Money market sectorPrint
Payment services and particularly payment account keeping, is one of the best known financial services, widely used by consumers. In the light of the Board's procedure, the opening of a payment account is still problem-free, as no procedure was initiated in this matter.
However, the termination and closing of payment accounts caused substantial problems for petitioners, where the related disputes were rather varied. Petitioners complained in several procedures of not having received proper information in the branches to their questions related to the closing of the account and in respect of measures to be taken by them based on the regulations and requirements of financial service providers.
Disputes between the parties often arose due to the fact that petitioners came forward with the request to close their payment account during their visit to the branch in person and did not submit it in writing (the form prescribed in the financial service provider's procedures for the termination of the account was not filled in), thus the payment account continued to exist, the financial service provider continued to keep it and recorded debt on it.
There were a high number of cases related to financial settlements connected to the closing of accounts. Petitioners often asked for verbal confirmation in the branch on the amount to be paid for closing and settling the account, during which they were informed on the then current debt. A longer period of time elapsed between the information and the actual payment, thus the payment made by the petitioner based on the previous information did not cover the debt in full.
In several cases the basis of the dispute was that petitioners received no document whatsoever on the closing of the accounts, so they believed that they had no outstanding debt and their accounts ceased to exist. They did not ask the financial service providers whether the payments made by them were sufficient and that they surely had no outstanding debt. The debt on the payment accounts often accumulated for several years before petitioners realised that in fact the accounts had not been closed. In the case of certain financial service providers, there was a minimum amount, based on the general contractual terms, reaching which the financial service provider was obliged to send a notice (monthly statement) to the petitioner. Until the petitioner's debt did not reach this minimum amount, it sent no monthly statements. Thus it took even an aggregate of several months’ fees to reach the amount that would have resulted in an obligation to send account statements, thus the petitioner found that the account he believed to have been closed still existed.
In other cases, additional fees, costs should have been paid to close a payment account, which the petitioner did not undertake to fulfil. It also happened that petitioners settled the amount necessary for the termination of the account by transferring it from another payment account and indicated the designation of the amount in the comment field (relates to the closing of the account), based on which the account was still not terminated. Debt typically was accumulated by debiting the annual fee of the bank card belonging to the bank account and other fees related to account management. Petitioners erroneously assumed that if they initiated no transactions on their payment accounts, and there was no turnover on them based on prior payment orders (e.g. direct debits) or due to other reasons, the maintenance of the account was “formal”, hence no cost may occur in respect thereof. The typical attitude of consumers in the disputed cases was that they had made personal arrangements for terminating the payment accounts, they failed to check the account statements that might have been sent by the financial service provider, thus they could not notice the occurrence, and the accumulation of debt. The failure to check account statements occurred more often in those cases where petitioners used online banking services and accordingly they asked for their account statements in electronic form.
A dispute arose between the parties due to the fact that upon terminating the account the petitioner withdrew the account balance in cash, he did not calculate with a cash withdrawal fee and claimed that it was illegally charged, citing that the account termination is free of charge and he received no information on the costs. In this specific case the parties agreed; the financial service provider waived the cash withdrawal commission, on basis of equity, as part of a settlement agreement.
In certain cases, financial service providers made the disbursement of a loan or the provision of more favourable conditions conditional upon the petitioner's opening of a bank account at a given service provider. If the loan application was rejected, but the account had already been opened, petitioners believed that the payment account automatically ceased to exist, as no loan was connected to it, i.e. the reason underlying the opening thereof failed. However, financial service providers did not terminate the bank accounts in these cases, and regarded them as contracts independent of the loan. Petitioners often found out several months after the failed loan transaction that they still had the bank account, on which they incurred a debt due to their failure to terminate it.
With regard to payment accounts opened in connection with loan disbursement (instalment account) the source of additional dispute was that the financial service provider terminated the loan contract, even the enforcement procedure has started, i.e. the contractual obligation to perform instalments no longer existed, nevertheless the financial service provider did not consent to the termination of the payment account.
In cases in which petitioners had a document about the termination of the account, previously accepted by the financial service providers and nevertheless the financial service providers called upon the petitioners to settle their arrears, the financial service providers – during the procedure of the Board – accepted the documentary evidence and took measures to cancel the debt and to close the accounts.
Disputes related to the termination of payment accounts usually ended with settlement agreements; financial service providers waived – on an equitable basis, maintaining their legal position – the debt in part or in full, or agreed on payment by instalments. Settlement agreements could be concluded particularly in those cases in which the amount of debt was nominal, or there had been no turnover on the payment account for several years.
Consumers turned to the Board in several cases due to the modification of account-keeping fees. In these cases the problem was typically caused by misunderstandings that occurred upon informing customers verbally in the branch. It was so in a case in which the petitioner switched account packages and although the account-keeping fee decreased the overall costs of maintaining the account increased.
Upon switching payment accounts or account packages, petitioners primarily considered the amount of account-keeping fees and failed to calculate with the costs related to the use of the payment account.
In a few cases problems arose from the fact that upon opening a bank account in the branch, tellers failed to make the account holders fill in and sign a declaration necessary for the free of charge cash withdrawal, thus the account holders were not entitled to withdraw cash at no charge. The petitioners complained of the fees charged by the financial service providers for the cash withdrawal.
