REPORT ON OPERATIONS OF THE CENTRE FOR FINANCIAL CONSUMER PROTECTION AND EDUCATION January June 2015

Transcription

1 ADMINISTRATION FOR SUPERVISION OF FINANCIAL INSTITUTIONS CENTRE FOR FINANCIAL CONSUMER PROTECTION AND EDUCATION REPORT ON OPERATIONS OF THE CENTRE FOR FINANCIAL CONSUMER PROTECTION AND EDUCATION January June 2015 August 2015

2 I. INTRODUCTION... 2 II. COMPLAINTS, EARLY COMPLAINTS AND MEDIATION PROPOSALS Consumer complaints Banks Insurance undertakings Other financial services providers Early complaints Mediation proposals III. MEDIATIONS IV. CONSUMER INFORMATION AND EDUCATION Consumer information Queries Calls received by the Call Centre Financial education Public lectures Financial education offices

3 I. INTRODUCTION From 1 January to 30 June 2015, the National Bank of Serbia s Centre for Financial Consumer Protection and Education (hereinafter: the Centre): acted upon 645 complaints and 15 mediation proposals, and scheduled and held 29 mediations. The Centre also received 379 early complaints which were referred to relevant institutions for further handling. It responded to 945 consumer queries and answered 8,660 telephone calls and 533 s received by the Call Centre. Note that the Law on Amendments and Supplements to the Law on the Protection of Financial Services Consumers, which came into effect on 27 March 2015, introduced an improved procedure for the protection of the rights and interests of financial services consumers enabling them to apply for mediation of the NBS before filing a complaint, as well as during and after the complaint handling. II. COMPLAINTS, EARLY COMPLAINTS AND MEDIATION PROPOSALS 1. Consumer complaints In the period from 1 January to 30 June 2015, the number of complaints and early complaints against financial institutions (1,024) fell by 12%, y-o-y. Early complaints in H1 accounted for 37% of all complaints in this group, indicating that a significant number of financial services consumers (hereinafter: consumers) are still not familiar with the complaint filing procedure, meaning that a complaint must first be made to the relevant financial institution in an attempt to resolve the issue in direct communication, and only if the issue remains unresolved, a complaint is filed with the National Bank of Serbia. 2

4 The majority of complaints and early complaints (84.7%) related to bank operations, which can be explained by the fact that banking services are the most widely used financial services. Overview of complaints and early complaints by type of financial services provider, January-June 2015 Financial services provider Complaints Early complaints Total In % Banks % Insurance companies % Leasing providers % VPF management companies % TOTAL , % Source: National Bank of Serbia. In the period under review, the Centre received 645 complaints against financial institutions, down by 15.5% y-o-y. However, observed by quarter, the number of complaints in Q increased by 11.5% relative to a quarter earlier, primarily due to an increase in the number of complaints with regard to housing and consumer loans Q1 Complaints in 2008 Complaints in 2009 Complaints in 2010 Complaints in 2011 Complaints in 2012 Complaints in 2013 Complaints in 2014 Complaints in 2015 Q2 340 Of these complaints, 81.8% related to banks. 3

5 Of all received complaints against financial institutions in the first two quarters, 547 were processed (85%), of which 438 (80%) were assessed as unfounded and 109 (20%) as founded. Number of complaints by type of financial services provider, January-June 2015 Financial services provider Unfounded complaints Unfounded complaints - denied Unfounded complaints - granted Founded complaints Founded complaints - denied Founded complaints - granted In progress Banks Insurance companies VPF management companies Leasing providers TOTAL TOTAL in % 67.9% 63.7% 4.2% 16.9% 2.3% 15% 15.2% 100% Source: National Bank of Serbia. Total 1.1. Banks From the beginning of the year, the number of complaints against banks reached a total of 515, down by 19% from the same period of In Q2 2015, consumers filed a total of 278 complaints against banks, up by 17% from the quarter before. There was a marked increase in the number of complaints relating to housing and consumer loans Complaints in 2008 Complaints in 2009 Complaints in 2010 Complaints in 2011 Complaints in 2012 Complaints in 2013 Complaints in 2014 Complaints in

