69916 v2 Resolving disputes between consumers and financial businesses: Current arrangements in central and eastern Europe ï?® Bulgaria ï?® Estonia ï?® Lithuania ï?® Slovakia ï?® Croatia ï?® Hungary ï?® Poland ï?® Slovenia ï?® Czech Republic ï?® Latvia ï?® Romania By David Thomas and Francis Frizon for THE WORLD BANK Global Program on Consumer Protection and Financial Literacy January 2012 Contents Preface Glossary ........................................................................................................................ page 2 Introduction ................................................................................................................... page 3 Executive summary ......................................................................................................... page 6 Consumer conditions compared.........................................................................................page 12 Country studies Bulgaria ........................................................................................................................ page 16 Croatia ......................................................................................................................... page 20 Czech Republic .............................................................................................................. page 27 Estonia ......................................................................................................................... page 31 Hungary ....................................................................................................................... page 35 Latvia ........................................................................................................................... page 38 Lithuania ...................................................................................................................... page 46 Poland .......................................................................................................................... page 52 Romania ....................................................................................................................... page 58 Slovakia ........................................................................................................................ page 68 Slovenia ....................................................................................................................... page 71 This report is a product of the authors, overseen by staff from the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations and conclusions expressed in this report do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. Resolving disputes between consumers and financial businesses: Central and eastern Europe 1 Preface Glossary Abbreviations and acronyms ADR = alternative dispute resolution body (for out-of-court redress) CEE 10 = the 10 countries from the CEE 11 that are already members of the EU CEE 11 = the 11 central and eastern European countries covered by this report1 EU = European Union2 FIN-NET = European network of financial ombudsmen and financial ADRs3 GDP = Gross domestic product Terminology ‘Ombudsman’ is recognised worldwide. This report uses it to include equivalent bodies that in some countries use other titles, such as ‘arbiter’. ‘ADR’ is used in this report to cover both ombudsmen and other types of out-of-court redress bodies such as complaints boards and complaints departments of financial regulators. ‘Mediator’ is used for different purposes in different countries. Most use it for those ADRs that only mediate. But some use it for those with a wider role, similar to an ombudsman. ‘Microenterprises’ (the smallest businesses) and ‘small and medium enterprises’ are EU-wide definitions.4 ‘Financial business’ is used in this report to cover the whole range of businesses that provide or distribute credit, financial services or payment services. ‘Intermediary’ is used to cover a financial business (such as an insurance broker) that distributes the financial products of others. 1 The CEE 11 are Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. 2 The 27 EU member states are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and UK. Croatia is on track to become a member. 3 http://ec.europa.eu/internal_market/fin-net/index_en.htm 4 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2003:124:0036:0041:en:PDF Resolving disputes between consumers and financial businesses: Central and eastern Europe 2 Preface Introduction Purpose of this report This report surveys the current position in establishing and developing financial ombudsmen and other financial ADRs in Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia (the CEE 11). It draws on previous reports from The World Bank and others, which underlined how financial ombudsmen can help to increase consumer confidence in financial services, and hence also benefit financial businesses by helping markets to improve and grow. It also draws on information from the European Commission that compares the attitudes of consumers across Europe – their level of confidence in existing levels of consumer protection, their readiness to complain and the relative ease of using ADRs compared to the courts. The factual information about the existing arrangements in the CEE 11 is published in good faith, following enquiries with the relevant bodies, and was sent to the bodies concerned for comment during the consultation period that preceded the finalisation of this report. The report focuses on financial ombudsmen and financial ADRs covering banking and credit and also insurance – but details are also provided of out-of-court redress arrangements in relation to packaged investments and stock exchange transactions where these are readily available. There are currently significant gaps in coverage – both by country and by sector. And a number of the ombudsmen/ADRs that exist do not appear to comply with recognised European Union standards for out-of-court redress bodies. In November 2011 the European Commission proposed a directive on ADR, intended to come into force in 2014.5 This will require European Union member states to establish ADRs for all consumer sectors, and to ensure that these ADRs comply with compulsory standards, Linked report This report is published alongside another report from The World Bank – Resolving disputes between consumers and financial businesses: Fundamentals for a financial ombudsman – which explains the foundations on which financial ombudsmen can be created and developed. That other report also includes details of particular issues that are relevant to financial ombudsmen and other financial ADRs in the European Union. All of the CEE 11 are members of the European Union – except for Croatia, which is on track to become a member. The European network of financial ombudsmen and financial ADRs (FIN-NET) covers cross-border financial disputes (where the consumer is in one EU member state and the financial business is in another). FIN-NET members must comply with two requirements – explained in that other report. 5 http://ec.europa.eu/consumers/redress_cons/adr_policy_work_en.htm Resolving disputes between consumers and financial businesses: Central and eastern Europe 3 The first requirement is that the financial ombudsman/ADR must accept the terms of the FIN-NET memorandum of understanding which covers operational requirements in cooperating with other members of FIN-NET in cross-border cases.6 The second requirement is that the financial ombudsman/ADR must comply with the seven principles in European Commission Recommendation 1998/257/EC: the independence, transparency, adversarial, effectiveness, legality, liberty and representation principles.7 The standards in Recommendation 1998/257/EC are likely to be superseded by similar ones in the proposed European directive on ADR. Those standards are intended to be compulsory for all ombudsmen/ADRs in the European Union from 2014. Acknowledgements This report was prepared by:  David Thomas (Principal Ombudsman, Financial Ombudsman Service in the UK); and  Francis Frizon (Insurance Mediator in France). Having originally qualified as lawyers, both of them have been:  ombudsmen for more than a dozen years;  steering committee members of FIN-NET (the European network of financial ombudsmen/ADRs);  steering committee members of INFO (the worldwide network of financial ombudsmen).8 They are grateful to:  Sue Rutledge, Juan Carlos Izaguirre, Tomáš Prouza and their colleagues in the Global Program on Consumer Protection and Financial Literacy at The World Bank who have overseen this report;  the authors of the various documents from The World Bank and other organisations that are cited in this report and provide an essential foundation for it;  Jean-Yves Mulle, Malgorzata Feluch and their colleagues (including Irena Vukic) in the European Commission’s Internal Market Directorate General;  colleagues from other financial ombudsmen and financial ADRs who have provided information about their own arrangements; and  the following who helped collect information on bodies other than their own: - Živa Drol-Novak from the Consumers Association, Slovenia; - Alin Iacob, a Romanian member of the EU Financial Services Consumer Group; - Ana Keglevic from the Law Faculty, Zagreb University, Croatia; - Frantisek Klufa, former Financial Arbiter, Czech Republic; - Marekas MoÄ?iulskis from the State Consumer Rights Protection Authority, Lithuania; - Razvan Resmerita, Director of the European Consumer Centre, Romania; and - MaÅ‚gorzata Wiecko from the Insurance Ombudsman, Poland. 6 http://ec.europa.eu/internal_market/fin-net/docs/mou/en.pdf 7 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31998H0257:EN:NOT 8 www.networkfso.org – 49 member financial ombudsman schemes in 31 countries worldwide. Resolving disputes between consumers and financial businesses: Central and eastern Europe 4 During the consultation period, the draft of this report was presented at three international meetings:  the INFO annual conference in Canada in September 2011;  the FIN-NET bi-annual meeting in Malta in October 2011; and  a financial ombudsman conference in Armenia in October 2011. Comments in this report do not necessarily reflect the views of the organisations mentioned. Resolving disputes between consumers and financial businesses: Central and eastern Europe 5 Preface Executive summary Consumer confidence Consumer confidence in existing consumer-protection measures, across all sectors, is below the European Union average in all of the CEE 10. Consumers in the CEE 10, apart from those in Slovenia, are less likely than the EU average to complain if something goes wrong. In all of the CEE 10, consumers find it less easy than the EU average to resolve disputes with sellers/providers either through ADR or the courts. But throughout the EU, including in the CEE 10, consumers and sellers/providers prefer ADR to the courts for resolving disputes. Bulgaria The World Bank reviewed the financial ombudsman/ADR position previously in 2009. The Diagnostic Review of Consumer Protection and Financial Capability in Bulgaria9 recommended that consideration should be given to creating a financial ombudsman, to replace existing conciliation committees. At present, consumers have free access to the legally-established Conciliation Commission for Payment Disputes, which provides non-binding recommendations in disputes about credit cards, loans, payment services and electronic money. There is no financial ombudsman or financial ADR for other aspects of banking or for any aspects of insurance or other financial products. Bulgaria has no member of FIN-NET to handle cross-border cases. As recommended in 2009, consideration should be given to creating a financial ombudsman – which should adopt the standards that will enable it to become a member of FIN-NET. Croatia The World Bank reviewed the financial ombudsman/ADR position previously in 2010. The Diagnostic Review of Consumer Protection and Financial Literacy in Croatia10 said that the proposed mediation centre for the banking sector was unlikely to be successful, and that consideration should be given to establishing a financial ombudsman. 9 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/RO_-_CPFL_Vol_I.pdf 10 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/Croatia_CPFL_Vol1_English.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 6 In banking, all that is available to consumers at present is mediation. Consumers have to pay a fee for that (though the fee was being waived until the end of 2011). In insurance, consumers have free access to mediation, or to an industry-appointed ombudsman who can provide a non-binding recommendation limited to complaints about the insurance code of ethics. Croatia in not yet a member of the European Union. It is not eligible to join FIN-NET for cross-border disputes, but the Chamber of Economy was accepted as a FIN-NET observer in October 2011. As recommended in 2010, consideration should be given to establishing a financial ombudsman – which should adopt the standards that will enable it to become a member of FIN-NET. Czech Republic The World Bank reviewed the financial ombudsman/ADR position previously in 2007. The Technical Note on Consumer Protection in Financial Services in the Czech Republic11 recommended that the existing Financial Arbiter (then dealing only with electronic payments in the banking sector) should be converted into a financial ombudsman covering all areas of the financial sector. In banking, consumers have free access to the legally-established Financial Arbiter – which now covers payment services and (since July 2011) consumer credit and some investment products. The Arbiter provides mediation and decisions binding on the financial business and consumer. In insurance, there is currently no financial ombudsman/ADR – but it is hoped that the Financial Arbiter’s jurisdiction will be extended to insurance, and additional investment products, in 2012. The Financial Arbiter is a member of FIN-NET to cover cross-border cases. Consideration should be given to continuing to extend the Financial Arbiter’s jurisdiction until it covers all areas of the financial sector, as recommended in 2007. Estonia The World Bank has not previously reviewed the financial ombudsman/ADR position in Estonia. In both banking and insurance, consumers have free access to the legally-established Consumer Complaint Committee (provided the claim is for at least €20). The Committee provides a non-binding recommendation, and is a member of FIN-NET. In insurance, consumers have the alternative of free access to the industry-appointed Insurance Conciliation Body, which provides mediation or a non-binding recommendation. It is not a member of FIN-NET. 11 http://siteresources.worldbank.org/EXTECAREGTOPPRVSECDEV/Resources/CR_CPFS_12June07.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 7 Hungary The World Bank has not previously reviewed the financial ombudsman/ADR position in Hungary. Both banking and insurance, as well as other financial services, have been covered by the Financial Arbitration Board since 1 July 2011. This was established by law and is run by the Hungarian Financial Supervisory Authority. It is a member of FIN-NET. It provides free access to consumers. It offers mediation, a non-binding recommendation and (if both parties agree in advance) a decision that is binding on both parties. Latvia The World Bank previously reviewed the financial ombudsman/ADR position in 2010. The Diagnostic Review of Consumer Protection and Financial Literacy in Latvia12 and Action Plan on Financial Consumer Protection in Latvia 13 recommended:  The Consumer Rights Protection Centre (which is a government agency) should make sure it is legally equipped to deal with all relevant financial services complaints it receives, proposing legislative change if necessary.  Consideration should be given to establishing a financial ombudsman by law – to replace the ombudsmen established by the banking and insurance associations, which were not seen by consumers as independent and were little-used. At present, the government-appointed Consumer Rights Protection Centre has a very limited role in relation to individual disputes. In banking and insurance, there are industry-appointed ombudsmen – which provide non-binding recommendations. But consumers appear to doubt the impartiality of these ombudsmen and seldom use them – and both of them charge consumers a fee (though this is refunded if the consumer wins). The industry-based Motor Insurers’ Bureau provides non-binding recommendations in disputes between third parties and motor third-party liability insurers. Latvia has no member of FIN-NET to handle cross-border disputes. The Consumer Rights Protection Centre complies with Commission Recommendation 1998/257/EC, but does not propose to join FIN-NET – because of the Centre’s limited role in individual disputes. The banking and insurance ombudsmen, and the Motor Insurers’ Bureau, have not demonstrated that they comply with Commission Recommendation 1998/257/EC. 12 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/Latvia_CP_Vol_1_En.pdf 13 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/LV_Action_Plan_ConsultativeDraft.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 8 The existing banking and insurance ombudsmen should adopt the standards that will enable them to become members of FIN-NET – or as recommended in 2010, consideration should be given to establishing a financial ombudsman by law. Lithuania The World Bank previously reviewed the financial ombudsman/ADR position in 2009. The Diagnostic Review of Consumer Protection and Financial Literacy in Lithuania14recommended:  The Insurance Supervisory Commission should retain its consumer protection role in insurance while the State Consumer Rights Protection Authority increases its capacity and expertise.  The State Consumer Rights Protection Authority and the Insurance Supervisory Commission should be given legal authority to make decisions binding on financial businesses.  