In 2016, new types of disputes appeared, in which financial service providers decided to phase out the preferential – zero account-keeping fee – account type/account package, notified their customers of this, while providing them with the possibility to switch to another account type/account package or to terminate the account. In the procedures initiated at the Board petitioners claimed that in the information notifications related to the termination of the account type financial service providers indicated 2016 as the year of phase-out; however, in case they returned the declaration related to the switching of account types, financial service providers executed the switching of the account package upon the receipt of the declaration, i.e. they terminated the free of charge account-keeping mid-year, and charged the fees stated in the terms and conditions. Petitioners requested that financial service providers should provide the preferential account type until the end of 2016 and refund the already charged account-keeping and other fees. Financial service providers proposed settlement agreements to settle the disputes. A dispute, also related to an account package with preferential conditions, arose when a financial service provider prescribed certain conditions for the preferential account package, and the failure to comply with those resulted in the modification of the package to the basic account package. In the procedure, the petitioner did not dispute its failure to comply with the conditions, but disapproved the absence of notification prior to the modification of the account package. The financial service provider confirmed that it did provide the necessary information on the account statement, however, the petitioner failed to check the electronic account statements and the information included in them, and noticed the change only when the fees were debited to his account.
In relation to transactions executed on payment accounts, disputes arose also due to the inadequate knowledge of the announcements or the preferential conditions attached to the account type, with regard to fees charged for orders given in forints. Prior to executing transfer orders of higher amounts, petitioners failed to check the amount of the fees chargeable for the execution of the order and the way they could have optimised the costs. It was quite common that in the case of certain account types financial service providers specified lower fees or no fees at all for orders initiated via online banking.
There were several disputes in respect of fees charged for higher-amount forint cash withdrawals, which were attributable to either the financial service providers' failure to provide proper information or the petitioners' failure to check the announcement in advance. It was already known for the petitioners that in Hungary two cash withdrawals per month, not exceeding HUF 150,000 in total, initiated by a bankcard is free of charge; however, they failed to obtain prior information on the fees before their high-amount cash withdrawals, and they thought it over only afterwards, after seeing the magnitude of the debited fees, how they could have carried out the transaction otherwise to avoid or reduce the high fees.
Disputes, belonging to the category of fulfilment of payment orders, also arose in connection with foreign currency transfer orders. It was more frequent in the case of foreign currency transfer orders that petitioners only found out the amount of fee charged after the execution of their order which in certain cases was as much as the transferred amount.
There was a case in which the receiving bank could not credit the amount of the foreign currency transfer order initiated from a forint payment account, because the given bank account number was incorrect, therefore it returned the amount to the sender's bank account, which was credited with a lower amount than the original forint amount due to the changes in exchange rates applied for the conversions and also with regard to the deduction of the foreign bank's fee.
It is a common experience that customers tend to read the announcement related to the fees charged for orders only after seeing the fee charged or after realising the consequences of non-fulfilment.
There were also cases in which it was disputed by the parties which type of the various exchange rates used by the financial service providers (e.g. commercial exchange rate, cashier exchange rate) should be applied to the given transaction in the course of a foreign currency conversion. When the financial service provider realised during the procedure that the written information provided to the customer with regard to the applied exchange rate types was not clear, it resolved the dispute by a settlement agreement.
There were a large number of disputes related to foreign currency transfer orders, in which petitioners asked for the immediate, out of turn correction of transfer orders due to clerical errors, or for the waiving or sharing of the exchange rate losses incurred in relation to the erroneous transfer orders that involved conversion. Financial service providers did not conclude settlement agreements, not even on an equitable basis, in respect of the claims arising from the erroneous orders given by petitioners, citing the disclaimers in the general contractual terms. In another case, in relation to a foreign currency transfer order, the petitioner claimed that his urgent transfer had not been received by the beneficiary in due course. The financial service provider proved that it acted in line with the regulations in all respects, but the petitioner submitted the order late, which was fulfilled by the financial service provider in accordance with the regulations. The Board found that the financial service provider committed no infringement, hence it terminated the procedure.
Procedures in relation to foreign currency transfer orders to non-EEA or non-SEPA (Single Euro Payment Area) member states were also initiated. In these cases petitioners complained of the fulfilment of credit transfers after the deadline specified or expected by them and the resulting exchange rate loss they suffered. Financial service providers, being the other party to the dispute, that initiated the transfer orders usually relied on the services of intermediary financial institutions (correspondent banks) for the fulfilment of the foreign currency transfer orders, thus clarifying the facts of the cases also involved financial institutions that were not parties to the procedure. Unfortunately, in such cases the Board only had limited means of proof.
Among the procedures related to payment accounts were also cases in which the financial service providers' electronic records and the documentary evidence submitted during the procedure contradicted each other, or the service providers were unable to prove the correctness of their records by documents.
Several procedures were launched in respect of the keeping of payment accounts in relation to succession resulting from the account holder's death. These cases include the claims of heirs specified in the final resolution of the distribution of the estate or the claims of beneficiaries specified in the beneficiary statement belonging to the payment account. In relation to the estate distributed in the probate, in a large number of cases petitioners complained of the slow administration by financial service providers, but there was also a case in which the petitioner disputed the measures of the financial service provider on the merits. The petitioner, as the holder of the usufruct rights, objected that the financial service provider paid the balance of the testator's payment account to the heirs ignoring the usufruct rights, and submitted a claim for damages.
In cases, in which testators left a debt and financial service providers called upon the heirs to settle the debt only after several years, petitioners always objected that the service providers charged interest for the period elapsed between the transfer of the estate and the measure taken for the sake of enforcement. They particularly criticised the financial service providers' delayed actions in those cases in which service providers failed to register the testators' debt in the probate procedures as the debt of the deceased, the heirs did not learn thereof from other sources either, and as such they were not in the position to calculate with it. In these cases financial service providers made efforts to find an equitable solution for the petitioners to close the dispute, thus usually they concluded a settlement agreement.
