History of the FABPrint
The Financial Arbitration Board was established by the Act on the Hungarian Financial Supervisory Authority on 1 July 2011. Prior to that there had been no financial arbitration in Hungary. Consumers could refer their legal disputes on financial matters to the arbitration board having powers for their residence, if they did not want to take the matter to court, because they trusted that a settlement would be reached with the service provider within a short time. Although many customers have chosen and still choose to initiate litigation on financial matters, these are complicated, lengthy and costly. Such litigations only impose difficulties on the courts as well, because in a very significant part of such cases an expert witness needs to be involved for a resolution. Unfortunately, there are not enough financial experts in this country.
The concept of the establishment of financial reconciliation was formulated in an effort to enforce the cooperation of financial services providers with their customers, furthermore, to have qualified, well-versed, experienced lawyers and economists knowledgeable on finances to provide assistance with legal disputes on financial matters, in a simple, fast and cost-saving manner. Accordingly, the most important characteristic of such procedures is that they are fast and free of charge. A forum is available where the parties may reach an agreement within their discretion – with a little assistance – and by this they also release the burden on the judicial system through bypassing the court procedure.
At the time when financial disputes were still resolved in the framework of general arbitration, in 2010 a total of 880 applicants took this opportunity. In 2011 – during the first six months of the operation of the Board – 1196 applications had already been received from consumers, and of these 857 had been closed before the end of that year, as a result of the efforts of a total of seven proceeding councils. The year 2012 was the first full year of financial arbitration, in that year the number of cases increased already, financial consumers submitted 3224 applications. In 2013 procedures were initiated in 4320 more cases, and a total of 4181 new cases were received between 1 January and 31 December 2014. The increase in the number of cases shows that a kind of trust by the society is expressed to the Board, because it functions predictably and professionally. Predictability and professionalism have been and are fundamental values for the parties, because they provide security.
The reason and purpose of the activities of the Board is to protect the justified interests of users the services provided by financial organisations, and strengthen public confidence in the system of financial intermediation. Justified interest is an important aspect for the Financial Arbitration Board, since the adjudication of that constitutes the basis for its decision, but also for conciliation itself.
The Hungarian Financial Supervisory Authority was terminated as of the end of September 2013. On 1 October 2013 the Magyar Nemzeti Bank took over the tasks fulfilled by it formerly. Although this organisational change did not meaningfully affect the operation of the Board, it was still significant, since the Board operates within the organisational framework of Magyar Nemzeti Bank, as a stand-alone and independent internal organisation, pursuant to the provisions of Sections 96-130 of Act CXXXIX of 2013 on the Magyar Nemzeti Bank. From this time its operating conditions and financing have been provided by the Magyar Nemzeti Bank, which undertakes to foster the efficient operation of the financial intermediary system, as well as the resolution of disputes in a fast, free and most reassuring way for all in the future as well.
The year 2015 posed a great task to the Board. This had been the first year when the task was no longer arbitration in the traditional sense of the term, rather the fulfilment of a one-time and special task as well. Concerning HUF and foreign currency loans lent to individual consumers earlier, based on the statutes, laws and MNB Governor’s directives created, published and put into effect in the second half of the year 2014, the Board became the primary forum for the legal remedies of the legal disputes arising as a result of settlement under the law and conversion into HUF. The year 2015 posed a huge challenge. In the first four years of the operation of the Board a total of 12,921 petitions were received from consumers, in 2015 the number of new cases was 20,353. We had to be ready to manage a volume of cases in an appropriate manner that exceeded the total number of cases managed in the previous four years in aggregate. New rules were adopted, which required new organisation of work, major changes in the organisational structure, a different working method, larger staff, IT and physical infrastructure development, and last but not least, considerable professional preparation. Moreover, these requirements had to be satisfied simultaneously and within a very limited time, meanwhile continuously monitoring the central bank's supervisory activity related to the settlement, thus preparing for the fulfilment of our duties to the fullest extent.
Last year the nature and role of the Board changed substantially. The Board performed not only conciliation, but it was also burdened with major decision-making obligations, thereby establishing an unprecedented practice in alternative dispute resolution. Our new role and the related, not at all negligible, tasks also necessitated the modification of the rules in the MNB Act, regulating the general operation of the Board, thereby facilitating the resolution of the cases faster and in larger volumes than before, through the participation of one board member and one minute-keeper instead of hearings held by three-member panels. We enacted our previous practice of also addressing cases of equity, because – as circumstances permit – we would like to continue helping financial consumers unable to fulfil their obligations through no fault of their own by providing a forum for them, where the financial service providers could consider at the proceeding conducted with us whether they are able or willing to make a decision based on equitable principles.
Our Board turned 5 years old on 1 July 2016! As to the result of our work, during those five years we had closed about 20.000 cases and approved of almost 6.000 settlements. The number of settlement reached its peak point in 2014, although it has slightly decreased since then, parallel with that the number of settlements made prior to the hearing has been going up, as is the number of instances of voluntary compliance after the receipt of the notice on the procedure. During those 5 years the procedure was terminated in almost one thousand such cases. The number of recommendations and injunctions has been decreasing constantly, which is proof for the improvement of inclination to and ability for settlement.