At a later stage, consumer protection in insurance should pass from the Insurance Supervisory Commission to the State Consumer Rights Protection Authority (a FIN-NET member).  In the longer term, the State Consumer Rights Protection Authority was likely to become overwhelmed and consideration should be given to establishing a statutory financial ombudsman. In banking, consumers have free access to the government-appointed State Consumer Rights Protection Authority – which provides mediation, non-binding recommendations and decisions that are binding on both parties. It is a member of FIN-NET, for cross-border disputes. In insurance, consumers have free access to the government-appointed Insurance Supervisory Commission – which provides mediation and non-binding recommendations. It is not a member of FIN-NET. As a result of forthcoming changes to the regulatory arrangements, expected in 2012, the arrangements for out-of-court redress may change. But the position has not yet been decided. As recommended in 2009, if out-of-court redress remains with the State Consumer Rights Protection Authority, it should be given the necessary powers and resources – or consideration should be given to creating a financial ombudsman, which should adopt the standards that would enable it to become a member of FIN-NET. Poland The World Bank has not previously reviewed the financial ombudsman/ADR position in Poland. In banking, consumers have access to the industry-appointed Banking Ombudsman, which provides a decision that binds the financial business but not the consumer. Consumers must pay a fee of €12.50, which is refunded if they win. In insurance, consumers have free access to the government-appointed Insurance Ombudsman, which provides a non-binding recommendation – with the possibility, at some cost, of going on to arbitration. 14 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/Lithuania_CP_Vol1_En.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 9 In both banking and insurance, consumers have the alternative of access to the Arbitration Court at the Financial Supervisory Authority, which provides mediation and decisions binding on both parties. Consumers must pay a fee of €62.00, which is refunded if they win. The Banking Ombudsman, Insurance Ombudsman and Arbitration Court at the Financial Supervisory Authority are all members of FIN-NET to handle cross-border disputes. Romania The World Bank previously reviewed the financial ombudsman/ADR position in 2009. The Diagnostic Review of Consumer Protection and Financial Literacy in Romania15 recommended:  A financial ombudsman or other similar procedure should be put in place, and should become a member of FIN-NET.  As a first step, ombudsmen could be established by the professional associations. If this did not prove sufficiently effective, consideration should be given to establishing an ombudsman by law. A Special Projects Initiative was established with support from The World Bank which, amongst other things, produced proposals for a financial ombudsman. In banking, the National Bank of Romania provides a non-binding recommendation in disputes about cross-border transfers. The banking ombudsman proposed by the Special Projects Initiative has not been established. Consumers have access to the Union of Banking Mediators and the Association of Mediators in the Financial-Banking Field – FINBAN, but they both charge consumers a non-returnable fee and provide only mediation. In insurance, there is the industry-appointed Insurance Arbitration Commission – but this charges consumers a non-returnable fee, provides only mediation and focuses on business-to-business disputes. None of these bodies is a member of FIN-NET to cover cross-border complaints – though the Union of Banking Mediators has put itself forward as a candidate and the Association of Mediators in the Financial-Banking Field – FINBAN says it plans to apply. As recommended in 2009, consideration should be given to creating a financial ombudsman – which should adopt the standards that will enable it to become a member of FIN-NET. Slovakia The World Bank previously reviewed the financial ombudsman/ADR position in Slovakia in 2007. The Technical Note on Consumer Protection in Financial Services in Slovakia16 recommended that a financial ombudsman should be created, and should join FIN-NET. 15 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/RO_-_CPFL_Vol_I.pdf 16 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/SkCPFSVolIMainReport.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 10 In banking, at present consumers have free access to the industry-appointed Banking Ombudsman – which provides mediation and a non-binding recommendation, if the financial business is a member of the bankers association. In insurance, there is no financial ombudsman/ADR. Slovakia has no member of FIN-NET to handle cross-border complaints. As recommended in 2007, Slovakia should have a financial ombudsman – which should not be restricted to banking and which should adopt the standards that will enable it to become a member of FIN-NET. Slovenia The World Bank has not previously reviewed the financial ombudsman/ADR position in Slovenia. In banking, consumers have free access to the Banking Settlement Council, appointed by a body where half of the members come from the financial industry. It provides a non-binding recommendation. In insurance, consumers have free access to the industry-appointed Mediation Centre (providing mediation in damages claims) and Insurance Ombudsman (providing non-binding recommendations on breaches of the insurance code or good insurance practice, but not damages claims). Slovenia does not have a member of FIN-NET to handle cross-border complaints. The Banking Settlement Council, Insurance Mediation Centre and Insurance Ombudsmen have not demonstrated that they comply with Commission Recommendation 1998/257/EC. They should adopt the standards that will enable them to become members of FIN-NET (and should use the opportunity of adopting best practice from amongst their FIN-NET colleagues) or consideration should be given to establishing a financial ombudsman by law. Resolving disputes between consumers and financial businesses: Central and eastern Europe 11 Preface Consumer conditions compared This chapter shows that: consumer confidence in the CEE 10 is below average; and consumers and businesses throughout the EU find it easier to resolve disputes through ombudsmen and other ADRs rather than through the courts. The information in this chapter is from the European Consumer Conditions Scoreboard (fifth edition, published March 2011)17 and relates to all sectors, not just financial services. The European Commission publishes comparative details of conditions in the EU member states, in order to:  identify whether markets are working for consumers;  track the integration of the retail single market; and  monitor national consumer conditions. Consumer conditions index The information collected is collated into a consumer conditions index, to help estimate the impact of policies on the welfare of consumers. The latest index is for 2010. The percentage scores (against a potential maximum of 100%) were – United Kingdom 74% Hungary 57% Ireland 72% Portugal 57% Luxembourg 70% Poland 55% Austria 67% Slovenia 54% Finland 66% Latvia 54% Netherlands 66% Estonia 54% Italy 66% Cyprus 54% Germany 65% Spain 53% Denmark 63% Slovakia 53% Sweden 62% Czech Republic 52% Belgium 61% Lithuania 49% EU average 61% Greece 48% France 59% Romania 46% Malta 58% Bulgaria 42% The scoreboard shows that the consumer conditions index scores for all of the CEE 10 countries fall below the average across the EU. Confidence in consumer protection The statistics from which the consumer conditions index is calculated include the percentage of consumers who: 17 http://ec.europa.eu/consumers/strategy/docs/5th_edition_scoreboard_en.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 12  feel adequately protected by existing consumer-protection measures: and  felt they had a reason to complain but did not complain: The percentage scores (against a potential maximum of 100%) were – Consumers who feel adequately Consumers who felt they had a reason to protected by existing consumer complain but did not complain: protection measures: United Kingdom 80% Austria 5% Austria 79% Luxembourg 6% Ireland 79% Denmark 9% Denmark 72% Sweden 10% Luxembourg 71% Germany 11% Germany 69% Italy 13% Netherlands 69% Netherlands 13% Finland 68% Belgium 16% Italy 61% Portugal 16% Sweden 61% Malta 17% EU average 57% United Kingdom 17% Belgium 53% Spain 18% Portugal 53% Finland 20% Hungary 51% France 20% Slovakia 51% Slovenia 22% Malta 49% Ireland 23% Poland 49% EU average 23% Czech Republic 47% Greece 25% France 47% Cyprus 26% Cyprus 44% Czech Republic 32% Spain 44% Hungary 32% Estonia 43% Slovakia 38% Slovenia 39% Poland 40% Latvia 38% Lithuania 43% Romania 34% Latvia 50% Lithuania 33% Bulgaria 52% Greece 30% Estonia 55% Bulgaria 27% Romania 57% 80% of consumers in the UK feel adequately protected. The average across the EU is 57%. But consumers in the CEE 10 feel less well protected – suggesting that much remains to be done to increase their confidence. All the CEE 10 are below the EU average. Poland, Czech Republic and Estonia are below 50%. Slovenia, Latvia, Romania and Lithuania are below 40%. Bulgaria is below 30%. Resolving disputes between consumers and financial businesses: Central and eastern Europe 13 Consumers in the CEE 10, apart from those in Slovenia, are also less likely to complain if something goes wrong. Presumably this reflects, amongst other things, a lower level of confidence that any complaint they made would be satisfactorily resolved. Confidence in ADRs and the courts The statistics also show how easy consumers find it to resolve disputes with sellers/suppliers through ADRs or through the courts. The percentage scores (against a potential maximum of 100%) were – Consumers finding it easy to resolve Consumers finding it easy to resolve disputes with sellers/providers disputes with sellers/ providers through through ADRs: the courts: Ireland 68% United Kingdom 51% United Kingdom 67% Ireland 49% Cyprus 61% Germany 40% Austria 57% Austria 39% Finland 55% France 36% Netherlands 51% Italy 35% France 52% Luxembourg 35% Germany 52% Greece 34% Luxembourg 52% Netherlands 34% Greece 48% EU average 33% EU average 48% Belgium 30% Hungary 46% Denmark 29% Italy 46% Finland 28% Romania 44% Romania 28% Poland 43% Spain 25% Belgium 40% Poland 21% Spain 38% Czech Republic 20% Denmark 37% Malta 20% Malta 34% Sweden 20% Sweden 34% Lithuania 18% Lithuania 33% Cyprus 19% Portugal 32% Bulgaria 19% Slovenia 32% Latvia 19% Czech Republic 28% Estonia 16% Estonia 27% Slovakia 16% Slovakia 25% Portugal 15% Latvia 24% Slovenia 15% Bulgaria 23% Hungary 9% The scoreboard shows that consumers in all the CEE 10 countries find is less easy than the EU average to resolve disputes with sellers/providers either through ADR or through the courts. Resolving disputes between consumers and financial businesses: Central and eastern Europe 14 But it is notable that in every EU member state consumers find it easier to resolve disputes with sellers/providers through ADR than through the courts (irrespective of consumers’ varying levels of confidence in their national courts). Additionally, figure 40 on page 44 of the European Consumer Conditions Scoreboard shows that retailers in every EU member state also prefer ADRs to the courts as a redress mechanism for disputes with consumers. This suggests that, in the CEE 10, increasing consumer access to adequate and effective ADRs – such as ombudsmen – has a key role to play in increasing the current below-average levels of consumer confidence in various sectors, including financial services. Resolving disputes between consumers and financial businesses: Central and eastern Europe 15 Bulgaria БългариÑ? Basic information Bulgaria joined the European Union in 2007. It currently retains its national currency, with a fixed exchange rate to the Euro. It has a population of about 7.6 million. Access to financial services in 2007 was 56%, compared to an average of 91% in western Europe.18 Domestic credit provided by the banking sector in 2009 was 69.4% of GDP (compared to 157.9% for the EU as a whole).19 Information from the European Consumer Conditions Scoreboard (fifth edition, published March 2011) includes:  consumer conditions index score 42%  consumer confidence in existing consumer protection measures 27%  consumers who had a reason to complain but did not complain 52%  ease of consumers resolving disputes with sellers/ suppliers through ADRs 23%  ease of consumers resolving disputes with sellers/ suppliers through courts 19% Any previous report on resolving financial disputes The World Bank’s 2009 Diagnostic Review of Consumer Protection and Financial Capability in Bulgaria20 noted:  Consumer confidence was low compared to elsewhere in the EU. A survey on consumer protection in financial services was needed.  56% of consumers had an account with a financial business. 33% had a debit card and 9% had a credit card. 46% of household savings were in Euros.  Households had increasingly borrowed in foreign currency, mainly in Euros – with borrowing in foreign currency nearing 30% by the end of 2008.  The Consumer Protection Act (revised 2007) specified that consumers should have access to both judicial and out-of-court procedures for resolution of consumer disputes.  The constitution of Bulgaria restricted to the courts the power to make final legally-binding decisions.  Existing conciliation committees would not act if either party declined to attend. The average time for a case to be heard in court was five years, even with simple cases.  This meant that there was no effective mechanism for dispute settlement in issues related to financial services, limiting the conditions for a healthy financial market. 18 http://siteresources.worldbank.org/INTFINFORALL/Resources/4099583-1194373512632/FFA_book.pdf - pages 190/191 19 http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS 20 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/RO_-_CPFL_Vol_I.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 16 Recommendations included:  Consumer protection legislation for all financial services should be covered by the Commission for Consumer Protection (within the Ministry of Economy and Energy).  All financial businesses should be obliged to establish a clear process by which consumers could submit disputes – which should be noted in all contracts.  Consideration should be given to a financial ombudsman as a long-term solution, replacing the existing conciliation committees.  Creation of a financial ombudsman would take time, but it could have the most favourable long- term impact on financial consumer protection.  There were advantages and disadvantages to whether the ombudsman was established by the professional associations or as an independent authority established by law.  Bulgaria should join FIN-NET, the network of out-of-court schemes in the EEA responsible for handling disputes between consumers and financial businesses. Current financial ombudsman/ADR schemes The Law on Consumer Protection established regional conciliation commissions for out-of-court settlement of consumer disputes. The system is managed by the Commission for Consumer Protection – which is a collegiate authority under the Minister of Economy, Energy and Tourism.21 Conciliation commissions consist of three members – one appointed by the Commission on Consumer Protection, one professional and one consumer representative. The conciliation is not binding on the parties. The National Bank of Bulgaria says that the only out-of-court redress scheme in financial services is the Conciliation Committee for Payment Disputes (Помирителна комиÑ?иÑ? за платежни Ñ?порове). The Committee was established, under article 128 of the Law on Payment Services and Payment Systems, as part of the Commission for Consumer Protection. Article 185 of the Insurance Code requires an insurer, before concluding an insurance contract, to provide written information which includes details of any procedures for out-of-court settlement of disputes – but there is currently no ombudsman/ADR that covers insurance. The table at the end of this chapter gives fuller information on the Conciliation Committee for Payment Disputes. It is not a member of FIN-NET. Conclusions Consumers have free access to the legally-established Conciliation Commission for Payment Disputes, which provides non-binding recommendations in disputes about credit cards, loans, payment services and electronic money. There is no financial ombudsman or financial ADR for other aspects of banking or for any aspects of insurance or other financial products. Bulgaria has no member of FIN-NET to handle cross-border cases. 21 http://ec.europa.eu/consumers/overview/country_profile/BG_web_country_profile.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 17 As recommended in 2009, consideration should be given to creating a financial ombudsman – which should adopt the standards that will enable it to become a member of FIN-NET. Resolving disputes between consumers and financial businesses: Central and eastern Europe 18 Conciliation Committee for Payment Disputes (Bulgaria) Name, in national language Помирителна комиÑ?иÑ? за платежни Ñ?