PROPOSAL OF THE BOARD
TO AVOID PROBLEMS RELATED TO PAYMENTS
Consumers should study the contracts concluded with financial service providers, including the general contractual terms, the announcements and the lists of conditions, as only in the knowledge thereof can they consult the teller of the financial service provider in a comprehensive manner.
If a consumer makes a legal declaration (e.g. terminating the account, submitting an order) when acting in person, he should ask for a written confirmation thereof. The issuance of the confirmations is often integrated at systemic level in the procedures of the financial service provider, thus it can be assumed that the absence thereof also means the failure to fulfil the requested operation.
If a petitioner wishes to submit any instrument in person via the teller of a financial service provider, he should ask for a documentary confirmation of the submission (e.g. on the copy of the submitted instrument).
The account statement sent by the financial service provider should always be checked, as the service provider communicates important information in it, in addition to the monthly transactions, with regard to the future changes of the terms and conditions or potential discounts.
Financial service providers should make efforts to provide accurate and full information. If consumers give orders or make other requests verbally, the requests should be confirmed in writing even if it is not specifically asked for by the consumers.
Disputes related to new deposits typically arose from the fact that the eligibility for the preferential deposit rate was tied to a condition, or usually to the simultaneous fulfilment of several conditions, and those were not met at the time or during the period prescribed by the deposit contract. The consequence of non-fulfilment of the conditions was that upon the maturity of the deposit financial service providers credited an interest amount calculated not with the preferential interest rate, but with a clearly less favourable “basic rate”. The Board found that irrespective of the amount to be placed on a term deposit, i.e. in the case of higher amount deposits as well, customers turned to the administrator of the financial service providers with trust, accepted his advice in all issues, thus, e.g. in respect of early withdrawal of deposits and preferential rate deposits, not noticing that the conditions of the new deposits, including the interest premiums, may have changed. Almost without exception in all cases petitioners cited that they had submitted an order for a new deposit based on the information provided by the administrator of the financial service provider, the conditions specified by the administrator upon submitting the order in respect of the petitioner's new deposit were complied with in full, the condition designated by the financial service provider as missing were unknown, they had received no information about it, nor had been warned about the existence thereof and the legal consequences of non-compliance. Financial service providers resolved the disputes in various manners. There were cases in which financial service providers undertook to pay part of the difference in interest in view of the customer relation dating back to several years, while in other cases, in view of the fact that prior to making the deposit petitioners received the relevant announcement and had the opportunity to peruse it, and the probability of false information provided by the administrator was negligible, rejected the petitioners' claims.
The number of disputes related to home advance savings account was not high. Disputes arose, among others, in relation to contracting fees, the crediting of state subsidy and the granting of housing loan that may be applied for with regard to the home advance savings account. In view of the fact that the rules of the home advance savings account facility are governed by law, there was limited room for the parties' free agreement. A dispute arose from the fact that the petitioner raised the contractual amount in respect of two of his contracts and he should have paid an account opening fee difference. In the case of one of the contracts the financial service provider, as the fee difference had already been collected, refused to repay the amount, while in the case of the other contract, with a view to settling the matter amicably, waived the payment of the fee difference, and in the end the parties concluded a settlement agreement.
In another dispute, also related to fee payment, the petitioner argued that upon concluding the contract he had emphasised to the participating salesperson that due to his personal circumstances it was uncertain at the time of concluding the contract whether he would be able to satisfy the conditions necessary for the state subsidy. He stated that the salesperson informed him that if the advance savings deposit was terminated, the already deposited amount, including the contract conclusion fee, would be returned to him. During the procedure it was not proven that the petitioner had indeed received erroneous information; nevertheless, the financial service provider undertook, on equitable basis, to repay part of the contracting fee paid.
Procedures were also initiated due to the cancellation and repayment of state subsidy. In one of the cases, the petitioner concluded two home advance savings contracts in a way that in the case of one of the accounts he indicated a beneficiary for the utilisation of the state subsidy. The beneficiary passed away and, as it is customary in such cases, the state subsidy could have been applied for by specifying another close relative beneficiary. In the absence of this, the account savings may only be paid out in the amount increased by the interest on the deposit. Since the petitioner was unable to designate another beneficiary complying with the relevant statutory provision, his petition for crediting the state subsidy was unfounded, the procedure was terminated and the financial service provider had to repay the state subsidy applied for until that date together with the interest to the Hungarian State Treasury.
PROPOSAL OF THE BOARD
FOR PROBLEMS RELATED TO DEPOSITS
It is extremely important that consumers should peruse, in addition to the individual deposit orders, the general contractual terms, the announcements and the lists of conditions, as these are the documents that contain in full the conditions of granting higher interest or other preferential conditions and benefits. Usually these conditions are easy to understand; the disputes are caused by the fact that consumers do not become acquainted with them in due course.
Service providers should emphasise to the tellers the importance of providing accurate and complete information. If standard forms are used for preferential new deposits, these forms must be clear and transparent.
Cases related to the use of debit cards usually involved the use of automatic teller machines (ATM). The vast majority of disputes in connection with this concerned cash withdrawal from the ATMs. Procedures also started in relation to certain services belonging to bank cards (e.g. SMS service), and also because petitioners disagreed with the conversion of the amounts withdrawn from Hungarian ATMs using their foreign bank cards, or they complained of the settlement of the transactions when they used bankcards issued by a domestic financial service provider abroad.
