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- Protective measures: The Central Bank proposes to increase fines for banks for violating consumer rights
Protective measures: The Central Bank proposes to increase fines for banks for violating consumer rights
The Central Bank of the Russian Federation advocates an increase in penalties for credit institutions for violating the rights of consumers of financial services. This was stated in the State Duma by the head of the Bank of Russia, Elvira Nabiullina. In her opinion, increased financial responsibility is a strong deterrent to unscrupulous behavior. Izvestia investigated how much fines could be increased and how else the rights of customers could be protected.
Regulation of the sphere
A bill to strengthen banks' responsibility for consumer rights violations is under development, the Central Bank's press service told Izvestia.
"As previously noted by the Chairman of the Bank of Russia, E.S. Nabiullina, it is assumed that the amount of the fine will be determined based on the principle of proportionality of the material benefits received as a result of violations — from 0.1 to 1% of the size of the credit institution's own funds (capital)," the regulator added.
The Central Bank recognizes that the severity of the problem has decreased in the past year, Alexey Voylukov, an MBA professor of business practice in digital finance at the Presidential Academy, told Izvestia. In addition, the State Duma has already adopted a new bill that provides for additional regulation and restrictions in this area, which will allow for better control of unfair practices and reduce the number of complaints.
— After approval and signing by the president, the law should enter into force in September of this year. There is no need to increase the size of fines, especially given the existing measures and new legislative initiatives that effectively solve existing problems," he said.
The imposition of additional services, although it takes place, in his opinion, is not a primary problem that requires an immediate solution through a sharp increase in fines. It is important to note that not everything depends solely on banks and credit institutions.
— For example, car dealers often impose additional services, increasing the cost of the car and forcing buyers to purchase cars on credit. In this context, banks only provide loans for the stated amounts and are not related to the additional services offered by car dealers, — Alexey Voylukov is sure.
Therefore, according to the expert, the problem needs to be solved directly with car dealers and regulatory authorities such as Rospotrebnadzor, and not through increasing fines for banks, punishing everyone who just passed by.
Obviously, the Central Bank is now referring to further tightening the fight against so—called misseling, the unfair practice of selling financial products (services) to consumers, involving the failure to provide complete, transparent and clear information about the nature of financial services, their associated risks, their cost and other significant conditions, as well as deliberate distortion of information, substitution of one product for another. Vladimir Popov, Associate Professor of the Department of Private Law at the State University of Management, emphasized in an interview with Izvestia.
— The problem of consumer protection in the banking sector lies in the fact that administrative legislation does not impose special penalties for banks and other credit institutions for violations that constitute a missel. They are subject to the general rules on liability for violations of consumer rights, although in many other cases the requirements for credit institutions are significantly higher than for ordinary commercial organizations in the field of services," the expert noted.
Therefore, according to him, the proposal to increase the amount of fines for them by five or ten times seems quite reasonable and timely.
— As for other measures to protect the rights of consumers of banking services, the norms of the laws "On Consumer Rights Protection" and "On Consumer Credit (Loan)" in combination with other norms of civil legislation are sufficient. The client has the right to demand compensation for the losses incurred, payment of a legal penalty and a fine for non—fulfillment of his legal requirements, compensation for moral damage," the expert reminded.
The main thing is to formulate as clearly as possible in the law which actions (inaction) of a credit institution constitute a violation of consumer rights, Vladimir Popov noted.
Also, sometimes there are some kind of banking ersatz products that are not related to insurance, Sergey Khudyakov, co-owner of insurance broker Mainsgroup, told Izvestia.
— A product with low customer value and high bank commission. The practice is vicious, and it has long been eliminated in many countries around the world. This will also happen in Russia," he said.
Additional responsibility
The point of fines for banks is not to make money from it, but to ensure that financial punishment for each violation has a significant impact on the financial performance of a credit institution, Vyacheslav Putilovsky, Associate director for banking Ratings at Expert RA, told Izvestia.
— That is, the income, direct and indirect, from consumer rights violations did not cover the costs of financial sanctions. A few years ago, a system of fines already existed, but it turned out to be insufficiently effective, since the bank's revenues, for example, from misseling or violating the BCI legislation (when free tests on the customer base are simpler and cheaper than marketing research) greatly exceeded the cost of fines. The Bank of Russia has now taken a close look at this problem," he said.
The most effective methods, according to him, are the introduction of personal responsibility for top management, restriction of problematic activities, turnover fines or fines in relation to capital.
Increasing fines for credit institutions does not make sense, since due to the specifics of their activities, their turnover and capital are significantly higher than that of a medium-sized enterprise, not to mention a small business, Yulia Suvorova, director of the legal department of Compare, noted in an interview with Izvestia.
— At the moment, the amount of the fine is set by the Administrative Code of the Russian Federation in a fixed amount and does not take into account the financial condition of the violator, therefore, a fine significant for a bakery, for example, is completely insensitive for the same bank. At the same time, it is worth noting that both the Bank of Russia and the Federal Antimonopoly Service have already introduced quite a lot of requirements for the activities of credit institutions aimed at protecting consumer rights, including rules for disclosing information about the essential terms of the contract, and stricter requirements for advertising financial services," the expert emphasized.
In addition to increasing fines, there are other measures to protect clients' rights, Fyodor Sidorov, a private investor and founder of the School of Practical Investment, told Izvestia.
— For example, in 2018, the Institute of the Financial Ombudsman was established, which deals with the out-of-court settlement of disputes between consumers and financial organizations. This allows clients to resolve conflicts faster and at lower cost," the expert believes.
Thus, in his opinion, the combination of a moderate increase in fines and the development of out-of-court settlement mechanisms contributes to more effective protection of the rights of consumers of financial services.
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