порове Name, in English Conciliation commission for payment disputes Website address www.kzp.bg E-mail address for enquiries Not available Phone number + 359 2 933 0577 or + 359 2 914 51277 Fax number + 359 2 988 4218 Address Sofia 1000, 4a Slaveikov Square Status / governance Type of ADR scheme Part of government consumer protection body Status Established by law Decision maker Panel of five (appointed by):  Chairman (Director of Bulgarian National Bank)  2 members (association of commercial banks)  2 members (Commission on Trade and Consumer Protection) Funding from Government Is the ADR a member of No FIN-NET? If the ADR is not a member of No reason given FIN-NET, say why Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses Must they complain to financial Yes business first? Maximum time limit for financial Time limit = 7 days business to respond Must financial business tell Yes (article 68 of the Funds Transfers, Electronic Payment complainants about the ADR? Instruments and Payment Systems Act) Must complainants pay a fee? No Types of resolution provided Recommendation, not binding on either party Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Credit cards and loans All banks in country, both national and foreign-owned Payment services All banks in country, both national and foreign-owned Electronic money All banks in country, both national and foreign-owned Resolving disputes between consumers and financial businesses: Central and eastern Europe 19 Croatia Hrvatska Basic information Croatia is on track to become a member of the European Union, having signed an accession treaty in November 2011. It retains its national currency, with a floating exchange rate to the Euro. It has a population of about 4.4 million. Access to financial services in 2007 was 42%, compared to an average of 91% in western Europe. Domestic credit provided by the banking sector in 2009 was 76.9% of GDP (compared to 157.9% for the EU as a whole).22 As Croatia is not yet an EU member, it is not yet covered by the European Consumer Conditions Scoreboard. Any previous report on resolving financial disputes The World Bank’s 2010 Diagnostic Review of Consumer Protection and Financial Literacy in Croatia23 noted:  There was no national consumer protection agency that covered all sectors, and consumer protection responsibility was not assigned to the financial regulators.  Household debt had been increasing, but lay within the range found in the EU member states that joined in 2004/2007.  The Credit Institutions Act and Consumer Protection Act both required extensive information to be provided to financial consumers.  The Consumer Credit Act had clarified and harmonised the definition of the annual percentage rate for loans, effective from January 2011.  But complaints by consumers about banks unilaterally changing interest rates were common, according to the Ministry of Finance.  ‘Bundling’ of financial products (where a consumer taking one product is tied to taking one or more linked products) was much more extensive than the norm in the EU.  The greatest weakness was the mechanism for resolving disputes. Consumers could apply to any one of nine different institutions – but none was responsible for finding a solution. Recommendations included:  Financial businesses should strengthen their internal procedures to handle complaints from retail customers.  Codes of conduct or consumer protection codes should provide guidance on how financial businesses should deal with complaints. 22 http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS 23 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/Croatia_CPFL_Vol1_English.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 20  The Croatian Banking Association’s code of banking practices should be strengthened and made into a consumer protection code.  The proposed mediation centre for the banking sector was not likely to be successful. The Insurance Bureau’s mediation centre had been more effective, and had generated respect.  Consideration should be given to establishing a financial ombudsman – and whether that should be through the professional associations or established by law.  A start could be for the Banking Association to establish an ombudsman with a governance structure like that of the Insurance Bureau’s mediation service.  The Insurance Bureau’s mediation service should extend its role to cover complaints about securities and pensions also.  Establishing a Financial Consumer Complaints Centre would give consumers a single point for enquiries and complaints.  But the most efficient approach would be to set up a single dispute-resolution mechanism for the entire financial sector. Current financial ombudsman/ADR schemes It is still the case that there is no single consumer protection agency and no central point for complaints against financial businesses. There is a very wide range of institutions involved in this sector of the market, including the:  Consumer Protection Department of the Ministry of Economy, Labour and Entrepreneurship (Ministarstvo gospodarstva, rada i poduzetniÅ¡tva);  State Inspectorate of the Republic of Croatia (Državni inspektorat Republike Hrvatske);  Croatian Financial Services Supervisory Agency (Hrvatska Agencija za nadzor Financijskih usluga);  Croatian National Bank (Hrvatska Narodna Banka);  State Agency for Deposit Insurance and Bank Rehabilitation (Državna Agencija za osiguranje Å¡tednih uloga i sanaciju banaka); and  Central Depositary and Clearing Company [dealing with disputes from the Zagreb Stock Exchange] (SrediÅ¡nje klirinÅ¡ko depozitarno druÅ¡tvo d.d.). The Croatian Chamber of Economy has a:  Mediation Centre (Centar za mirenje pri Hrvatskoj gospodarskoj komori);  Court of Honour (Sud Ä?asti pri Hrvatskoj gospodarskoj komori); and  Permanent Arbitration Court (Stalno izbrano sudiÅ¡te pri Hrvatskoj gospodarskoj komori). The banking industry association relies on a mediation centre within the employers’ association. Only mediation is provided, and consumers normally have to pay a fee (though this is waived until the end of 2011). The insurance industry association has both a mediation centre (providing mediation to both consumers and businesses) and an ombudsman (providing non-binding recommendations, limited to complaints by consumers relating to the insurance code of ethics). Resolving disputes between consumers and financial businesses: Central and eastern Europe 21 The table at the end of this chapter gives fuller information on the:  Banking Mediation Centre (Centar za mirenje u bankarstvu pri Centru za mirenje Hrvatske udruge poslodavaca);  Insurance Mediation Centre (Centar za mirenje - Hrvatski ured za osiguranje);  Insurance Ombudsman (Pravobranitelj za podruÄ?je osiguranja - Hrvatski ured za osiguranje); and  Mediation Centre at the Chamber of Economy (Centar za mirenje pri Hrvatskoj gospodarskoj komori). Croatia has not yet joined the European Union; so none of these is yet eligible to apply for membership of FIN-NET. The Chamber of Economy was accepted as an observer at FIN-NET meetings in October 2011. Conclusions In banking, all that is available to consumers is mediation. Consumers have to pay a fee for that (though the fee was being waived until the end of 2011). In insurance, consumers have free access to mediation, or to an industry-appointed ombudsman who can provide a non-binding recommendation limited to complaints about the insurance code of ethics. Croatia in not yet a member of the European Union. It is not eligible to join FIN-NET for cross-border disputes, but the Chamber of Economy was accepted as a FIN-NET observer in October 2011. As recommended in 2010, consideration should be given to establishing a financial ombudsman – which should adopt the standards that will enable it to become a member of FIN-NET. Resolving disputes between consumers and financial businesses: Central and eastern Europe 22 Banking Mediation Centre (Croatia) Name, in national language Centar za mirenje u bankarstvu pri Centru za mirenje Hrvatske udruge poslodavaca Name, in English Centre for Mediation in Banking at the Centre for Mediation of the Croatian Employers' Association Website address www.hup.hr  Centar za mirenje E-mail address for enquiries centar-za-mirenje@hup.hr Phone number +385 1 4897 557 Fax number +385 1 4897 583 Address Hrvatska udruga poslodavaca, Pavla Hatza 12, HR-10000 Zagreb Status / governance Type of ADR scheme Mediation scheme within employers’ association and in cooperation with the banking industry association Status Private, voluntary Decision maker appointed by Agreed case-by-case by the parties Funding from  Case fees paid by industry  Case fees paid by complainants (fees waived for individual consumers to the end of 2011) Is the ADR a member of FIN-NET? No If the ADR is not a member of FIN-NET, say Croatia is not yet a member of the EU why Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses Must they complain to financial business No first? Maximum time limit for financial business to No time limit respond Must financial business tell complainants No about the ADR? Must complainants pay a fee? Yes (not refunded); fee depends on amount of claim (fees waived for individual consumers to the end of 2011) Types of resolution provided Mediation Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Deposits  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country Credit cards and loans  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country  all intermediaries in country Mortgages  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country  all intermediaries in country Payment services  All banks in country, both national and foreign-owned  all other types of financial business in country Electronic money  All banks in country, both national and foreign-owned  all other types of financial business in country Non-life insurance  All insurers in country, both national and foreign-owned  all intermediaries in country Life insurance  All insurers in country, both national and foreign-owned  all intermediaries in country Packaged investments  All providers in country, both national and foreign-owned  all intermediaries in country Company stocks and shares  All companies in country, both national and foreign-owned  all intermediaries in country Resolving disputes between consumers and financial businesses: Central and eastern Europe 23 Insurance Mediation Centre (Croatia) Name, in national language Centar za mirenje - Hrvatski ured za osiguranje Name, in English Insurance Mediation Centre - Croatian Insurance Bureau Website address www.huo.hr/mirenje_frame.php E-mail address for enquiries mirenje@huo.hr Phone number + 385 1 4696 600 Fax number + 385 1 4696 664 Address Martićeva 73, HR - 10000 Zagreb Status / governance Type of ADR scheme Part of industry association Status Based on the Law on Insurance Decision maker appointed by Body with majority of members from the financial industry Funding from Levy and case fees paid by the industry Is the ADR a member of No FIN-NET? If the ADR is not a member of Croatia is not yet a member of the EU. FIN-NET, say why Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses Must they complain to financial Yes business first? Maximum time limit for financial No time limit business to respond Must financial business tell Yes complainants about the ADR? Must complainants pay a fee? No Types of resolution provided Mediation Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Non-life insurance All authorised:  insurers in country, both national and foreign-owned  intermediaries Life insurance All authorised:  insurers in country, both national and foreign-owned  intermediaries Resolving disputes between consumers and financial businesses: Central and eastern Europe 24 Insurance Ombudsman (Croatia) Name, in national language Pravobranitelj za podruÄ?je osiguranja - Hrvatski ured za osiguranje Name, in English Insurance Ombudsman - Croatian Insurance Bureau Website address www.huo.hr/index.php E-mail address for enquiries pravobranitelj@huo.hr Phone number + 385 1 4696 636 Fax number + 385 1 4696 660 Address Martićeva 73, HR - 10000 Zagreb Status / governance Type of ADR scheme Part of industry association Status Based on the Law on Insurance Decision maker appointed by Body with majority of members from the financial industry Funding from Levy paid by the industry Is the ADR a member of No FIN-NET? If the ADR is not a member of Croatia is not yet a member of the EU. FIN-NET, say why Complaints / outcomes Takes complaints from Consumers Must they complain to financial Yes business first? Maximum time limit for financial No time limit (but usually within 30 days) business to respond Must financial business tell Yes complainants about the ADR? Must complainants pay a fee? No Types of resolution provided Recommendation, not binding on either party – and limited to complaints relating to the insurance code of ethics Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Non-life insurance All authorised:  insurers in country, both national and foreign-owned  intermediaries Life insurance All authorised:  insurers in country, both national and foreign-owned  intermediaries Resolving disputes between consumers and financial businesses: Central and eastern Europe 25 Mediation Centre at the Chamber of Economy (Croatia) Name, in national language Centar za mirenje pri Hrvatskoj gospodarskoj komori Name, in English Mediation Centre at the Croatian Chamber of Economy Website address www.hgk.hr E-mail address for enquiries mirenje@hgk.hr Phone number + 385 1 48 48 622 Fax number + 385 1 48 48 625 Address Roosveltov trg 2, 10 000 Zagreb Status / governance Type of ADR scheme Professional and business association Status Established by law Decision maker appointed by Croatian Chamber of Economy Funding from Government and European Union PHARE project Is the ADR a member of FIN-NET? No If the ADR is not a member of FIN- Croatia is not yet a member of the EU NET, say why Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition) Must they complain to financial No business first? Maximum time limit for financial No time limit business to respond Must financial business tell No complainants about the ADR? Must complainants pay a fee? Yes (not refunded); fee = €150 Types of resolution provided Mediation Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Deposits  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country Credit cards and loans  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country  all intermediaries in country Mortgages  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country  all intermediaries in country Payment services  All banks in country, both national and foreign-owned  all other types of financial business in country Electronic money  All banks in country, both national and foreign-owned  all other types of financial business in country Non-life insurance  All insurers in country, both national and foreign-owned  all intermediaries in country Life insurance  All insurers in country, both national and foreign-owned  all intermediaries in country Packaged investments  All providers in country, both national and foreign-owned  all intermediaries in country Company stocks and shares  All companies in country, both national and foreign-owned  all intermediaries in country Resolving disputes between consumers and financial businesses: Central and eastern Europe 26 Czech Republic ÄŒeská Republika Basic information The Czech Republic joined the European Union in 2004. It currently retains its national currency, with a floating exchange rate to Euro. It has a population of about 10.5 million. Access to financial services in 2007 was 85%, compared to an average of 91% in western Europe. Domestic credit provided by the banking sector in 2009 was 62.4% of GDP (compared to 157.9% for the EU as a whole).24 Information from the European Consumer Conditions Scoreboard (fifth edition, published March 2011) includes:  consumer conditions index score 52%  consumer confidence in existing consumer protection measures 47%  consumers who had a reason to complain but did not complain 32%  ease of consumers resolving disputes with sellers/ suppliers through ADRs 28%  ease of consumers resolving disputes with sellers/ suppliers through courts 20% Any previous report on resolving financial disputes The World Bank’s 2007 Technical Note on Consumer Protection in Financial Services in the Czech Republic25 noted:  Supervision of banking, insurance and securities had been consolidated in the Czech National Bank.  But supervision of other providers of consumer credit lay with the Czech Trade Inspection, which lacked expertise in financial issues.  Consumers deciding to pay off loans earlier than originally agreed in the loan contract discovered prepayment penalties of up to 100% of the amount of the loan.  Advice from distribution agents was skewed by widely differing commissions and there were insufficient rules to prevent churning of insurance products.  The Czech Bankers Association had adopted a Banking Activities Standard and also the EU Code of Conduct in Mortgage Lending.  But the Banking Activities Standard was not mandatory for member banks, and the Czech Bankers Association had no enforcement powers.  The Association of Funds and Asset Management had extensive disclosure and conduct rules (enforceable on its members) and a powerful ethics committee. 24 http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS 25 http://siteresources.worldbank.org/EXTECAREGTOPPRVSECDEV/Resources/CR_CPFS_12June07.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 27  A Financial Arbiter had been created - appointed by, and reporting to, the Chamber of Deputies – and had joined FIN-NET.  But the Arbiter’s jurisdiction remained limited, covering only electronic payments in the banking sector.  The Arbiter’s independence was constrained because it had no budget, depending on the willingness of the Czech National Bank to cover its expenses. Recommendations included:  The supervisory responsibilities of the Trade Inspection in respect of consumer credit should be transferred to the National Bank.  The truthfulness and accuracy of advertising and information disclosure (before, during and after the point of sale) should be improved.  New rules were required on the knowledge and ethics of distributors of financial products, and cooling-off periods should be introduced for some products.  The Financial Arbiter should be converted into a financial ombudsman (perhaps on the UK model), with a comprehensive jurisdiction covering all areas of the financial sector.  The arbiter/ombudsman should have an independent budget, financed by the financial businesses in its jurisdiction.  