In a large number of procedures involving complaints related to cash withdrawal from ATMs, petitioners and financial service providers identically specified the place and date of the executed or attempted cash withdrawal transaction by a bank card; however, according to petitioners the specified amount was debited to the payment account despite the fact that the ATM did not issue the banknotes.
If during a procedure financial service providers were able to prove, in respect of the disputed transactions, by documents retrieved from their system, that the transaction was executed with the use of the correct PIN code, the error log contained no error message, the ATM stocktaking did not reveal any difference (surplus), they consistently refused to reimburse the disputed amount. They emphasised that the proper use, storage and safekeeping of bank card data, including the PIN code, was the responsibility of petitioners. It cannot be regarded as proper safekeeping if a petitioner stores the PIN code next to his bank card, or at a place that can be acquired together with it, thus e.g. in his mobile phone.
Several ATM-related cases ended with positive results. In one of the cases the petitioner disputed the cash withdrawal. He stated that despite several attempts, the ATM did not dispense cash in the requested amount, only much less than that. On his account statement the financial service provider indicated the cash withdrawal in the requested amount. The financial service provider investigated the petitioner's complaint by analysing the ATM journal tape and the stocktaking of the cash holdings, based on which it rejected the petitioner's complaint. After launching the Board's procedure the financial service provider repeatedly investigated the case and based on the analysis of the ATM video recording it established that the transaction had been initiated by the petitioner, but he left the ATM before the completion thereof and the cash was taken from the ATM slot not by the petitioner, but by another customer of the financial service provider. When the financial service provider contacted this person, he repaid the illicitly taken amount and the financial service provider credited the disputed amount to the petitioner's account.
In another case, the petitioner enforced a claim against the financial service provider due to a malfunction occurred during the use of an ATM. In this case as well the petitioner stated that despite the fact that his attempted cash withdrawal failed, the financial service provider debited his account with the claimed amount. The financial service provider repeatedly verified the disputed transaction in the procedure at the Board, in the course of which it established that the petitioner's complaint was grounded, as a surplus occurred in the respective ATM. Within the framework of a settlement agreement the financial service provider undertook to credit the claimed amount to the petitioner's payment account.
In another ATM-related case the financial service provider stated at the hearing that based on the video recording taken by the ATM it could be established that an unidentified person stepped to the ATM after the disputed transaction, but did not initiate a bank card transaction, thus it gave rise to a suspicion that theft may have occurred. The financial service provider informed the petitioner that it can release the video recording upon an enquiry from a public authority. Although in this case no immediate solution could be provided for the petitioner in the procedure, a positive ending of the case became a possibility, which could be ensured by a successful criminal investigation.
Several financial service providers offer the possibility to make cash deposits to payment accounts via ATMs with the use of a debit card. There were several cases, in which petitioners stated that the amount credited to the payment account was less than the amount the petitioner indicated as deposited. In these cases financial service providers proved with stocktaking documents that the deposits were made not in the amounts claimed by petitioners, thus they did not credit the amount requested by the petitioner subsequently. In view of the fact that petitioners were unable to confirm their statements, the Board had to terminate the procedures.
In several cases the subject of the dispute was the bearing of the damages arising from fraudulent card use. During the transactions performed with lost or stolen bank cards, in the vast majority of cases the perpetrators committed the fraud by knowing the security codes (PIN code, CVC code) belonging to the bank card. In these cases financial service providers consistently rejected responsibility for the loss, citing the customers' gross negligence. There were also examples of unfortunate events when petitioners, as victims of a crime, disclosed their bank card data via a link to a known website, which resulted in the execution of bank card transactions not intended by them. In these cases financial service providers cited the petitioners' gross negligence as prior to disclosing their bank card data they failed to ascertain that they were doing so on a real website, hence they usually refused to reimburse the loss. It happened in one case that the financial service provider reimbursed the full loss as the petitioner provably did not disclose his bank card data the fraud was committed without it.
PROPOSAL OF THE BOARD
FOR PROBLEMS RELATED TO DEBIT CARDS
It is a feature of the product that consumers “communicate” with the service providers not in person, but most often via ATMs or card reader terminals. The safekeeping and secure use of the PIN code to be applied for the identification of the card bears utmost importance.
The vast majority of disputes related to credit card products arose in connection with those credit card contracts that petitioners concluded upon the purchase of goods, simultaneously with a trade credit contract, contained in the same instrument. According to the contracts, the loan assessment related to the credit card and the dispatch of the credit card to petitioners took place after the fulfilment of the instalments arising from the trade credit contracts within a certain period of time. There were a few petitioners who utilised the credit line approved for the credit cards and accumulated a debt from that. In several cases the credit cards were not activated, but due to the charging of the credit card and account-keeping fees and the non-payment thereof by the petitioners, after the due repayment of the trade credit the petitioners accumulated credit card debt. These disputes typically ended with settlement agreements, as financial service providers allowed repayment by instalments at preferential interest rates or free of interest, or they forgave the debt in the case of smaller amounts. During the procedures the Board found that upon contracting, petitioners did not take into consideration the fact that they concluded a contract for two products, they were not aware of the features of credit cards and failed to peruse the usage and conditions, particularly the interest conditions. Disputes related to the use of credit cards often ended with the result that during the hearing petitioners obtained detailed information on the usage of credit cards, received a response to all of their questions and based on that they could reassuringly decide whether or not they wish to use credit cards in the future.
