IBAN discrimination – everything you need to know and what to do about it

Anyone who opens a payment account with a financial institution, such as a bank, credit union or digital payment service provider in the EU (and many countries outside of it), is issued an International Bank Account Number (IBAN). An IBAN is a standardised format used to identify bank accounts in international transactions. Therefore, your IBAN will almost always be required whenever you want to send or receive money from another country using your account.

However, there have been cases where certain companies or employers do not accept the IBANs of some users, which is referred to as IBAN discrimination. If you are keen to learn more about IBAN discrimination, this article is for you. In this article, we will explore all the crucial details about IBAN discrimination and what you should do if you become a victim. Without any further ado, let's dive right in!

What is IBAN discrimination?

IBAN discrimination refers to when a company, employer, or any organisation refuses to accept your IBAN for payments or direct debits. Remember, your IBAN starts with two initials that represent your country. For instance, an IBAN for someone in Germany starts with DE (e.g., DE89370400440532013000) while a Spanish bank will give you one that may look like this: ES2200818779758344217731.

Unfortunately, some companies tend to refuse IBAN numbers of people or even businesses not in their country. It is important to note that IBAN discrimination is illegal under the Single Euro Payments Area (SEPA) Regulation, which prohibits discrimination based on the country of origin of an IBAN. SEPA was created to simplify payments and money transfers made across banks and financial institutions in the European Union and EEA.

Causes of IBAN discrimination

The common causes of IBAN discrimination include the following:

Lack of awareness

Some companies, especially those that primarily serve local customers and rarely engage in international transactions, may not be well-informed about IBAN rules. They might not fully understand the importance of IBANs in cross-border payments or be aware of the SEPA Regulation's prohibition on discrimination. As a result, they may unintentionally reject or refuse to accept payments to foreign IBAN accounts, causing inconvenience to some of their customers.

Political events

Certain political events can lead to confusion and uncertainty about financial regulations, including those related to IBAN usage. For instance, in the aftermath of Brexit, there were reports of increased IBAN discrimination in the UK. This is because some businesses in the UK were not aware that the SEPA regulation was still valid in the UK. Such events might create misconceptions or misunderstandings about the legality and necessity of accepting foreign IBANs, leading to unintentional discriminatory practices.

Country bias

Some companies may have a bias towards or against transacting with people from certain countries. This bias could be influenced by various factors, including past experiences with customers from specific countries, cultural perceptions, or economic considerations. Such biases can result in the rejection of IBANs associated with certain countries, which is not only discriminatory but also contrary to the principles of the single market within the EU.

Why is IBAN discrimination illegal?

As stated earlier, the SEPA Regulation was designed to ease euro payments across Europe and prohibits IBAN discrimination to ensure people can access essential services regardless of their bank account's country. Discriminating against IBANs from other SEPA countries undermines the EU's single market principles of free trade, and any company or employer violating this regulation may face legal consequences.

The European SEPA Regulation fosters financial integration among European countries and harmonises payment processes, making it easier for individuals and businesses to transact across borders. By enforcing the prohibition of IBAN discrimination, the SEPA Regulation promotes cross-border financial transactions and economic cooperation in the EU. It standardises payment formats within the Eurozone, allowing individuals to send and receive euro payments seamlessly.

What are the steps you can take if you experience IBAN discrimination?

If you ever become a victim of IBAN discrimination, here are some actions you can take:

Contact the company or employer

The first thing you need to do is to directly contact the company or employer that discriminated against your IBAN. You should politely explain to them that their actions are in violation of the SEPA Regulation, which prohibits IBAN discrimination.

Provide them with all the relevant information about the regulation and how it ensures equal access to essential services irrespective of the account's country. As stated earlier, some companies, especially small businesses and startups, may not be aware of this regulation. So, bringing it to their attention could lead to a resolution.

File a complaint with a national competent authority

If you inform the company about their discriminatory practice and they don’t address the issues or continue to discriminate against your IBAN, take the next actions such as reporting IBAN discrimination to the national competent authority in the country where it occurred. This competent authority is responsible for overseeing compliance with the SEPA Regulation and handling cases of discrimination.

Contact the European Commission's Consumer Helpdesk

If you encounter difficulties resolving the issue at the national level or if the response from the competent is not satisfactory, you can seek assistance from the European Commission's Consumer Helpdesk. They can provide guidance and support in resolving cross-border consumer issues, including those related to IBAN discrimination.

Publicise the discrimination

You may also publicise the discrimination on social media and other online platforms if you don’t get urgent help from the responsible bodies. This step should be taken cautiously and as a last resort, as it could potentially lead to legal complexities. Most companies are not willing to risk their reputation because of a single transaction. So, publicising this issue could force them to urgently resolve it.

Final thoughts

This article has covered everything you may need to know about IBAN discrimination and the SEPA regulation, including what you can do about it if you ever become a victim. It is important to note that this issue can occur not only in the EU but also in other countries that use the IBAN standard. While seeking justice is essential, it is sometimes more practical to prevent certain issues, especially in cross-border business where delayed payments can lead to potential profit losses.

One thing you can do is opt for payment service providers that equip you with more than one set of account details. This diversification will let you operate in foreign markets using local payment channels – often not only faster but also considerably cheaper. For example, MultiPass Global Account comes with an IBAN, UK account number & sort-code as well as US account & routing numbers. This combination enables you to make simple and streamlined payments in 70+ currencies to over 200 countries and territories not only via SWIFT but also via local payment networks such as SEPA, ACH, Faster Payments and others.

Interested in learning more? Tell us about your individual business case and let us advise you on the best payment scenario!