The arbiter/ombudsman would also benefit from the establishment of a governing board to ensure its independent governance and accountability. Current financial ombudsman/ADR schemes The only ombudsman or ADR for financial services in the Czech Republic is the Financial Arbiter (FinanÄ?ní arbitr ÄŒeské republiky). The Arbiter has seen a number of changes:  After The World Bank’s 2007 report, the Arbiter’s jurisdiction was extended to cover most banking services.  A new law, which came into force in July 2011, made further changes. Under this law: - the Arbiter and deputy are appointed by the government, instead of the Chamber of Deputies; - funding is within the Ministry of Finance’s budget, instead of the Czech National Bank; and - the Arbiter’s jurisdiction was extended to cover consumer credit and some investments.26  The Ministry of Finance has proposed a further change, under which the Arbiter’s jurisdiction would be extended in 2012 to cover insurance, and investments covered by the European Markets in Financial Instruments Directive. The table at the end of this chapter gives fuller information on the Financial Arbiter. It is a member of FIN-NET. Conclusions In banking, consumers have free access to the legally-established Financial Arbiter – which covers payment services and (since July 2011) consumer credit and some investment products. The Arbiter provides mediation and decisions binding on the financial business and consumer. 26 The Arbiter covers collective investment products such as UCITS (an EU-defined collective investment) and unit trusts sold to the public. The Arbiter does not yet cover other packaged retail investment products. Resolving disputes between consumers and financial businesses: Central and eastern Europe 28 In insurance, there is currently no financial ombudsman/ADR – but it is hoped that the Financial Arbiter’s jurisdiction will be extended to insurance, and additional investment products. The Financial Arbiter is a member of FIN-NET to cover cross-border cases. Consideration should be given to continuing to extend the Financial Arbiter’s jurisdiction until it covers all areas of the financial sector, as recommended in 2007. Resolving disputes between consumers and financial businesses: Central and eastern Europe 29 Financial Arbiter (Czech Republic) following the July 2011 changes Name, in national language FinanÄ?ní arbitr ÄŒeské republiky Name, in English Financial Arbiter of the Czech Republic Website address www.financniarbitr.cz E-mail address for enquiries arbitr@finarbitr.cz Phone number + 420 257 042 094 Fax number + 420 221 674 666 Address Legerova 1581/69, 110 00 Praha 1 Status / governance Type of ombudsman scheme Legally separate ombudsman scheme Status Established by law Ombudsman appointed by Government Funding from State Budget, through Ministry of Finance Is the ombudsman scheme a Yes member of FIN-NET? Complaints / outcomes Takes complaints from Consumers only Must they complain to financial Yes business first? Maximum time limit for financial Time limit = 30 days (60 days in complex cases) business to respond Must business tell complainants Yes about ombudsman? Must complainants pay a fee? No Types of resolution provided  Mediation; failing which  decision – binding on both financial business and consumer Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Deposits  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country Credit cards and loans  All banks in country, both national and foreign-owned  all credit unions in country  all other types of types of financial business  all intermediaries in country Mortgages None Payment services  All banks in country, both national and foreign-owned  all other types of financial business in country Electronic money  All banks in country, both national and foreign-owned  all other types of financial business in country Non-life insurance None [but may be covered in 2012] Life insurance None [but may be covered in 2012] Investments27  All providers in country, both national and foreign-owned  all intermediaries in country 27 The Arbiter covers only collective investment products such as UCITS (an EU-defined collective investment) and unit trusts sold to the public. The Arbiter does not yet cover other packaged retail investment products, but these may be covered in 2012. Resolving disputes between consumers and financial businesses: Central and eastern Europe 30 Estonia Eesti Basic information Estonia joined the European Union in 2004. It adopted the Euro in 2011. It has a population of about 1.3 million. Access to financial services in 2007 was 86%, compared to an average of 91% in western Europe. Domestic credit provided by the banking sector in 2009 was 106.2% of GDP (compared to 157.9% for the EU as a whole). 28 Information from the European Consumer Conditions Scoreboard (fifth edition, published March 2011) includes:  consumer conditions index score 54%  consumer confidence in existing consumer protection measures 43%  consumers who had a reason to complain but did not complain 55%  ease of consumers resolving disputes with sellers/ suppliers through ADRs 27%  ease of consumers resolving disputes with sellers/ suppliers through courts 16% Any previous report on resolving financial disputes This is the first report from The World Bank regarding this topic in Estonia. Current financial ombudsman/ADR schemes The Consumer Protection Board (Tarbijakaitseamet) is the national authority for consumer protection, including: supervising the consumer market; informing and advising consumers; and settling consumer complaints. The Consumer Complaint Committee (Tarbijakaebuste Komisjoni) is an independent institution, under the Consumer Protection Act, and operates out of the Consumer Protection Board to settle disputes between consumers and sellers/providers. The Committee sits in panels comprising a chairman (an expert in consumer law) and an equal number of consumer and business representatives. All decisions of the committee are published on the Consumer Protection Board’s website. The consumer must first have complained to the business and the amount in dispute must be at least €20. The Committee’s decision is not binding. If the business does not comply, the Consumer Protection Board can, with the consumer’s consent, take the case to court. 28 http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS Resolving disputes between consumers and financial businesses: Central and eastern Europe 31 The Insurance Conciliation Body (Kindlustuse lepitusorgan) covers insurers and insurance intermediaries. It seeks to resolve complaints by mediation or recommendation. The industry chooses a panel of conciliators, and the complainant selects a conciliator from the panel. The table at the end of this chapter gives fuller information on the:  Consumer Complaint Committee; and  Insurance Conciliation Body. The Consumer Complaint Committee is a member of FIN-NET. Conclusions In both banking and insurance, consumers have free access to the legally-established Consumer Complaint Committee (provided the claim is for at least €20). The Committee provides a non-binding recommendation, and is a member of FIN-NET. In insurance, consumers have the alternative of free access to the industry-appointed Insurance Conciliation Body, which provides mediation or a non-binding recommendation. It is not a member of FIN-NET. Resolving disputes between consumers and financial businesses: Central and eastern Europe 32 Consumer Complaint Committee (Estonia) Name, in national language Tarbijakaebuste komisjon Name, in English Consumer Complaint Committee Website address www.tarbijakaitseamet.ee/index.php?id=1570 E-mail address for enquiries info@tarbijakaitseamet.ee Phone number +372 6 201 700 Fax number + 372 6 201 701 Address Rahukohtu 2, Tallinn 10130 Status / governance Type of ADR scheme Part of government consumer protection body Status Public, established by law Decision maker appointed by Chairmen are appointed jointly by the Minister of Justice and the Minister of Finance and Communication Funding from Government Is ADR a member of FIN-NET? Yes Complaints / outcomes Takes complaints from Consumers Must they complain to financial Yes business first? Maximum time limit for financial Time limit = 15 days business to respond Must financial business tell No complainants about the ADR? Must complainants pay a fee? No Types of resolution provided Recommendation, not binding on either party Maximum that can be awarded No maximum amount Minimum that can be claimed Minimum that can be claimed = € 20 Products / types of business covered Deposits  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country Credit cards and loans  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country  all intermediaries in country Mortgages  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country  all intermediaries in country Payment services  All banks in country, both national and foreign-owned  all other types of financial business in country Electronic money  All banks in country, both national and foreign-owned  all other types of financial business in country Non-life insurance  All insurers in country, both national and foreign-owned  all intermediaries in country Life insurance  All insurers in country, both national and foreign-owned  all intermediaries in country Packaged investments  All providers in country, both national and foreign-owned  all intermediaries in country Company stocks and shares  All companies in country, both national and foreign-owned  all intermediaries in country Resolving disputes between consumers and financial businesses: Central and eastern Europe 33 Insurance Conciliation Body (Estonia) Name, in national language Kindlustuse lepitusorgan Name, in English Insurance Conciliation Body Website address www.eksl.ee  Lepitusorgan E-mail address for enquiries lepitus@eksl.ee Phone number + 372 667 1800 Fax number Address Mustamäe tee 44, Tallinn 10621 Status / governance Type of ADR scheme Part of industry association Status Private Decision maker appointed by A body with a majority of members from the financial industry chooses a panel of 11 members. The complainant chooses one from that panel. Funding from Case fees paid by industry Is ADR a member of FIN-NET? No If the ADR is not a member of Other things take priority at present FIN-NET, say why Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses Must they complain to financial Yes business first? Maximum time limit for financial They must respond within a reasonable time business to respond Must financial business tell Yes complainants about the ADR? Must complainants pay a fee? No Types of resolution provided  Mediation  Recommendation, not binding on either party Maximum that can be awarded Maximum that can be awarded = €350,000 Minimum that can be claimed No minimum amount Products / types of business covered Non-life insurance  All insurers in country, both national and foreign-owned*  members of the only insurer association  all intermediaries in country [* all are members of the Estonian Insurance Association] Life insurance  All insurers in country, both national and foreign-owned*  members of the only insurer association  all intermediaries in country [* all are members of the Estonian Insurance Association] Resolving disputes between consumers and financial businesses: Central and eastern Europe 34 Hungary Magyarország Basic information Hungary joined the European Union in 2004. It currently retains its national currency with a floating exchange rate to the Euro. It has a population of about 10 million. Access to financial services in 2007 was 66%, compared to an average of 91% in western Europe. Domestic credit provided by the banking sector in 2009 was 79.9% of GDP (compared to 157.9% for the EU as a whole).29 Information from the European Consumer Conditions Scoreboard (fifth edition, published March 2011) includes:  consumer conditions index score 57%  consumer confidence in existing consumer protection measures 51%  consumers who had a reason to complain but did not complain 32%  ease of consumers resolving disputes with sellers/ suppliers through ADRs 46%  ease of consumers resolving disputes with sellers/ suppliers through courts 9% Any previous report on resolving financial disputes This is the first report from The World Bank regarding this topic in Hungary. Current financial ombudsman/ADR schemes From 1 July 2011 the Financial Arbitration Board (Pénzügyi BékéltetÅ‘ Testület), established by law, took over out-of-court settlement of disputes relating to contracts between consumers and financial businesses. Its President is appointed by the Financial Supervisory Authority. The Financial Arbitration Board covers all financial businesses supervised by the Financial Supervisory Authority – including banks, insurers, mortgage-lenders, voluntary private pension funds, occupational pension funds, voluntary mutual funds, capital market institutions, and intermediaries. If a financial business rejects a complaint from a consumer, it is required to inform the consumer of the existence of the Financial Arbitration Board. The Board provides mediation and non-binding recommendations. If both parties agree in advance, it will provide a decision binding both parties. The table at the end of this chapter gives fuller information on the Financial Arbitration Board, which is a member of FIN-NET. Before 1 July 2011 disputes between consumers and financial businesses could be considered by arbitration boards (Békéltet testület) set up by the state. The Arbitration Board of Budapest 29 http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS Resolving disputes between consumers and financial businesses: Central and eastern Europe 35 (Budapesti BékéltetÅ‘ Testület) was a member of FIN-NET, in order to provide a link with financial ombudsmen/ADRs elsewhere in the European Union for cross-border cases. But these arrangements have been superseded by the Financial Arbitration Board. Conclusions Both banking and insurance, as well as other financial services, have been covered by the Financial Arbitration Board since 1 July 2011. This was established by law and is run by the Hungarian Financial Supervisory Authority. It is a member of FIN-NET. It provides free access to consumers. It offers mediation, a non-binding recommendation and (if both parties agree in advance) a decision that is binding on both parties. Resolving disputes between consumers and financial businesses: Central and eastern Europe 36 Financial Arbitration Board (Hungary) Name, in national language Pénzügyi BékéltetÅ‘ Testület Name, in English Financial Arbitration Board Website address www.pszaf.hu/pbt E-mail address for enquiries pbt@pszaf.hu Phone number + 36 1 489 91 00 Fax number + 36 1 489 91 02 Address 39 Krisztina krt., Budapest, H-1013 Status / governance Type of ADR scheme Independent body run by the Hungarian Financial Supervisory Authority Status Public, established by law Decision-maker appointed by Regulator Funding from Regulatory budget of the state Is ADR a member of FIN-NET? Yes Complaints / outcomes Takes complaints from Consumers Must they complain to financial Yes business first? Maximum time limit for financial Time limit = 30 days business to respond Must financial business tell Yes complainants about the ADR? Must complainants pay a fee? No Types of resolution provided  Mediation  Recommendation, not binding on either party  Decision – binding on both financial business and consumer, if they agree that in advance Maximum that can be awarded No maximum limit Minimum that can be claimed No minimum amount Products / types of business covered Deposits  All banks in country, both national and foreign-owned  all credit unions in country  all other businesses in country Credit cards and loans  All banks in country, both national and foreign-owned  all credit unions in country  all other businesses in country Mortgages  All banks in country, both national and foreign-owned  all other businesses in country [Independent mortgage intermediaries not allowed in Hungary] Payment services  All banks in country, both national and foreign-owned  all other businesses in country Electronic money No institution has yet applied to issue electronic money Non-life insurance  All insurers in country, both national and foreign-owned  all independent intermediaries Life insurance  All insurers in country, both national and foreign-owned  all independent intermediaries Packaged investments  All providers in country, both national and foreign-owned [Independent investment intermediaries not allowed in Hungary] Company stocks and shares None Resolving disputes between consumers and financial businesses: Central and eastern Europe 37 Latvia Latvija Basic information Latvia joined the European Union in 2004. It currently retains its national currency, but with a fixed exchange rate to the Euro. It has a population of about 2.3 million. Access to financial services in 2007 was 64%, compared to an average of 91% in western Europe. Domestic credit provided by the banking sector in 2009 was 93.2% of GDP (compared to 157.9% for the EU as a whole).30 Information from the European Consumer Conditions Scoreboard (fifth edition, published March 2011) includes:  consumer conditions index score 54%  consumer confidence in existing consumer protection measures 38%  consumers who had a reason to complain but did not complain 50%  ease of consumers resolving disputes with sellers/ suppliers through ADRs 24%  ease of consumers resolving disputes with sellers/ suppliers through courts 19% Any previous report on resolving financial disputes A 2009 study by one of the authors of this report, as part of an EU assistance programme, noted:  Significant parts of the industry were owned by businesses from Finland, Denmark, Sweden and Germany.  Latvian law on unfair contract terms provided greater protection than the current European directive.  Despite this, some foreign-owned mortgage lenders had tried to apply (arguably unfair) penalty charges and interest-rate adjustments out of line with general movements in interest rates.  