Unauthorised use of credit cards was the subject of financial consumer disputes several times. During an unauthorised use, the petitioner's credit card account was debited and high amounts were transferred to foreign bank accounts with the misuse of the petitioner's data after communicating over the phone. It turned out during the hearing that the misuse of data took place within the family, which was followed by filing criminal charges. The service provider did not fulfil the petitioner's request, i.e. the cancellation of the debt, but it suspended its claim for the payment of the debt until the police investigation is closed.
In credit card-related cases, if the contract was terminated due to the petitioner's default, the financial service provider typically assigned the receivable. In certain cases petitioners disputed both the legal basis and the amount of the claim. The financial service providers maintained the claim, in terms of its legal basis, in all cases, but in some of the cases they forbore from collecting it or partially waived it on the principle of equity.
PROPOSAL OF THE BOARD
FOR PROBLEMS RELATED TO CREDIT CARDS
Financial service providers should always emphasise prior to concluding a contract that the hire purchase loan contract also contains a credit card agreement. Consumers should be informed separately on the features of credit cards.
Consumers should read the contract prior to signing it, listen thoroughly to the information provided and if they have any question they should ask it before signing the contract. If they are uncertain, they should not sign the contract until they receive a reassuring answer to all of their questions. Consumers must be aware of the fact that the purchase of the product against payment by instalments is not identical with a hire purchase loan.
CREDIT AND LOAN TRANSACTIONS
A large number of disputes related to loan contracts originally related to foreign currency-denominated contracts. In the case of foreign currency-denominated credit and loan transactions, in a substantial number of the petitions, petitioners cited the invalidity of the loan contracts, for which they stipulated the following causes: their contractual intention was not aimed at the conclusion of a foreign currency-denominated contract; upon concluding the contract, the financial service provider did not provide adequate information on the exchange rate risk and the conditions of the contractual scheme. In a large number of cases, based on the position of the petitioners, foreign currency did not appear in their contracts, the loan amount was disbursed in forints and they did not understand why they had to bear the higher burden arising from exchange rate fluctuation. In addition to disputing the validity of the contract, it was also a frequent assumption of petitioners that if the contract is invalid then no payment obligation whatsoever exists any more, and in fact the financial service providers should repay the amounts paid so far. Some petitioners argued that they read the information on online forums that since their contract was invalid no instalments are needed to be paid. These petitioners, based on the often misleading information provided on online forums, suspended the payment of instalments hoping that their contract was fully invalid or expecting that based on the result of the procedure conducted at the Board financial service providers would waive the claim in part or in full. In these cases petitioners accumulated considerable arrears, and the magnitude of their already existing arrears was further increased by substantial default interest.
Financial service providers maintained their position in these cases as well, according to which they deem the contract valid until the invalidity thereof is established by the court and they were willing to negotiate solely in respect of the settlement of the outstanding debt. Financial service providers usually took into consideration the petitioners' circumstances that gave cause for equitable treatment. In such cases it helped the resolution of the case that at the hearing the financial service provider or the acting panel outlined the key features of the foreign currency-denominated contract scheme. Petitioners received in all cases general information also on the fact that the invalidity of a contract and the legal consequences thereof (e.g. restoration of the original status) are claims that may only be enforced by court. If petitioners understood what caused the increase in debt and accepted what was said by the financial service provider, in most cases the parties initiated a compromise on the possibilities of settling the outstanding debt. Service providers did find it feasible to waive the debt in full; when a petitioner was able to pay a higher amount in one sum, then the remaining debt was forgiven in part or in full.
A large number of petitions were received in which although petitioners disputed the validity of the contract, they accepted the fact that they had a debt, and wished to settle it. They mostly asked for debt forgiveness citing equity arguments. In these cases it created difficulties that petitioners often had no specific financial offer for the settlement of their debt and expected the financial service providers to somehow resolve the situation. Most frequent causes cited by petitioners included changes in their living conditions, decrease in their income, job loss and illness. Cases related to these types of petitions of equity rarely ended with settlement agreements. In order to resolve equity petitions, financial service providers recommended to submit a specific petition, containing documentary evidence of the circumstances to be taken into consideration based on the principle of equity. In some of the cases they proposed the joint sale of the property serving as collateral for the loan, as they saw higher probability of debt forgiveness after the prepayment from the purchase price.
In the case of mortgage loans, the Board most often received equity petitions from customers with terminated contracts due to payments in arrears over 90 days, where the debt had already been transferred to a debt management company. Petitioners argued in several cases that based on MNB Recommendation 1/2016, financial service providers should provide them with an opportunity to resolve the case and forgive part of the debt. Financial service providers usually did not rule out selling the collateral property, but in most cases this was not acceptable for the petitioners, as they had no other accommodation. Some of the financial service providers offered no other solution for petitioners, and even denied their consent to participate in the NET programme of the National Asset Management Fund (Nemzeti Eszközkezelő). In these cases settlement agreement on the merits were rare, usually because petitioners as debtors were practically insolvent, and under the minimum monthly instalment offered by them it was unrealistic to expect the recovery of the loans, the amount of which was often several tens of millions of forints. In these cases the conclusion of a compromise was also often hindered by the fact that there had been already a foreclosure procedure in progress against the debtor, to which several service providers were parties, seeking enforcement.