6 Complaint numbers and reasons Complaints received against banks in the second quarter related to loans (62.6%), current accounts (17.3%), payment cards (11%) and foreign currency saving (5.4%). Number of complaints by type, January-June 2015 Type of complaints Jan. Feb. Mar. April May June Total in % Foreign currency savings % Dinar savings % Other % Deposit transactions % Cash loans % Other loans % Consumer loans % Housing loans % Loans % Debit cards % Credit cards % Payment cards % Escrow accounts % Payment transactions % Current accounts % Payment transactions % Exchange transactions % Оther % Other % TOTAL % Source: National Bank of Serbia The analysis of consumers complaints In Q2, most consumer complaints related to: requests to verify whether the bank has acted in accordance with the Decision on Measures for Preserving Stability of the Financial System in the Context of Foreign Currency-Indexed Loans (hereinafter: Decision), i.e. whether the bank has reimbursed the correct amount of overcharged interest in respect to undefined and indefinable nominal interest rate under loan agreements, and whether the principal was adjusted in accordance with the Decision; requests for clarifications of the proposed models which facilitate continued repayment of CHF-indexed loans, in accordance with the Decision; requests for a refund of exchange rate differences charged in the period before the application of the Law on Amendments and Supplements to the Law on the Protection of Financial Services Consumers; 5

7 refusal of the financial institution to approve temporary suspension of loan repayment; failure of the financial institution to return the collateral after loan repayment; defaults on loans, cards and current accounts reported to the Credit Bureau; collection, i.e. automatic account debiting for the amount of agreed fees, most frequently account maintenance fees on natural persons current accounts which have not been used for an extended period of time; fees charged to legal entities in the agreed amount though payment transaction was not performed; failure to notify the consumer about the level of his debt in respect of loans, leasing and credit cards, as well as a failure to notify the consumer in case of a significant unauthorised overdraft for over a month; failure to notify the consumer prior to blocking his/her account; inability of the financial institution to return the funds which were transferred to wrong accounts stated by the consumer in payment orders; problems in collection of bills of exchange issued by legal entities. In Q2 2015, the Centre received a large number of complaints by consumers requesting that banks return funds in respect of monthly instalments charged at the agreed exchange rate (buying, middle or selling rate), which was higher than the rate at which the loan was extended, plus the default interest on exchange rate differences determined in this manner. Given that the Law on Amendments and Supplements to the Law on the Protection of Financial Services Consumers is not retroactive with respect to the obligation of banks to return funds to consumers on any account, or to return the amount of default interest on those funds, explanations to that effect were sent to consumers. In particular, Article 41 of the Law on Amendments and Supplements to the Law on the Protection of Financial Services Consumers envisages that as regards the repayment of liabilities of financial services consumers due starting from 27 March 2015 (beginning of the application of the law) under loan agreements indexed to a foreign currency concluded prior to the application of the Law on the Protection of Financial Services Consumers (5 December 2011), the banks shall apply the agreed exchange rate (buying, middle or selling) or the exchange rate which is more favourable for the financial services consumer than the one used at the time. As regards the complaints in respect of the refusal of financial institutions to approve temporary suspension of loan repayment, Article 32 of the Law on the Protection of 6

8 Financial Services Consumers prescribes that, should circumstances occur during the life of the loan agreement which put the consumer into a difficult financial position, the bank may, at the consumer's request, declare suspension of repayment (moratorium) for a specified period of time during which it shall not calculate default interest on due but unsettled obligations. However, this Article of the Law stipulates the bank s right, rather than its obligation, meaning that banks are not obligated to approve moratorium at the consumer s request, but have a discretionary right in deciding whether, and to whom, suspension of loan repayment will be approved. Further, as regards unauthorised current account overdraft incurred through automatic account debit for payment of agreed fees for the maintenance of customers current accounts which were not used to perform any transaction for an extended period of time, but were not closed, Article 31 of the Law on the Protection of Financial Services Consumers prescribes, inter alia, that in the event of a significant unauthorised account overdraft lasting longer than one month, the bank has an obligation to notify the consumer without delay, in writing or on another durable medium, of the amount of overdraft, interest rate to be applied to the amount of overdraft, as well as of any other potential costs and penalties. Where it was established during processing of customer complaints that the collection of fees led to an unauthorised overdraft on the customer's current account and recording of the default on the customer's credit report with the Credit Bureau, of which the bank failed to notify the consumer in accordance with Article 31 of the Law, banks accepted that the complaints were founded and either wrote off such receivables or initiated the write-off procedure, while the recording of default on the customer's credit report with the Credit Bureau was deleted. 7

