operating in the Irish market in recent months to help prepare them for issues that may crop up as the two overseas-owned banks retreat.
Meanwhile, Ulster Bank is pushing out wide-scale redundancies until next year, as its keeps branches open to deal with customers moving their banking activities elsewhere.
While the bank has repeatedly said in the past year that it would not carry out a bank-wide voluntary redundancy scheme before the first half of 2022, Ms Howard told the meeting that it is now “highly unlikely that we will see large numbers of redundancy exits this year”.
She said that the bank’s branches will remain open throughout this process “to ensure those customers who wish can come directly to us for face-to-face help”.