The Act on the Conversion into Forints also gave rise to cases heard by the Board, as the said Act declared among others that within 90 days from the receipt of the notification on contract modification consumers were entitled to terminate the contract and make a final repayment to the service provider on condition that in such cases service providers were not entitled to charge any cost or fee to the consumer (preferential final repayment). A number of disputes arose from the inaccurate amount of final repayments. A petitioner indicated his intention to make a final repayment to the financial service provider, which in turn defined the amount to be paid. However, upon the final repayment the petitioner did not pay the exact amount, as a result of which the financial service provider treated it as excess payment. In this case the service provider could not be found in non-compliance, as it called the petitioner's attention to the fact that it could close the contract only upon the receipt of the exact amount during the final repayment.
In other cases, petitioners informed financial service providers in advance that they would make the final repayment from a loan taken from another bank, but failed to attach the related loan contract. Since the financial service providers saw no confirmation for the source of the repayment from a loan taken from another bank, they charged the fee legitimately. In some of these cases, financial service providers waived part of the fee on an equitable basis. In other cases, in relation to the charged or paid fee for final repayment, petitioners wished to enforce their claim for the reimbursement of the final repayment fee citing that they received no proper information with regard to the possibility of terminating the contract and that the fee charged upon the final repayment differed from that of specified in the confirmation of debt.
The law maximised the amount of instalments in the case of consumers with loans tied to an accumulation account. Financial service providers kept separate records of the difference between the instalment chargeable on the basis of the contract and the maximum instalment payable. Several petitions arose due to the fact that after the statutory settlement, petitioners made a final repayment of their loan, however, financial service providers failed to indicate the amount of the difference, accounted for separately, on the confirmation of the outstanding debt. Due to the omission of service providers, petitioners faced the extra burden upon the final repayment, the payment of which caused a problem to them, particularly when the deadline allowed for the free of charge final repayment was close or the payment made later than planned generated additional extra burden (e.g. interest). Petitioners usually did not dispute the existence and the amount of debt, but criticised the late notification thereof and in view of this asked for the payment of a certain amount. Service providers did not rule out the reimbursement of the confirmed loss; however, petitioners were unable to confirm the loss.
One type of the petitions received in relation to credit and loan transactions was closely related to the refinancing of loans. Petitioners disputed the amount of the fee charged upon loan refinancing; the absence of the actual refinancing was a frequent problem. In several cases, petitioners made arrangements for the refinancing or the final repayment, but forgot to fill in or submit the application for final repayment. The amount used for the final repayment appeared on the financial service providers' technical account, but the actual closing of the loan to be refinanced or closed did not take place, thus it continued to accrue interest.
In some of the petitions petitioners contested the basis of foreign currency-denominated lending. In the case of foreign currency-denominated loans, the settlement laws did not deal with the exchange rate difference arising from the different currency of disbursement and repayment. In the case of foreign currency-denominated loans consumers faced the fact that until the conversion into forint, at times their principal debt communicated in forints rose compared to the loan disbursed in forints instead of gradually decreasing. In the opinion of the petitioners, this does not comply with the definition of loan set out in the Civil Code. They recalculated their outstanding loan debt, claiming that the interest rate can only be the central bank base rate hence in their view service providers must repay the amount due to them. In view of the fact that petitioners basically cited invalidity when they recalculated their debt, the Board terminated the procedures in these cases.
As regards the mortgage loans, the amount of the fee charged for final repayment often gave rise to a dispute between the parties. Several petitions disputed the percentage rate of the prepayment or final repayment fee. In these cases, petitioners typically considered the rate specified in the contract as governing, although the contracts stipulated in all cases that it would be charged in accordance with the conditions specified in the prevailing announcement, which was used by service providers correctly. In several cases financial service providers did not accept the petitioners' arguments, but after a repeated review they proposed a settlement offer and refunded part of the fee charged for final repayment.
In the case of personal loans, it occurred several times that a nominal principal debt may as well have trebled after the termination of the loan and the assignment thereof to a debt management company – in view of the fact that consumers failed to settle their debt – due to the default interests charged by service providers, the payment of which caused considerable difficulties. It was a general feature of personal loan contracts that they entailed substantial costs and consumers did not act with due care when they took these loans. In a number of cases the parties managed to agree in the restructuring of the debt or the service providers offered to reduce the interest rate.
In the case of consumer credits a number of petitions related to payment protection insurance. Petitioners cited that they were not warned that besides the loan, advertised with a percentage-based APR, they also took out payment protection insurance. The reason of this phenomenon is that the loan applications were submitted at the merchants acting as an agent, where the petitioners were much more interested in the technical parameters of the products than the conditions of the loan. Several petitioners claimed that they only signed the loan application form, and did not tick off the payment protection insurance option. In the case of these petitions, the financial service providers proposed, as a settlement agreement, to cancel the payment protection insurance, or if it could be confirmed that petitioners had already indicated their intention to terminate the insurance previously, financial service providers cancelled the insurance premiums retrospectively. It was often the case that petitioners failed to check the loan conditions carefully, as a result of which, in the case of trade credits with high APR, they incurred substantial instalment obligation, of which they complained subsequently. In such cases, at the hearings the acting panels first of all made efforts to present how the instalments were accounted for, and to make consumers understand that the principal does not decrease to the degree expected by petitioners due to high interest rates. In these cases only a small number of disputes ended with a settlement agreement.
In a number of cases, the underlying cause of disputes related to hire purchase loans was that in the opinion of consumers the quality of the product purchased from the loan was inferior and they wanted to return it. However, they reported their intention to withdraw from the transaction after the deadline, thus it was not possible to take the goods back. Petitioners unfoundedly complained that they had to continue to pay the instalments of the loan taken for a product of substandard quality.