9 1.2. Insurance undertakings From 1 January to 30 June 2015, the Centre received 122 complaints against insurance undertakings, as many as in the first six months of last year. The number of complaints against insurance undertakings in Q2 was 57, down by 12% from the previous quarter Q1 Q2 Complaints in 2008 Complaints in 2009 Complaints in 2010 Complaints in 2011 Complaints in 2012 Complaints in 2013 Complaints in 2014 Complaints in 2015 The highest number of complaints received in Q2 related to motor third party liability insurance (33.3%), property insurance (15.8%), accident insurance (14%) and life insurance (8.8%). In Q2, the insureds most often complained about: amount and basis of compensation offered under a motor third party liability insurance policy; amount and basis of compensation offered under a property insurance policy; life insurance policies in case of an inability to continue paying the premium, and difficulties in exercising rights under an accident insurance policy. 8

10 Overview of complaints by type, January-June 2015 Complaints relating to Q1 Q2 Total in % Automobile liability % Property % Full coverage % Accident % Loan insurance % Travell insurance % Other % Non-life insurance % Life insurance % Supplemental life insurance % Rent insurance % Other % Life insurance % Companies in bunkruptcy and liquidity % Other % Other % TOTAL % Source: National Bank of Serbia Other financial services providers From 1 January to 30 June 2015, the Centre received 6 complaints against financial leasing providers, i.e. 0.9% of the total number of complaints, and two complaints against voluntary pension fund management companies, i.e. 0.3% of the total number of complaints. 2. Early complaints In the period under review, the Centre also received 379 early complaints, insignificantly fewer than a year earlier. These complaints were sent directly to the Centre instead of first being addressed to the relevant financial institution. Number of early complaints by financial services provider, January-June 2015 Financial services provider Q1 Q2 Total in % Banks % Insurance companies % Leasing providers % VPF companies % Other % TOTAL % Source: National Bank of Serbia. 9

11 The Centre forwarded all early complaints to relevant financial institutions for further handling. The number of early complaints received in Q2 increased by 17.8% from the first quarter Q1 Q2 Early complaints in 2008 Early complaints in 2009 Early complaints in 2010 Early complaints in 2011 Early complaints in 2012 Early complaints in 2013 Early complaints in 2014 Early complaints in 2015 A majority of early complaints received during Q2 were made against banks (93.2%), of which 67.5% were in connection with loans, 10.5% with current accounts and 6.8% with credit cards. 3. Mediation proposals In view of the amendments and supplements to the Law introducing the option of direct submission of mediation proposals without having previously filed a complaint, this report also covers the received mediation proposals, which numbered 15 in the observed period. Of this number, five proposals were accepted by financial institutions, nine were rejected, and one was abandoned. III. MEDIATIONS In the first two quarters of 2015, 29 mediations were scheduled and held by the NBS, which is 40.8% fewer than in the same period last year. 10

12 Number of mediations by type of financial services provider, January- June 2015 Financial services provider In progress Settlement Suspension Abandonment Total in % Banks % Insurance companies % Leasing providers % VPF management companies % TOTAL % Source: National Bank of Serbia. Of the total number of mediations, 23 were concluded, of which 30% ended in settlement. In Q2, 17 mediations were held, up by 41.7% from Q1. Mediations in January-June 2015 Financial services provider Q1 Q2 Total in % Banks % Insurance companies % Leasing providers % VPF management companies % TOTAL % Source: National Bank of Serbia. The majority of mediation sessions in the second quarter related to current accounts (17.6%), housing loans (11.8%), credit cards (11.8%) and motor third party liability insurance (11.8%). IV. CONSUMER INFORMATION AND EDUCATION 1. Consumer information In the observed period, the Centre replied to queries and answered calls from citizens wishing to learn about their rights regarding financial services, and met 26 information requests from journalists through four television appearances, seven statements released by phone and replies to queries of the press (Politika, Blic, Radio Laguna, RTS, RTS Potrošački Savetnik, Radio Beograd, TANJUG, TV Vojvodina, Danas, Novosti, Dnevnik, Svet Osiguranja) Queries In addition to the above complaints and early complaints, during the first half of 2015, the Centre received 945 queries about financial services. 11