Additionally, some mortgage lenders had required consumers to provide additional security for their loan, failing which they had been told that they would have to repay the debt in full.  There was some way to go in convincing government and industry stakeholders of the importance of consumer protection and redress in financial services and consumer credit.  There was no licensing for consumer credit activities such as credit-reference agencies, debt- collection agencies and debt-advisory services.  The Ministry of Justice was likely to be sympathetic to out-of-court redress for financial services and consumer credit because of the current workload of the courts.  The industry-sponsored banking ombudsman and the industry-sponsored insurance ombudsman were not greatly used by consumers. 30 http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS Resolving disputes between consumers and financial businesses: Central and eastern Europe 38  Both charged consumers a deposit. This was returnable if their complaint was upheld, but was likely to operate as a barrier to access, especially for smaller disputes.  Neither scheme claimed to comply with European Recommendation 98/257/EC. The banking ombudsman did not cover significant areas, including mortgages.  The European directive on payment services would make the provision of ADR compulsory from 1 November 2009. Current plans envisaged using the existing banking ombudsman.  The Consumer Rights Protection Centre accepted individual consumer complaints, and could take individual or general action as a result.  But its resources for this were limited and were necessarily limited by the public funds which could be made available.  None of the current ADRs in Latvia was a member of FIN-NET – the members of which were required to comply with European Recommendation 98/257/EC. The World Bank’s 2010 Diagnostic Review of Consumer Protection and Financial Literacy in Latvia31 and 2010 Action Plan on Financial Consumer Protection in Latvia 32 noted:  Households had increasingly borrowed in Euros. By June 2009 over 88% of household loans were not in the national currency.  In addition to mortgages for house purchase, more than 60% of consumer credit was also secured by mortgages over the borrowers’ homes  Private sector surveys showed that Latvian consumers had low levels of confidence in their ability to make sound consumer finance decisions.  The Consumer Rights Protection Centre was the primary enforcement agency for consumer protection in financial services, but lacked technical expertise.  Codes of conduct had been developed by Association of Latvian Commercial Banks, the Insurance association and the Association of Leasing Companies.  The banking and insurance associations had established their own ombudsmen, but these were not seen by consumers as independent and were little-used.  The banking ombudsman dealt only with disputes about electronic payments, and the insurance ombudsman dealt only with disputes about property and motor insurance.  There were no ombudsmen for other banking products, other insurance products or other large sectors of the financial market. Recommendations included:  A small steering committee should be established to monitor implementation of the action plan, update it as necessary and coordinate further actions.  Committee members should come from the Ministry of Economy, Consumer Rights Protection Centre, Financial and Capital Market Commission, Bank of Latvia, industry and consumers.  There should be a single code of conduct for each sector, which should be approved by the relevant regulator and contain a mechanism for dealing with breaches of the code.  The industry should develop ‘key facts’ disclosure documents and standardised contractual provisions. 31 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/Latvia_CP_Vol_1_En.pdf 32 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/LV_Action_Plan_ConsultativeDraft.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 39  These should then by approved by the Consumer Rights Protection Centre and the Financial and Capital Market Commission.  All financial businesses should have a unified complaint-handling system, monitored by the Financial and Capital Market Commission.  To protect consumers from abusive practices, debt collectors should be registered and subject to legally-defined ways of operation and supervision.  The Consumer Rights Protection Centre should make sure it is legally equipped to deal with all relevant financial services complaints it receives, proposing legislative change if necessary.  The Consumer Rights Protection Centre should strengthen its interaction with those in the financial sector to increase its expertise.  The Consumer Rights Protection Centre should strengthen its international contacts. Latvia should join FIN-NET.  The Consumer Rights Protection Centre and the Financial and Capital Market Commission should continue their ‘name and shame’ policy, with better use of websites.  By 2012 or 2013, when there is more experience with the other consumer protection activities, consideration should be given to establishing a financial ombudsman by law.  Such an ombudsman (as found in the UK and Ireland) can play a powerful role in dealing with complaints while building consumer confidence in financial services.  Meanwhile, in respect of any industry-specific ombudsmen, the state should focus on ensuring their independence, low cost for consumers and power to bind financial businesses. In relation to progress on the action plan, the Consumer Rights Protection Centre says:  The steering committee has been established.  A law has been adopted on the licensing of non-bank credit institutions.  The Centre has been allocated a limited number of staff to deal with the licensing.  A draft law on debt collection agencies is in process of adoption.  The Centre has had several meetings with the Association of Commercial Banks.  There is little progress on improving the independence or scope of the banking ombudsman. Current financial ombudsman/ADR schemes The Consumer Rights Protection Centre (PatÄ“rÄ“tÄ?ju TiesÄ«bu AizsardzÄ«bas Centrs) is still limited by the resources that are available to it. It is primarily a supervisory institution – rather than a complaints- handler, especially in financial services. In financial services it does not take decisions on individual cases, though individual complaints may spur more general action in relation to a financial business, which may also result in the resolution of the individual problem. There is a Banking Ombudsman (Latvijas Komercbanku asociÄ?cijas ombuds) and an Insurance Ombudsman (Latvijas ApdroÅ¡inÄ?tÄ?ju asociÄ?cija Ombuds). Both of these are based within industry associations. They are not widely used and consumers are not convinced of their impartiality. The Consumer Rights Protection Centre has been encouraging the Association of Commercial Banks to improve the banking ombudsman scheme – but without success so far. Resolving disputes between consumers and financial businesses: Central and eastern Europe 40 The Motor Insurers’ Bureau (Latvijas TransportlÄ«dzekļu apdroÅ¡inÄ?tÄ?ju birojs), which is established by law but forms part of the insurance industry association, handles disputes between third-parties and insurers in relation to motor third-party liability insurance The tables at the end of this chapter give fuller information on the:  Consumer Rights Protection Centre;  Banking Ombudsman;  Insurance Ombudsman; and  Motor Insurers’ Bureau. None of the four is a member of FIN-NET. The Latvian government has confirmed to the European Commission that the Consumer Rights Protection Centre complies with Commission Recommendation 98/257/EC, but the Centre says this was primarily in relation to conformity of products. The Consumer Rights Protection Centre does not consider that, in financial services, it is as prompt as the Recommendation requires – because its actions are subject to appeal to the courts, so that the whole process can take some years. The Consumer Rights Protection Centre does not consider that it would be a suitable representative for Latvia in FIN-NET, because of its limited role in relation to individual disputes. It believes that the appropriate way forward is to improve the Banking Ombudsman and Insurance Ombudsman, including ensuring that they comply with Commission Recommendation 98/257/EC, and for those ombudsmen then to join FIN-NET. Conclusions The government-appointed Consumer Rights Protection Centre has a very limited role in relation to individual disputes. In banking and insurance, there are industry-appointed ombudsmen – which provide non-binding recommendations. But consumers appear to doubt the impartiality of these ombudsmen and seldom use them – and both of them charge consumers a fee (though this is refunded if the consumer wins). The industry-based Motor Insurers’ Bureau provides non-binding recommendations in disputes between third parties and motor third-party liability insurers. Latvia has no member of FIN-NET to handle cross-border disputes. The Consumer Rights Protection Centre complies with Commission Recommendation 1998/257/EC, but does not propose to join FIN-NET – because of the Centre’s limited role in individual disputes. The banking and insurance ombudsmen have not demonstrated that they comply with Commission Recommendation 1998/257/EC. The existing banking and insurance ombudsmen should adopt the standards that will enable them to become members of FIN-NET – or as recommended in 2010, consideration should be given to establishing a financial ombudsman by law. Resolving disputes between consumers and financial businesses: Central and eastern Europe 41 Consumer Rights Protection Centre (Latvia) Name, in national language PatÄ“rÄ“tÄ?ju TiesÄ«bu AizsardzÄ«bas Centrs Name, in English Consumer Rights Protection Centre Website address www.ptac.gov.lv E-mail address for enquiries ptac@ptac.gov.lv Phone number + 371 67 388 624 Fax number + 371 67 388 634 Address K.Valdemara 157, Riga, LV- 1013 Status / governance Type of ADR scheme Part of government consumer protection body Status Public Decision maker appointed by Government Funding from Government Is the ADR a member of No FIN-NET? If the ADR is not a member of Does not directly deal with individual disputes FIN-NET, say why Complaints / outcomes Takes complaints from Consumers Must complainant complain to Yes financial business first? Maximum time limit for financial No time limit business to respond Must financial business tell No complainants about ADR? Must complainants pay a fee? No Types of resolution provided Recommendation, not binding on either party Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Deposits  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country Credit cards and loans  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country  all intermediaries in country Mortgages  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country  all intermediaries in country Payment services  All banks in country, both national and foreign-owned  all other types of financial business in country Electronic money  All banks in country, both national and foreign-owned  all other types of financial business in country Non-life insurance  All insurers in country, both national and foreign-owned  all intermediaries in country Life insurance  All insurers in country, both national and foreign-owned  all intermediaries in country Packaged investments  All providers in country, both national and foreign-owned  all intermediaries in country Company stocks and shares None Resolving disputes between consumers and financial businesses: Central and eastern Europe 42 Banking Ombudsman (Latvia) Name, in national language Latvijas Komercbanku asociÄ?cijas ombuds Name, in English Ombudsman of the Association of Commercial Banks of Latvia Website address http://www.bankasoc.lv E-mail address for enquiries aivars@bankasoc.lv Phone number + 371 67 284 562 Fax number + 371 67 828 170 Address Perses street 9/11, Riga, LV-1011 Status / governance Type of ombudsman scheme Part of industry association Status Private Ombudsman appointed by President of the Association of Commercial Banks of Latvia Funding from Court of Arbitration of the Association of Commercial Banks of Latvia Is the ombudsman scheme a No member of FIN-NET? If the ombudsman scheme is not  Too few complaints, and none cross-border yet a member of FIN-NET, say why  Does not comply with Recommendation 98/257/EC Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses Must they complain to financial Yes business first? Maximum time limit for financial Time limit = 10 days business to respond Must financial business tell No complainants about ombudsman? Must complainants pay a fee? Yes (refunded if complainant wins); fee = € 21.34 Types of resolution provided Recommendation, not binding on either party Maximum that can be awarded Maximum that can be awarded = € 50,000 Minimum that can be claimed No minimum amount Products / types of business covered Deposits None Loans None Mortgages None Credit cards All banks in country, both national and foreign-owned Payment services All banks in country, both national and foreign-owned Electronic money All banks in country, both national and foreign-owned Resolving disputes between consumers and financial businesses: Central and eastern Europe 43 Insurance Ombudsman (Latvia) Name, in national language Latvijas ApdroÅ¡inÄ?tÄ?ju asociÄ?cija Ombuds Name, in English Latvian Insurers Association Ombudsman Website address www.laa.lv E-mail address for enquiries office@laa.lv Phone number + 371 67 360 898 Fax number + 371 67 360 838 Address 6 Biekensalas street, office 218, Riga, LV-1004 Status / governance Type of ombudsman scheme Part of industry association Status Private Ombudsman appointed by Body with majority of members from financial businesses Funding from Case fees paid by financial businesses Is the ombudsman scheme a Not yet, but would like to join member of FIN-NET? If the ombudsman scheme is not a Does not comply with Recommendation 98/257/EC member of FIN-NET, say why Complaints / outcomes Takes complaints from Consumers Must complainant complain to Yes financial business first? Maximum time limit for financial Time limit = 1 month business to respond Must financial business tell No complainants about ombudsman? Must complainants pay a fee? Yes (refunded if complainant wins): fee = €30 to €300 Types of resolution provided Recommendation, not binding on either party Maximum that can be awarded Maximum that can be awarded = life insurance: €2,857 travel insurance: €2,857 motor vehicle insurance: €28,571 property insurance: €142,857 Minimum that can be claimed No minimum amount Products / types of business covered Non-life insurance  all insurers in country, both national and foreign-owned;  but not intermediaries Life insurance  all insurers in country, both national and foreign-owned;  but not intermediaries Packaged investments None Company stocks and shares None Resolving disputes between consumers and financial businesses: Central and eastern Europe 44 Motor Insurers’ Bureau (Latvia) Name, in national language Latvijas TransportlÄ«dzekļu apdroÅ¡inÄ?tÄ?ju birojs Name, in English Motor Insurers' Bureau of Latvia Website address www.ltab.lv E-mail address for enquiries ltab@ltab.lv Phone number + 371 67 114 300 Fax number + 371 67 114 333 Address 9 Lomonosova street, Riga, LV-1019 Status / governance Type of ADR scheme Part of industry association Status Established by law Decision-maker appointed by Body with majority of members from financial industry Funding from Insurance industry Is the ADR scheme a member of No FIN-NET? If the ADR scheme is not a Does not comply with Recommendation 98/257/EC member of FIN-NET, say why Complaints / outcomes Takes complaints from Motor liability third party  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses  Insurance companies Must complainant complain to No financial business first? Maximum time limit for financial No time limit business to respond Must financial business tell No complainants about the ADR? Must complainants pay a fee? No Types of resolution provided Recommendation, not binding on either party Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Motor third-party liability All insurers in country, both national and foreign-owned, that are insurance authorised to issue motor third party liability insurance Resolving disputes between consumers and financial businesses: Central and eastern Europe 45 Lithuania Lietuva Basic information Lithuania joined the European Union in 2004. It currently retains its national currency, but with a fixed exchange rate to the Euro. It has a population of about 3.3 million. Access to financial services in 2007 was 70%, compared to an average of 91% in western Europe. Domestic credit provided by the banking sector in 2009 was 69.3% of GDP (compared to 157.9% for the EU as a whole). 33 Information from the European Consumer Conditions Scoreboard (fifth edition, published March 2011) includes:  consumer conditions index score 49%  consumer confidence in existing consumer protection measures 33%  consumers who had a reason to complain but did not complain 43%  ease of consumers resolving disputes with sellers/ suppliers through ADRs 33%  ease of consumers resolving disputes with sellers/ suppliers through courts 18% Any previous report on resolving financial disputes A 2005 study by one of the authors of this report, as part of an EU assistance programme, noted:  Lithuanian consumers lacked confidence in financial services – resulting, for example, from loss of deposits shortly after Lithuania regained its independence.  Access to out-of-court redress could be a significant factor in developing consumer confidence in, and use of, financial services – both within Lithuania and cross-border.  Redress was currently provided through the Insurance Supervisory Commission (for insurance) and the State Consumer Rights Protection Authority (for other financial services).  Both were state bodies, established by law, independent of financial businesses and consumers. Their decisions were advisory, not binding.  