Several petitions were received, in which petitioners had several loans with a financial service provider – typically with financial service providers offering “quick loans” – and they disputed the way the instalments were accounted for. In these cases petitioners incorrectly indicated the contract or reference number on the postal money order or the payment order, thus the instalment was not posted to the loan that it was intended for by the petitioner, as a result of which he incurred default interest. In these cases financial service providers, in view of the consumer's mistake, repaid the default interest or credited it to the loan account, and the parties were able to conclude a settlement agreement.
Petitioners often cited the failure of the financial service providers' duty to provide information or the inadequacy of the information. In these cases the acting panels primarily examined the provisions of the contract, in view of the fact that there is limited room to prove the absence or the inadequacy of the information.
The Board received a number of petitions in relation to state subsidy for housing purposes, and particularly to pre-financing loans, in which petitioners claimed that financial service providers ignored the fact that they reported the birth of their child in due course and they fulfilled their contractual undertakings. In their opinion, financial service providers illegitimately charged the contribution paid by the state during the repayment of the pre-financing loan. During the procedure petitioners were unable to prove that they complied with their reporting obligation in due course, therefore the acting panels terminated the procedure.
In relation to technical accounts linked to loan contracts with an exchange rate cap scheme (accumulation account loans), petitioners reported as an additional problem that they were unable to find out the reason why the service providers kept a debt against them on their records and to calculate the amount thereof. At the hearings service providers presented and deduced in detail the debts recorded on these technical accounts, thus the acting panels terminated the procedures.
Several petitions related to the participation in the programme of the National Asset Management Fund. One of the petitioners criticised that the service provider – despite the fact that he complied with the statutory conditions – rejected his application to participate in the programme of the National Asset Management Fund, citing business policy reasons. The financial service provider's reason for rejection was grounded, thus the procedure was terminated. In fact, the reason for the rejection was partly the non-compliance with the statutory conditions (e.g. the loan amount exceeded 90 per cent of the property's market value, the mortgagee of the loan and the lender were two different financial service providers), and in part business reasons, as the financial service provider could hope for higher recovery upon selling the property. In the case of these petitions procedures ended with termination as well.
The Board found that in most of the cases the interpretation of compliance with the eligibility criteria for participating in the programme of the National Asset Management Fund caused difficulties to petitioners. In several cases the person participating in the programme and the vulnerable relative were two different persons. As a result of this the applicant and the vulnerable person satisfied different conditions, however the participation was conditional upon joint compliance with several conditions. The definition of the notion of close relative served as a basis for several disputes.
PROPOSAL OF THE BOARD
IN RELATION TO CREDIT AND LOAN TRANSACTIONS
It is necessary to inform consumers that the submission of a complaint to the service provider or a petition to the Board does not entail the suspension of their payment obligation. The instalments should be paid by the due date even after filing a complaint or petition, as the parties' contractual obligations continue to exist.
If the repayment of the instalments of an outstanding loan causes difficulties to consumers and they apply to the financial service provider for payment facilities, they should propose a realistic settlement agreement to the service provider, as it is also in the interest of consumers to find a real solution in the matter. Accordingly, if a consumer's outstanding debt is HUF 20,000,000, an offer of HUF 10,000 monthly instalment cannot be regarded as a realistic settlement agreement proposal, as presumably this amount would not cover even the interest. A realistic proposal may increase the chances of a settlement agreement.
In the case of loan refinancing or final repayments, financial service providers always proceed on the basis of an application. Service providers should provide adequate and accurate information on the conditions necessary for a transaction. The declaration of a consumer can be proven if they submit their application on the dedicated, paper based standard forms, and ask the administrator to acknowledge the receipt thereof on a copy, which must be retained by consumers.
Consumers should obtain information, prior to concluding the contract, on the conditions of the given loan or credit transaction, with special reference to APR, and other costs not included in the APR, thereby avoiding facing with unexpected expenses later. However, service providers also have special responsibility for providing necessary information. Consumers must be informed of the contractual conditions in a simple and easy to understand way. In the product brochures service providers should highlight the circumstances that most frequently give rise to disputes and call the attention of consumers to the special features of each transaction.
MOTOR VEHICLE FINANCING, PROPERTY AND FINANCIAL LEASE
In the case of new petitions received in 2016 in relation to motor vehicle financing, property and financial lease contracts, it could be observed that for the majority of the petitioners it was still difficult to meet their payment obligations even after the statutory settlement and the conversion into forints, performed on the basis of Act XL of 2014 and Act CXLV of 2015, respectively.
Disputes related to vehicle purchase financing loans and lease contracts were partially attributable to the foreign currency nature of the contracts at the time of conclusion. Petitioners were unable to pay the higher instalments resulting from exchange rate fluctuations, thus the loan contracts were terminated. In addition, in the case of fixed instalment loan contracts the principal debt did not change or hardly changed due to exchange rate fluctuations, hence petitioners requested that financial service providers should assume part of the extra burden arising from exchange rate fluctuations. It was rejected by financial service providers in all cases. Another problem was that the petitioners' position was that by paying fixed instalments they acted in accordance with contract therefore they wanted to continue paying fixed instalments until the end date of the maturity set in the contract. In these cases the parties usually were unable to reach a compromise.