13 Of the queries received in Q2 2015, the majority related to banks 81.8%, of which 61.8% concerned loans and 9.8% current accounts. Number of queries by type of financial services provider, January-June 2015 Financial services provider Q1 Q2 Total in % Banks % Insurance companies % Leasing providers % VPF management companies % Exchange offices % Other % TOTAL % Source: National Bank of Serbia. The number of queries submitted to the Centre was 56% higher, y-o-y Q1 Q2 Queries in 2008 Queries in 2009 Queries in 2010 Queries in 2011 Queries in 2012 Queries in 2013 Queries in 2014 Queries in 2015 The number of queries increased because citizens, users of housing loans indexed to the Swiss franc, were better informed and much more interested in finding a way to resolve issues relating to the repayment of these loans and acquiring additional information about the Decision on Measures for Preserving Stability of the Financial System in the Context of Foreign Currency-Indexed Loans, manner and deadlines for its implementation (the accuracy of banks calculations of overpaid funds and calculations of loan liabilities under the four offered repayment models, as well as queries regarding payment of the approval fee 12

14 of the National Housing Loans Insurance Corporation (NKOSK), verification of a mortgage deed and entry in the register of mortgaged property, etc.). In addition, mediation of the NBS was sought by consumers having difficulties in settling their debts on loans or other credit products because of unexpected circumstances (most often job loss), or requesting to suspend repayment (moratorium) of those liabilities. Many consumer queries were also made in relation to defaults registered on credit reports with the Credit Bureau, exchange rate applied in loan repayment, current account maintenance fee, costs of currency conversion relating to the use of payment cards abroad and problems related to the settlement of liabilities under a loan agreement of a deceased loan user, i.e. the rights and liabilities of the successor or the deceased loan user Calls received by the Call Centre The Call Centre answered 8,660 telephone calls and 533 online queries in H1, which is a total of 9,193 information requests to the Call Centre. Overview of queries, January-June 2015 Field Jan. Feb. Mar. April May June Total in % Banking services and leasing , % Insurance and VPF % Exchange transactions % Enforced collection , % Payment System % Savings bills and frozen fx savings % Exchange rate lists , % Other , % TOTAL 1,232 1,330 1,743 1,618 1,226 1,511 8, % Source: National bank of Serbia. The number of telephone calls received in the observed period was 9.4% lower y-o-y, whereas the number of telephone calls received in Q2 was slightly higher than the number of calls in Q The calls mostly related to terms and conditions of banking services, enforced collection and exchange rate lists. 13

15 Most queries submitted electronically concerned consumer rights, saving deposits, enforced collection and exchange operations. 14.7% 26.3% 15.8% 2.5% 7.6% 7.6% 3.8% 21.7% Banking services and leasing Exchange transactions Payment System Exchange rate lists Insurance and VPF Enforced collection Savings bills and frozen fx savings Other 2. Financial education 2.1. Public lectures In H1 2015, 21 public lectures were given in 17 towns and villages across Serbia, attended by a total of 900 people. The number of lectures held in Q doubled relative to a quarter earlier, while the number of attendees rose by 25%. Financial products and services were presented through 45 presentations. Citizens were most interested in the following topics: rights of financial services consumers, things to bear in mind when borrowing, currency clause, variable interest rate, agricultural loans, agricultural insurance, saving deposits and loan refinancing. Three lectures were intended for entrepreneurs and farmers. Educational materials on financial products and services were distributed both during public lectures and visits made by citizens to financial education offices. A total of 70,000 educational leaflets were distributed in H1 2015, of which 40,000 were distributed in Q2. Due to frequent complaints and queries in relation to the use of payment cards abroad, succession of debt under loans, loans for pensioners and insurance against job loss, the website Tvoj novac, which is dedicated to financial education, was updated with information about these financial products and services. 14

16 2.2. Financial education offices In H1 2015, the staff replied to 846 queries of citizens who visited the regional financial education offices, up by 2.7% y-o-y. In Q2, a total of 478 citizens visited these offices and the number of queries went up by 30% from Q In Q2, the majority of citizens queries involved banking services (49.2%), notably housing loans indexed to Swiss francs, saving deposits, calculation of monthly loan instalments, sureties, credit records, and current accounts. 15