The Insurance Supervisory Commission’s redress scheme was virtually ready for membership of FIN-NET, but required some modifications to its rules.  The State Consumer Rights Protection Authority’s redress scheme was working towards being ready for membership of FIN-NET, but had a little further to go.  Some modifications were required to its draft law, and it would need to develop technical expertise in financial services.  It would be helpful to harmonise discrepancies between the basis of decision and time limits used by the Insurance Supervisory Commission and the State Consumer Rights Protection Authority. 33 http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS Resolving disputes between consumers and financial businesses: Central and eastern Europe 46  The Lithuanian Banking Association was developing its thinking about creating an ombudsman scheme. But there were no draft rules yet available for inspection.  There were two, and potentially three, bodies operating in a comparatively small market place – whereas the trend elsewhere was towards a single body with comprehensive jurisdiction.  It would be helpful if the financial industry were to develop codes of conduct, to promote fair competition and provide greater clarity on good practice for financial businesses and consumers.  It would be preferable if the financial industry were to consult consumers and the State Consumer Rights Protection Authority on the contents of the codes. The World Bank’s 2009 Diagnostic Review of Consumer Protection and Financial Literacy in Lithuania34 noted:  The key financial supervisory agencies were in place and had established basic rules of market conduct for business with retail customers.  The State Consumer Rights Protection Authority had been established. It covered the field of financial services and was a member of FIN-NET.  But it had power only to make recommendations. If these were ignored, it could publish the fact, but this appeared to have minimal impact.  Additionally, the Insurance Supervisory Commission had powers, under insurance law, to enforce consumer protection issues in insurance.  The Bank of Lithuania, as regulator of credit institutions, had no authority over disputes between consumers and banks.  Consumers had increased their use of financial services and would need a strengthened consumer protection framework.  Household exposure to Euros (through borrowing etc) was twice the exposure to the national currency. Recommendations included:  The financial professional associations should develop a format for simple and standard ‘key facts’ disclosures for each major retail product, subject to review by the financial regulatory bodies.  The financial professional associations should develop codes of conduct, subject to review by the State Consumer Rights Protection Authority and the financial regulatory bodies.  The codes of conduct should include guidelines for the time limits within which financial businesses should respond to complaints.  All financial businesses should be obliged to have a designated official, or department, responsible for receiving consumer complaints.  It would be helpful if the Consumer Protection Law were amended to enable the State Consumer Rights Protection Authority to create a coordinating forum with the financial regulatory bodies.  The State Consumer Rights Protection Authority should be given legal authority to make decisions binding on financial businesses.  The Insurance Supervisory Commission should retain its consumer protection role in insurance while the State Consumer Rights Protection Authority increases its capacity and expertise. 34 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/Lithuania_CP_Vol1_En.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 47  The Insurance Supervisory Commission should be given legal authority to make decisions binding on insurance businesses.  The State Consumer Rights Protection Authority could be the central point for receiving all complaints, passing insurance ones to the Insurance Supervisory Commission at present.  At a later stage, consumer protection in insurance should pass from the Insurance Supervisory Commission to the State Consumer Rights Protection Authority.  In the longer term, the State Consumer Rights Protection Authority was likely to become overwhelmed and consideration should be given to establishing a statutory financial ombudsman.  Based on experience elsewhere, a proactive financial ombudsman could build public confidence in financial services and increase the use of financial services by retail customers. Current financial ombudsman/ADR schemes The Insurance Supervisory Commission (Draudimo priežiÅ«ros komisija) covers consumer complaints about insurance. The State Consumer Rights Protection Authority (ValstybinÄ— vartotojų teisių apsaugos tarnyba) covers the rest of financial businesses. It is currently projected that, probably from 1 January 2012, supervision of the entire financial market will pass to the Bank of Lithuania. The Insurance Supervisory Commission, and the Securities Commission, will cease to exist as separate institutions. The arrangements for consumer complaints have not yet been decided. Options under consideration include all consumer complaints about financial businesses going to:  the State Consumer Rights Protection Authority;  the Bank of Lithuania; or  a newly-established financial ombudsman. The tables at the end of this chapter give fuller information on the existing consumer complaints arrangements of the:  State Consumer Rights Protection Authority; and  Insurance Supervisory Commission. The State Consumer Rights Protection Authority is a member of FIN-NET. The Insurance Supervisory Commission not a member. Conclusions In banking, consumers have free access to the government-appointed State Consumer Rights Protection Authority – which provides mediation, non-binding recommendations and decisions that are binding on both parties. It is a member of FIN-NET, for cross-border disputes. In insurance, consumers have free access to the government-appointed Insurance Supervisory Commission – which provides mediation and non-binding recommendations. It is not a member of FIN-NET. As a result of forthcoming changes to the regulatory arrangements, expected in 2012, the arrangements for out-of-court redress may change. But the position has not yet been decided. Resolving disputes between consumers and financial businesses: Central and eastern Europe 48 As recommended in 2009, if out-of-court redress remains with the State Consumer Rights Protection Authority, it should be given the necessary powers and resources – or consideration should be given to creating a financial ombudsman, which should adopt the standards that would enable it to become a member of FIN-NET. Resolving disputes between consumers and financial businesses: Central and eastern Europe 49 State Consumer Rights Protection Authority (Lithuania) Name, in national language ValstybinÄ— vartotojų teisių apsaugos tarnyba Name, in English State Consumer Rights Protection Authority Website address www.vvtat.lt E-mail address for enquiries tarnyba@vvtat.lt Phone number +370 5 262 6751 Fax number +370 5 279 1466 Address Vilniaus str. 25, Vilnius Status / governance Type of ombudsman scheme Part of government consumer protection body Status Public, established by law Decision maker appointed by Government Funding from Government Is the ADR a member of Yes FIN-NET? Complaints / outcomes Takes complaints from Consumers Must complainant complain to No financial business first? Must financial business tell Yes complainants about ADR? Must complainants pay a fee? No Types of resolution provided  Mediation  Recommendation, not binding on either party  Decision – binding on both financial business and consumer Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Deposits  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country Credit cards and loans  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country  all intermediaries in country Mortgages  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country  all intermediaries in country Payment services  All banks in country, both national and foreign-owned  all other types of financial business in country Electronic money  All banks in country, both national and foreign-owned  all other types of financial business in country Non-life insurance None Life insurance None Packaged investments None Company stocks and shares None Resolving disputes between consumers and financial businesses: Central and eastern Europe 50 Insurance Supervisory Commission – complaints (Lithuania) until 31 December 2011 Name, in national language Draudimo priežiÅ«ros komisija Name, in English Insurance Supervisory Commission Website address www.dpk.lt E-mail address for enquiries dandriukaitis@dpk.lt Phone number + 370 5243 1370 Fax number + 370 5272 3689 Address UkmergÄ—s g. 222, LT-07157 Vilnius Status / governance Type of ADR Part of financial regulator Status Public, established by law Decision maker appointed by Government Funding from Government and levy paid by industry Is the ADR a member of No FIN-NET? If the ADR is not a member of Does not comply with Recommendation 98/257/EC FIN-NET, say why Complaints / outcomes Takes complaints from Consumers Must complainant complain to Yes financial business first? Maximum time limit for financial Time limit = 2 month business to respond Must financial business tell Yes complainants about the ADR? Must complainants pay a fee? No Types of resolution provided  Mediation  Recommendation, not binding on either party Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Non-life insurance All insurers in country, both national and foreign-owned Life insurance All insurers in country, both national and foreign-owned Resolving disputes between consumers and financial businesses: Central and eastern Europe 51 Poland Polska Basic information Poland joined the European Union in 2004. It currently retains its national currency, with a floating exchange rate to the Euro. It has a population of about 38.1 million. Access to financial services in 2007 was 66%, compared to an average of 91% in western Europe. Domestic credit provided by the banking sector in 2009 was 61.5% of GDP (compared to 157.9% for the EU as a whole). 35 Information from the European Consumer Conditions Scoreboard (fifth edition, published March 2011) includes:  consumer conditions index score 55%  consumer confidence in existing consumer protection measures 49%  consumers who had a reason to complain but did not complain 40%  ease of consumers resolving disputes with sellers/ suppliers through ADRs 43%  ease of consumers resolving disputes with sellers/ suppliers through courts 21% Any previous report on resolving financial disputes This is the first report from The World Bank regarding this topic in Poland. Current financial ombudsman/ADR schemes There is a wide range of ADRs in Poland:  local consumer ombudsmen;  insurance ombudsman;  arbitration for insurance;  banking ombudsman;  arbitration through the financial regulator; and  regional arbitration. Local consumer ombudsmen (owiatowy/miejski rzecznik konsumentów) operate within the structure of local government, covering all consumer sectors – though seldom financial services. They operate informally without special procedures, but their recommendations are often accepted by businesses. The Insurance Ombudsman (Rzecznik Ubezpieczonych) investigates cases and makes non-binding recommendations. If the financial business does not accept the recommendation, the ombudsman will issue a legal opinion that the consumer can produce in the Arbitration Court. 35 http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS Resolving disputes between consumers and financial businesses: Central and eastern Europe 52 The Arbitration Court at the Insurance Ombudsman (SÄ…d Polubowny przy Rzeczniku Ubezpieczonych) resolves disputes about insurance contracts, open pension funds contracts and employee pension programmes. But the costs are quite high, coming close to those in the courts. The Permanent Consumer Arbitration Courts (StaÅ‚e Polubowne SÄ…dy Konsumenckie) operate within the Regional Comptroller of Trade Inspection and comprise 31 regional arbitration courts. They cover all consumer sectors. The Arbitration Court at the Polish Financial Supervision Authority (SÄ…d Polubowny przy Komisji Nadzoru Finansowego) covers banking (including mortgages, payment services and electronic money) and insurance, but requires the consumer to pay a fee of €62. The Arbitration Court at the Polish Financial Supervision Authority, the Permanent Consumer Arbitration Courts and the Arbitration Court at the Insurance Ombudsman are seldom used. They only have jurisdiction if both the parties agree, and financial businesses seldom do. If both the parties do agree to arbitration, the decisions are as binding as those of the civil courts and there is no appeal – though a party may apply to the civil courts for the decision to be annulled if it was issued in violation of the law. The Banking Ombudsman (Arbiter Bankowy) deals with disputes between consumers and members of the Alliance of Polish Banks (ZwiÄ…zek Banków Polskich) and six co-operative banks that have agreed to be covered by the banking ombudsman. The Banking Ombudsman is a lawyer, appointed by the Alliance of Polish Banks. The ombudsman’s decisions are binding on the bank, but the consumer may refer the case to court instead. The tables at the end of this chapter give fuller information on the:  Arbitration Court at the Polish Financial Supervision Authority;  Banking Ombudsman; and  Insurance Ombudsman. All three are members of FIN-NET. In relation to the Banking Ombudsman there are ongoing discussions about:  extending coverage to include also payment services providers other than banks;  accepting complaints from small and medium-sized enterprises, as well as consumers; and  increasing the maximum of €2,000 that can be awarded. Conclusions In banking, consumers have access to the industry-appointed Banking Ombudsman, which provides a decision that binds the financial business but not the consumer. Consumers must pay a fee of €12.50, which is refunded if they win. In insurance, consumers have free access to the government-appointed Insurance Ombudsman, which provides a non-binding recommendation – with the possibility, at some cost, of going on to arbitration. In both banking and insurance, consumers have the alternative of access to the Arbitration Court at the Financial Supervisory Authority, which provides mediation and decisions binding on both parties. Consumers must pay a fee of €62.00, which is refunded if they win. Resolving disputes between consumers and financial businesses: Central and eastern Europe 53 The Banking Ombudsman, Insurance Ombudsman and Arbitration Court at the Financial Supervisory Authority are all members of FIN-NET to handle cross-border disputes. Resolving disputes between consumers and financial businesses: Central and eastern Europe 54 Arbitration Court at Financial Supervision Authority (Poland) Name, in national language SÄ…d Polubowny przy Komisji Nadzoru Finansowego Name, in English Arbitration Court at the Financial Supervision Authority Website address www.knf.gov.pl/regulacje/Sad_Polubowny/index.html E-mail address for enquiries sad.polubowny@knf.gov.pl Phone number + 48 222 624 054 Fax number Address Plac PowstaÅ„ców Warszawy 1, 00-380 Warszawa Status / governance Type of ADR scheme Part of financial regulator Status Public Decision maker appointed by Regulator Funding from Regulator, and case fees paid by complainants Is ADR a member of FIN-NET? Yes Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses Must they complain to financial No business first? Maximum time limit for financial No time limit business to respond Must financial business tell No complainants about the ADR? Must complainants pay a fee? Yes (refunded if complainant wins); fee = €62 Types of resolution provided  Mediation  Decision – binding on both financial business and consumer Maximum that can be awarded No maximum amount Minimum that can be claimed Minimum that can be claimed = €125 Products / types of business covered Deposits  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country Credit cards and loans  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country  all intermediaries in country Mortgages  All banks in country, both national and foreign-owned  all credit unions in country  all other types of financial business in country  all intermediaries in country Payment services  All banks in country, both national and foreign-owned  all other types of financial business in country Electronic money  All banks in country, both national and foreign-owned  all other types of financial business in country Non-life insurance  All insurers in country, both national and foreign-owned  all intermediaries in country Life insurance  All insurers in country, both national and foreign-owned  all intermediaries in country Packaged investments None Company stocks and shares None Resolving disputes between consumers and financial businesses: Central and eastern Europe 55 Banking Ombudsman (Poland) Name, in national language Arbiter Bankowy Name, in English Banking Ombudsman Website address www.zbp.pl/arbiter E-mail address for enquiries arbiter@zbp.pl Phone number +48 224 868 400 Fax number Address ul. Kruczkowskiego 8, 00-380 Warszawa Status / governance Type of ombudsman scheme Part of industry association Status Private Ombudsman appointed by Body with majority of members from financial industry Funding from  Levy paid by industry  case fees paid by complainants Is the ombudsman scheme a Yes member of FIN-NET? Complaints / outcomes Takes complaints from Consumers Must they complain to financial Yes business first? Maximum time limit for financial Time limit = 14 days business to respond Must financial business tell No complainants about the ADR? Must complainants pay a fee? Yes (refunded if complainant wins); fee = € 12.50 Types of resolution provided Decision - binding on financial business, but not on consumer Maximum that can be awarded Maximum that can be awarded = € 2,000 Minimum that can be claimed No minimum amount Products / types of business covered Deposits Members of the only bank association and volunteer banks Credit cards and loans Members of the only bank association and volunteer banks Mortgages Members of the only bank association and volunteer banks Payment services Members of the only bank association and volunteer banks Electronic money Members of the only bank association and volunteer banks Resolving disputes between consumers and financial businesses: Central and eastern Europe 56 Insurance Ombudsman (Poland) Name, in national language Rzecznik Ubezpieczonych Name, in English The Polish Insurance Ombudsman Website address www.rzu.gov.pl E-mail address for enquiries m.wiecko@rzu.gov.pl Phone number + 48 223 337 328 Fax number + 48 223 337 329 Address Aleje Jerozolimskie 44, 00-024 Warszawa Status / governance Type of ombudsman scheme Legally separate ombudsman scheme Status Established by law Ombudsman appointed by Government Funding from Levy paid by industry Is the ombudsman scheme a Yes member of FIN-NET? Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses Must they complain to financial No business first? Maximum time limit for financial Time limit = 30 days business to respond Must financial business tell No complainants about the ADR? Must complainants pay a fee? No Types of resolution provided Recommendation, not binding on either party Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Non-life insurance  All insurers in country, both national and foreign-owned  all intermediaries in country Life insurance  All insurers in country, both national and foreign-owned  all intermediaries in country Packaged investments None Company stocks and shares None Resolving disputes between consumers and financial businesses: Central and eastern Europe 57 Romania România Basic information Romania joined the European Union in 2007. It currently retains its national currency. It has a population of about 21.5 million. Access to financial services in 2007 was 23%, compared to an average of 91% in western Europe. Domestic credit provided by the banking sector in 2009 was 52.7% of GDP (compared to 157.9% for the EU as a whole).36 Information from the European Consumer Conditions Scoreboard (fifth edition, published March 2011) includes:  consumer conditions index score 46%  consumer confidence in existing consumer protection measures 34%  consumers who had a reason to complain but did not complain 57%  ease of consumers resolving disputes with sellers/ suppliers through ADRs 44%  ease of consumers resolving disputes with sellers/ suppliers through courts 28% Any previous report on resolving financial disputes The World Bank’s 2010 Analysis of the Financial Literacy Survey in Romania37 noted a low level of financial literacy – equivalent to 31 on a scale from 0 to 100. The World Bank’s 2009 Diagnostic Review of Consumer Protection and Financial Literacy in Romania38 noted:  The rapid expansion of lending (more than half in foreign currency) and other financial services highlighted the need for strong consumer protection.  A common complaint concerned the lack of transparency in relation to fees, charges and commissions – and lack of notice of later changes in fees and charges.  Most banks had internal procedures for dealing with consumer complaints, but these were neither published nor well-publicised – and outcomes were not recorded.  The National Authority for Consumers’ Protection covered consumer protection in all sectors of the economy, although its expertise in financial issues was limited.  The banking and securities regulators left the resolution of consumer complaints to the National Authority for Consumers’ Protection and to the courts.  By contrast, the insurance and private pensions regulators tried to resolve consumer complaints by non-binding recommendations. 36 http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS 37 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/Romania_Financial_Literacy_June_2010.pdf 38 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/RO_-_CPFL_Vol_I.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 58  Romania had no system of small-claims courts for dealing more quickly and informally with disputes about smaller amounts.  A Special Projects Initiative (SPI) had been established as a public-private partnership with support from The World Bank and partly funded by Italy.  The SPI undertook projects on consumer protection and financial literacy, including producing proposals for a financial ombudsman (with input from one of the authors of this report).39  An economic impact study by SPI showed that an ombudsman would provide net positive benefit to the banking sector.  Establishment of a financial ombudsman by the Association of Romanian Banks would prompt the adoption of an industry code of conduct. Recommendations included:  An efficient means of resolving consumer complaints lies at the heart of consumer confidence in the financial sector.  The National Authority for Consumers’ Protection should establish a separate department or unit to deal with financial services issues.  Consideration should also be given to the possible creation of a special financial consumer protection agency.  The professional associations should be encouraged to develop consumer protection codes for each segment of the financial sector.  The financial regulators should require all financial businesses to have clear procedures (with time limits) for handling and resolving consumer complaints.  A financial ombudsman or other similar procedure should be put in place to strengthen confidence of consumers in using financial services. It should become a member of FIN-NET.  As a first step, ombudsmen could be established by the professional associations. If this did not prove sufficiently effective, consideration should be given to establishing an ombudsman by law. Current financial ombudsman/ADR schemes There are six out-of-court redress schemes in financial services that are said to be operating, or being created:  for cross-border transfers only, the National Bank of Romania, Legal Department (Banca NaÅ£ională a României, DirecÅ£iei Juridice)  Banking Mediator [ombudsman] (Mediatorul Bancar);  Union of Banking Mediators (Uniunea Mediatorilor Bancari din România);  Association of Mediators in the Financial-Banking Field – FINBAN (Asociatia de mediatori din Domeniul Financiar Bancar – FINBAN);  Insurance Arbitration Commission (Comisia de Arbitraj în domeniul asigurarilor si reasigurarilor de pe lânga Uniunea Nationala a Societatilor de Asigurare si Reasigurare din Romania); and 39 www.spi-romania.eu/admin/filemanager/files/program2007/c__background_study.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 59  Bucharest Stock Exchange Arbitration Court (Camerei Arbitrale a Bursei de Valori Bucuresti S.A). Some of these have not responded to requests for information about the bodies and their work. So the information in this section is supplemented by details from:  ‘Mediation of disputes related to cross-border transfers’ on the website of the National Bank of Romania;40  the Director of the European Consumer Centre in Romania (Centrul European al Consumatorilor din Romania);  a March 2011 presentation on ADR in financial services in Romania by Professor Carmen Bălan of the Academy of Economic Studies, Faculty of Marketing, Bucharest;  a Romanian member of the European Union’s Financial Services User Group; and  the Mediation Council (Consiliul de mediere) with which 67 mediation bodies are registered. The Mediation Council is a public-interest body based in Bucharest. It promotes mediation, develops standards for mediation training, authorises mediators, represents the interests of authorized mediators, produces a code of ethics and proposes improvements to the regulation of mediation. The courts in Romania now recommend consumers to use mediation before beginning court proceedings. Mediation is covered by Law 192/2006, which came into effect in 2008. In 2008, following on from the SPI (referred to in the previous section of this chapter), the National Bank of Romania approved a proposal by the Romanian Banking Association (AsociaÅ£ia Română a Băncilor) to create a banking ombudsman. The banking ombudsman was to be established (as a private, voluntary and independent system) by the banking association acting in partnership with the National Consumer Protection Authority (ANPC), the National Bank of Romania and the Ministry of Economic Affairs and Finance. The Romanian Banking Association registered the name Mediatorul Bancar with the State Office for Inventions and Trademarks – hence using terminology which may confuse consumers about the difference between mediation and the wider role of an ombudsman. In 2009, the Union of Banking Mediators (Uniunea Mediatorilor Bancari din România) was established by a group of mediators – as a completely separate initiative from the Mediatorul Bancar. The Union of Banking Mediators is prepared to provide mediation in relation to claims made by customers, by banks or between bank employees. Claims by customers (whether individuals or companies) may include all the usual sorts of complaints brought by customers against banks plus ‘unjustified registration as bad debtor with the Central Register of Banking Risks and with the Credit Bureau.’ Claims by banks may include: late payment; non-payment; threatening, insulting, slandering or striking bank employees; ‘denigration of bank in mass media by customers’; and ‘registration of unjust complaints with the National Authority for Consumer Protection and the National Bank of Romania.’ In 2010 the Romanian Banking Association published a short statement saying that the Union of Banking Mediators was not its initiative, and that it was continuing its efforts to establish an out-of- 40 www.bnr.ro/Mediation-of-disputes-related-to-cross-border-transfers-3312.aspx Resolving disputes between consumers and financial businesses: Central and eastern Europe 60 court redress scheme that would be recognised by the banking industry and provide an appropriate level of professionalism and knowledge. Later in 2010, according to the Mediation Council, the Romanian Banking Association encouraged the establishment of the Association of Mediators in the Financial-Banking Field – FINBAN (Asociatia de mediatori din Domeniul Financiar Bancar – FINBAN). The Council says that FINBAN was established by a number of mediators with relevant industry knowledge – being former bankers – and is recommended by the Romanian Banking Association as the first option for mediation. FINBAN has published procedures for consumers in relation to mediation of claims against banks and other financial businesses. It is also helping financial businesses to organise their internal arrangements for handling consumer complaints. The tables at the end of this chapter give fuller information on the:  National Bank of Romania, Legal Department;  Union of Banking Mediators;  Association of Mediators in the Financial-Banking Field – FINBAN;  Insurance Arbitration Commission; and  Bucharest Stock Exchange Arbitration Court. According to the experience of the European Consumer Centre in Romania, ADR is seldom used in Romania and consumers are reluctant to pay for the mediation. The work of the Insurance Arbitration Commission and the Bucharest Stock Exchange Arbitration Court appears to focus on disputes between one financial business and another, rather than disputes between consumers and financial businesses. None of these bodies is a member of FIN-NET, but the Union of Banking Mediators has put itself forward as a candidate for membership, and the Association of Mediators in the Financial-Banking Field – FINBAN says that it plans to apply for membership. Conclusions In banking, the National Bank of Romania provides a non-binding recommendation in disputes about cross-border transfers. The banking ombudsman proposed by the Special Projects Initiative has not been established. Consumers have access to the Union of Banking Mediators and the Association of Mediators in the Financial-Banking Field – FINBAN, but they both charge consumers a non-returnable fee and provide only mediation. In insurance, there is the industry-appointed Insurance Arbitration Commission – but this charges consumers a non-returnable fee, provides only mediation and focuses on business-to-business disputes. None of these bodies is a member of FIN-NET to cover cross-border complaints – though the Union of Banking Mediators has put itself forward as a candidate and the Association of Mediators in the Financial-Banking Field – FINBAN says it plans to apply. Resolving disputes between consumers and financial businesses: Central and eastern Europe 61 As recommended in 2009, consideration should be given to creating a financial ombudsman – which should adopt the standards that will enable it to become a member of FIN-NET. Resolving disputes between consumers and financial businesses: Central and eastern Europe 62 National Bank (Romania) Name, in national language Banca NaÅ£ională a României, DirecÅ£iei Juridice Name, in English National Bank of Romania, Legal Department Website address www.bnr.ro/Mediation-of-disputes-related-to-cross-border-transfers-3312.aspx E-mail address for enquiries Phone number + 40 21 312 43 75 Fax number + 40 21 314 97 52 Address 25, Lipscani St., Bucharest, 030031 Status / governance Type of ADR scheme Regulator Status Public Decision makers appointed by Regulator Funding from Not stated Is the ADR a member of No FIN-NET? If the ADR is not a member of Not stated FIN-NET, say why Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses Must they complain to financial Not stated business first? Maximum time limit for financial Not stated business to respond Must financial business tell Not stated complainants about the ADR? Must complainants pay a fee? Not stated Types of resolution provided Non-binding recommendation Maximum that can be awarded €50,000 Minimum that can be claimed Not stated Products / types of business covered Payment services Only for cross-border transfers:  All banks in country, both national and foreign-owned  all other businesses in country Resolving disputes between consumers and financial businesses: Central and eastern Europe 63 Banking Mediators (Romania) Name, in national language Uniunea Mediatorilor Bancari din România Name, in English Romanian Union of Banking Mediators Website address www.mediatorbancar.ro E-mail address for enquiries office@mediatorbancar.ro Phone number + 40 724 748 049 Fax number + 40 216 281 218 Address Bd-ul Chisinau nr.8 bl. M2,sc.C,parter, ap. 81 sector 2, Bucharest Status / governance Type of ADR scheme Professional association registered with the Mediation Council Status Private Decision makers appointed by Associates Funding from Case fees paid by complainants Is the ADR a member of FIN-NET? No If the ADR is not a member of Has put itself forward as a candidate FIN-NET, say why Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses Must they complain to financial Yes business first? Maximum time limit for financial Time limit = 30 days business to respond Must financial business tell No complainants about the ADR? Must complainants pay a fee? Yes: amount not stated (none refunded – unless the mediation is discontinued, in which event 50% is refunded) Types of resolution provided Mediation Maximum that can be awarded Not stated Minimum that can be claimed Not stated Products / types of business covered Deposits  All banks in country, both national and foreign-owned  all credit unions in country  all other businesses in country Credit cards and loans  All banks in country, both national and foreign-owned  all credit unions in country  all other businesses in country  all intermediaries in country Mortgages  All banks in country, both national and foreign-owned  all credit unions in country  all other businesses in country  all intermediaries in country Payment services  All banks in country, both national and foreign-owned  all other businesses in country Electronic money  All banks in country, both national and foreign-owned  all other businesses in country Non-life insurance All insurers in country, both national and foreign-owned Life insurance All insurers in country, both national and foreign-owned Packaged investments None Company stocks and shares None Resolving disputes between consumers and financial businesses: Central and eastern Europe 64 Association of Mediators in Financial - Banking Field FINBAN (Romania) Name, in national language Asociatia de mediatori din Domeniul Financiar Bancar – FINBAN Name, in English Association of Mediators in Financial-Banking Field – FINBAN Website address www.finban.ro E-mail address for enquiries office@finban.ro Phone number + 40 727 727 880 Fax number + 40 318 146 180 Address Negru Voda Street no. 3 office 16,, Sector 3. Bucharest Status / governance Type of ADR scheme Professional association registered with the Mediation Council Status Private Decision makers appointed by Associates Funding from Members fees, consultancy and training Is the ADR a member of FIN-NET? No If the ADR is not a member of Says it intends to apply for membership FIN-NET, say why Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses  Other Financial Institutions Must they complain to financial No business first? Maximum time limit for financial Time limit = 15 days business to respond Must financial business tell No complainants about the ADR? Must complainants pay a fee? Yes: amount not stated Types of resolution provided Mediation Maximum that can be awarded Not stated Minimum that can be claimed Not stated Products / types of business covered Deposits  All banks in country, both national and foreign-owned  all credit unions in country  all other businesses in country Credit cards and loans  All banks in country, both national and foreign-owned  all credit unions in country  all other businesses in country Mortgages  All banks in country, both national and foreign-owned  all credit unions in country  all other businesses in country Payment services  All banks in country, both national and foreign-owned  all other businesses in country Electronic money  All banks in country, both national and foreign-owned  all other businesses in country Non-life insurance All insurers in country, both national and foreign-owned Life insurance All insurers in country, both national and foreign-owned Packaged investments Fund Administrators Company stocks and shares Brokers and depositors Resolving disputes between consumers and financial businesses: Central and eastern Europe 65 Insurance Arbitration Commission (Romania) Name, in national language Comisia de Arbitraj în domeniul asigurarilor si reasigurarilor de pe lânga Uniunea Nationala a Societatilor de Asigurare si Reasigurare din Romania Name, in English Insurance and Reinsurance Arbitration Commission within the National Association of Insurance and Reinsurance Companies Website address http://unsar.ro/comisia-de-arbitraj-in-asigurarireasigurari E-mail address for enquiries office@unsar.ro Phone number + 40 314 057 328 Fax number + 40 213 177 832 Address Not stated Status / governance Type of ADR scheme Part of industry association Status Private Decision maker appointed by Body with a majority of members from financial industry Funding from Case fees paid by complainants Is ADR a member of FIN-NET? No If the ADR is not a member of Not stated FIN-NET, say why Complaints / outcomes Takes complaints from Those parties who agreed to arbitration in the insurance contract Must they complain to financial Not stated business first? Maximum time limit for financial Not stated business to respond Must financial business tell Not stated complainants about the ADR? Must complainants pay a fee? Yes (not refunded): amount not stated Types of resolution provided Mediation Maximum that can be awarded Not stated Minimum that can be claimed Not stated Products / types of business covered Non-life insurance All insurers in country, both national and foreign-owned Life insurance All insurers in country, both national and foreign-owned Packaged investments None Company stocks and shares None Resolving disputes between consumers and financial businesses: Central and eastern Europe 66 Bucharest Stock Exchange Arbitration Court (Romania) Name, in national language Camerei Arbitrale a Bursei de Valori Bucuresti S.A Name, in English Bucharest Stock Exchange Arbitration Court Website address http://www.bvb.ro/Regulations/RegCamArbit.aspx E-mail address for enquiries bvb@bvb.ro Phone number (+40)(21) 307 95 00 Fax number (+40)(21) 307 95 19 Address 34 - 36 Carol I Boulevard 020922, 14th Floor, Bucharest, sector 2 Status / governance Type of ADR scheme Part of the stock exchange Status Private Decision maker appointed by Body with a majority of members from financial industry Funding from Case fees paid by complainants Is ADR a member of FIN-NET? No If the ADR is not a member of Not stated FIN-NET, say why Complaints / outcomes Takes complaints from Those parties who agreed to arbitration in their contract, whether:  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses Must they complain to financial Not stated business first? Maximum time limit for financial Not stated business to respond Must financial business tell Not stated complainants about the ADR? Must complainants pay a fee? Not stated Types of resolution provided Mediation Maximum that can be awarded Not stated Minimum that can be claimed Not stated Products / types of business covered Company stocks and shares  All companies in country, both national and foreign-owned  all intermediaries in country Resolving disputes between consumers and financial businesses: Central and eastern Europe 67 Slovakia Slovensko Basic information Slovakia joined the European Union in 2004. It adopted the Euro in 2009. It has a population of about 5.4 million. Access to financial services in 2007 was 83%, compared to an average of 91% in western Europe. Domestic credit provided by the banking sector in 2008 was 53.8% of GDP (compared to 157.9% for the EU as a whole in 2009). 41 Information from the European Consumer Conditions Scoreboard (fifth edition, published March 2011) includes:  consumer conditions index score 53%  consumer confidence in existing consumer protection measures 51%  consumers who had a reason to complain but did not complain 38%  ease of consumers resolving disputes with sellers/ suppliers through ADRs 25%  ease of consumers resolving disputes with sellers/ suppliers through courts 16% Any previous report on resolving financial disputes The World Bank’s 2007 Technical Note on Consumer Protection in Financial Services in Slovakia42 noted:  The National Bank of Slovakia was the integrated regulator for the financial sector, having taken over the insurance and securities responsibilities of the Financial Market Authority.  There had been substantial growth in consumer credit – but, unlike in some nearby countries, hardly any in foreign currencies.  Responsibility for enforcing consumer credit law lay with the Slovak Trade Inspection Office which lacked the necessary expertise and capability.  About 50% of consumers had bank current (cheque) accounts, 43% had life insurance and 14% had a private pension.  Slovakia was one of only three EU member states where bank deposit accounts were tied in with residential mortgages and consumer loans.  Several mechanisms were in place for customers to lodge complaints but none was sufficiently effective.  The Arbitration Court of the Slovak Bank Association now covered all customer disputes with banks but had the same weaknesses (time and expense) as the courts. 41 http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS 42 http://siteresources.worldbank.org/INTECAREGTOPPRVSECDEV/Resources/SkCPFSVolIMainReport.pdf Resolving disputes between consumers and financial businesses: Central and eastern Europe 68 Recommendations included:  All providers of credit should be licensed – preferably by the National Bank of Slovakia rather than a separate agency.  The National Bank of Slovakia should specify in its regulations that a current account is not required in order to receive financing from a bank.  The industry association should develop sector-specific codes of conduct and encourage financial businesses to resolve complaints.  All financial businesses should be required to maintain in-house departments for the resolution of consumer complaints.  A financial ombudsman should be created (perhaps on the Irish model) to resolve consumer complaints that are not resolved by the financial businesses themselves.  The ombudsman should: be available to consumers free-of-charge; publish an annual report of its activities; and join FIN-NET. Current financial ombudsman/ADR schemes The only financial ADR in Slovakia is the Banking Ombudsman (Bankový ombudsman). The table at the end of this chapter gives fuller information about it. It is not a member of FIN-NET. The rules of the Bratislava Stock Exchange provided for a tribunal, but the stock exchange has confirmed that it is not currently active in the field of out-of-court redress for consumers. Conclusions In banking, consumers have free access to the industry-appointed Banking Ombudsman – which provides mediation and a non-binding recommendation, if the financial business is a member of the bankers association. In insurance, there is no financial ombudsman/ADR. Slovakia has no member of FIN-NET to handle cross-border complaints. As recommended in 2007, Slovakia should have a financial ombudsman – which should not be restricted to banking and which should adopt the standards that will enable it to become a member of FIN-NET. Resolving disputes between consumers and financial businesses: Central and eastern Europe 69 Banking Ombudsman (Slovakia) Name, in national language Bankový ombudsman Name, in English Banking ombudsman Website address www.bankovyombudsman.sk E-mail address for enquiries ombudsman@bankovyombudsman.sk Phone number + 421 257 205 309 Fax number + 421 257 205 315 Address Rajská 15/A, 81108 Bratislava 1 Status / governance Type of ombudsman scheme Part of industry association Status Private, voluntary Ombudsman appointed by Presidency of the Slovak Banking Association (representatives of seven member banks) by simple majority Funding from Members of the Slovak Banking Association Is the ombudsman scheme a No member of FIN-NET? If the ombudsman scheme is not No support for application from Ministry of Finance a member of FIN-NET, say why Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises and small and medium enterprises only if a complaint relates to one product being tied-in to another. Must they complain to financial Yes business first? Maximum time limit for financial Time limit = 30 days business to respond Must financial business tell Yes complainants about ombudsman? Must complainants pay a fee? No Types of resolution provided  Mediation  Recommendation, not binding on either party Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Deposits Members of the only bank association Credit cards and loans Members of the only bank association Mortgages Members of the only bank association Payment services Members of the only bank association Electronic money Members of the only bank association Resolving disputes between consumers and financial businesses: Central and eastern Europe 70 Slovenia Slovenija Basic information Slovenia joined the European Union in 2004. It adopted the Euro in 2007. It has a population of about 2 million. Access to financial services in 2007 was 97%, compared to an average of 91% in western Europe. Domestic credit provided by the banking sector in 2009 was 94.5% of GDP (compared to 157.9% for the EU as a whole).43 Information from the European Consumer Conditions Scoreboard (fifth edition, published March 2011) includes:  consumer conditions index score 54%  consumer confidence in existing consumer protection measures 39%  consumers who had a reason to complain but did not complain 22%  ease of consumers resolving disputes with sellers/ suppliers through ADRs 32%  ease of consumers resolving disputes with sellers/ suppliers through courts 15% Any previous report on resolving financial disputes This is the first report from The World Bank regarding this topic in Slovenia. Current financial ombudsman/ADR schemes In 1982 the Triglav Insurance Company (Zavarovalnica Trigrav) established an arbitration scheme, to handle complaints about that company under the Code of Civil Procedure. Now, the Insurance Act (article 333) requires all insurers to have an ADR for insurance services. The insurance association has established two bodies, though the consumers association (Zveza potroÅ¡nikov Slovenije) say they are little used. The Insurance Ombudsman (Varuh Pravic s PodroÄ?ja ZavarovalniÅ¡tva) deals with disputes about infringements of the insurance code and good insurance practice, but does not deal with damages claims. The Insurance Mediation Centre (Mediacijski Center) provides mediation in damages claims. The Banking Act (article 391) requires banks to have an ADR for banking services. The banking association established a Banking Settlement Council (Poravnalni svet pri Združenju bank Slovenije za zunajsodno reÅ¡evanje sporov med banko in stranko). The consumers association claims that the Banking Settlement Council is not seen as independent. 43 http://data.worldbank.org/indicator/FS.AST.DOMS.GD.ZS Resolving disputes between consumers and financial businesses: Central and eastern Europe 71 The Financial Instruments Markets Act (article 294) requires stockbrokers to have or join an ADR for stockbroking services or managing financial instruments. The stock exchange in Ljubljana established a tribunal but – after six years with no cases – decided in May 2011 to abolish it. The tables at the end of this chapter give fuller information on the:  Banking Settlement Council;  Insurance Mediation Centre; and  Insurance Ombudsman. None of these is a member of FIN-NET. In each sector, the law requires financial businesses to inform consumers about the relevant ADR. Conclusions In banking, consumers have free access to the Banking Settlement Council, appointed by a body where half of the members come from the financial industry. It provides a non-binding recommendation. In insurance, consumers have free access to the industry-appointed Mediation Centre (providing mediation in damages claims) and Insurance Ombudsman (providing non-binding recommendations on breaches of the insurance code or good insurance practice, but not damages claims). Slovenia does not have a member of FIN-NET to handle cross-border complaints. The Banking Settlement Council, Insurance Mediation Centre and Insurance Ombudsmen have not demonstrated that they comply with Commission Recommendation 1998/257/EC. They should adopt the standards that will enable them to become members of FIN-NET (and should use the opportunity of adopting best practice from amongst their FIN-NET colleagues) or consideration should be given to establishing a financial ombudsman by law. Resolving disputes between consumers and financial businesses: Central and eastern Europe 72 Banking Settlement Council (Slovenia) Name, in national language Poravnalni svet pri Združenju bank Slovenije za zunajsodno reÅ¡evanje sporov med banko in stranko Name, in English Settlement Council at the Bank Association of Slovenia in Out-of- Court Settlement of Disputes between Clients and the Bank Website address www.zbs-giz.si E-mail address for enquiries info@zbs-giz.si Phone number + 386 1 242 97 00 Fax number + 386 1 242 97 13 Address Združenje bank Slovenije, za Poravnalni svet, 1000 Ljubljana, Å ubiÄ?eva 2 Status / governance Type of ADR scheme Part of industry association Status Private Decision maker appointed by Body with half of members from the financial industry Funding from Levy paid by the industry Is the ADR scheme a member of No FIN-NET? If the ADR scheme is not a The ADR said FIN-NET membership had not been considered. It member of FIN-NET, say why did not reply to a question about whether or not it complied with Recommendation 98/257/EC. Complaints / outcomes Takes complaints from Consumers Must they complain to financial Yes business first? Maximum time limit for financial Time limit = 30 days business to respond Must financial business tell Yes complainants about ADR? Must complainants pay a fee? No Types of resolution provided Recommendation, not binding on either party Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Deposits Members of the only bank association Credit cards and loans Members of the only bank association Mortgages Members of the only bank association Payment services Members of the only bank association Resolving disputes between consumers and financial businesses: Central and eastern Europe 73 Insurance Mediation Centre (Slovenia) Name, in national language(s) Mediacijski Center Name, in English Mediation Centre Website address www.zav-zdruzenje.si/resevanje_sporov.asp E-mail address for enquiries info@zav-zdruzenje.si Phone number + 386 1 4376511 Fax number + 386 1 4735692 Address Slovensko Zavarovalno Združenje, Giz, Železna 14, Si-1000 Ljubljana Status / governance Type of ombudsman scheme Part of industry association Status Private, voluntary Mediators appointed by Council of the Slovenian Insurance Association Funding from Slovenian Insurance Association Is the ombudsman scheme a No member of FIN-NET? If the ombudsman scheme is not a Does not comply with Recommendation 98/257/EC member of FIN-NET, say why Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses Must they complain to financial No business first? Maximum time limit for financial No time limit business to respond Must financial business tell Yes complainants about ombudsman? Must complainants pay a fee? No Types of resolution provided Mediation Maximum that can be awarded No maximum amount Minimum that can be claimed No minimum amount Products / types of business covered Non-life insurance Members of the only insurer association Life insurance Members of the only insurer association Packaged investments None Company stocks and shares None Resolving disputes between consumers and financial businesses: Central and eastern Europe 74 Insurance Ombudsman (Slovenia) Name, in national language(s) Varuh Pravic s PodroÄ?ja ZavarovalniÅ¡tva Name, in English Insurance Ombudsman Website address www.zav-zdruzenje.si/resevanje_sporov.asp E-mail address for enquiries info@zav-zdruzenje.si Phone number + 386 1 4376511 Fax number + 386 1 4735692 Address Slovensko Zavarovalno Združenje, Giz, Železna 14, Si-1000 Ljubljana Status / governance Type of ombudsman scheme Part of industry association Status Private, voluntary Ombudsman appointed by General assembly of the Slovenian Insurance Association Funding from Slovenian Insurance Association Is the ombudsman scheme a No member of FIN-NET? If the ombudsman scheme is not a Does not comply with Recommendation 98/257/EC member of FIN-NET, say why Complaints / outcomes Takes complaints from  Consumers  Micro-enterprises (EU definition)  Small and medium enterprises (EU definition)  Larger businesses Must they complain to financial Yes business first? Maximum time limit for financial Time limit = 6 weeks business to respond Must financial business tell Yes complainants about ombudsman? Must complainants pay a fee? No Types of resolution provided Recommendation, not binding on either party Maximum that can be awarded The recommendation covers whether the insurer complied with the industry code and good practice: not compensation – so Minimum that can be claimed there is no maximum award or minimum claim. Products / types of business covered Non-life insurance Members of the only insurer association Life insurance Members of the only insurer association Packaged investments None Company stocks and shares None Resolving disputes between consumers and financial businesses: Central and eastern Europe 75