Financial service providers converted the foreign currency-denominated car purchase financing loans in accordance with the provisions of Act CXLV of 2015 on Resolving Issues Related to the HUF Conversion of Receivables from Certain Consumer Loan Agreements. As a result of this, in the first half of 2016 the Board received a large number of petitions related to disputes arising from car purchase financing loan contracts. The common feature of these procedures, related to the notification letters on the conversion of the car financing loan contracts into forint, was that a large number of petitioners disputed the amount of the outstanding debt or the repayment schedule thereof after the conversion into forints. In several cases, petitioners understood only at the hearing that the conversion of the debts took place not at the exchange rate that prevailed on the contracting date, hence the forint equivalent of the principal debt was registered in a higher amount than designated by them thus it also influenced the repayment schedule. At the hearings financial service providers most often provided a full description of the features related to the conversion into forints, often also deducing the specific calculation method in detail.
Settlement agreements for the repayment of the outstanding debt were concluded in several cases, even in such a way that in some of the cases financial service providers were willing to reduce the outstanding debt or to offer the possibility of repayment by interest-free instalments.
There were only a small number of cases in which petitioners did not agree to the conversion into forints, thus their contracts continued to be denominated in foreign currency. In these cases financial service providers showed willingness to convert the outstanding debt into forints at the prevailing exchange rate. There were petitioners who disputed the conversion into forint in their petitions – although the statutory conditions of these were fulfilled – however, based on the information received at the hearing, they changed their position and they managed to agree with the financial service provider on the continuation of the instalments under more advantageous conditions.
In the case of petitions belonging to the other group of petitions related to car loans and lease contracts, petitioners disputed the validity of the contracts. In several cases of this petition type, despite the fact that petitioners cited invalidity, they were unable to dispute the debt on the merits and made objections of general nature (e.g. they disputed the signing authority of merchants/agents acting upon the conclusion of the contract). Financial service providers refused to acknowledge the contract as null and void, and deemed the cited reasons for nullity ungrounded. They maintained their position that they would consider the contract valid until the court declares it otherwise, namely null and void, and they would settle accounts with the debtor in view of the nullity only on the basis of a binding order stated in a non-appealable court ruling.
In a number of these cases a settlement agreement could be reached during the hearings. These agreements typically related to the reduction of the transactional interest rate or to the decrease of instalments by extending maturity. Experience still showed that service providers were willing to agree on debt forgiveness of a larger amount, if it was accompanied by a larger amount of payment by the petitioner.
Many petitioners failed to take into consideration when they took out the loan that the value of the vehicle would considerable decrease within a short period of time and fully depreciate by the end of the tenure. In some of the cases the vehicles were stolen, thus petitioners did not want to continue paying their debt in view of the fact that they no longer possessed and used the vehicle, thus – they argued – they would pay a debt in respect of an asset they did not even have. In these cases petitioners received detailed information at the hearing to the effect that irrespective of the said circumstances they had to meet their outstanding payment obligation; in view of this, they were already in a position to agree with the service providers on the potentially eased terms of payment.
In many instances petitioners disputed the legitimacy of the repossession of vehicles securing the loan, as well as the sales price of the repossessed vehicles. In these cases it could be established that financial service providers legitimately terminated the contract due to the debtor's default on the payment obligations specified in the loan contracts, and they duly documented the repossession of the vehicle securing the loan and settled accounts with regard to the vehicle's sales price in accordance with the contract. The respective contracts and the related business regulations stipulated that the valuation (minimum sales price, option price) had to be performed on the basis of the vehicle's EUROTAX value, and the amounts settled by financial service providers satisfied this criterion. In view of this, the Board was not in the position to accept the petitioners' arguments according to which it would have been possible to sell the vehicle for a higher price in the market.
The settlement of the exchange rate difference charged in respect of foreign currency-denominated integrated CASCO premium was a recurring case type. At the customers' request, the respective service providers prepared a statement – in view of the Supervisory Authority's resolution to this effect – on the exchange rate difference projected on the insurance premium enforced and collected in the interest. They refunded part of the exchange rate difference allocable to CASCO in 2015, in relation to which – due to the considerably different amounts – several customers initiated proceedings. Financial service providers cited that they were not in the position to depart from the method recommended by the supervisory authority, and by applying such method they fully complied with their reimbursement obligation. The position of customers was that it was the financial service provider that provided them with the information on the actually collected amount for the insurance premium under the title of exchange rate difference hence it has to refund it.
The position of the Board was that in cases in which financial service providers formerly calculated, at the customer's request, the exchange rate difference charged on CASCO premiums, petitioners had a good reason to expect that this served as a basis for the amount of the reimbursement.
Several petitions were aimed at the release of vehicle registration cards, in some cases linked to the option signed upon contracting. In these cases petitioners cited that in their opinion after the expiry of the five-year term of the option, service providers were obliged to release the registration cards. The Board examined the available contract documentation and established that the option and the depositing of the registration card were stipulated as two independent collaterals, they were not related to each other thus the expiry of the option does not entail the automatic release of the registration card. From the service providers' point of view, after the expiry of the option, the only collateral is represented by the registration card.
Petitions for the release of registration cards were ungrounded; financial service providers cancelled the option, but in view of the outstanding debt, they refused to release the registration card, which was permitted by the General Contractual Terms and the Business Regulations.
The majority of financial service providers made efforts to conclude a settlement agreement. Although in the responses they refused to propose a settlement agreement, in most of the cases they came to the hearing with a proposal. At the hearing they offered several alternatives to petitioners for the settlement of the debt, of which petitioners could select the most favourable one. When it was possible, financial service providers made an offer to extend the maturity of the contract or to reduce the amount of the monthly instalt.
Many petitioners made use of the possibility of selling the vehicle independently or with the cooperation of financial service providers, by delivering it to their business site, and offsetting the proceeds against the debt. After the offset, the debt was forgiven or a new agreement was concluded for the payment of interest-free instalments or a reduced interest rate.
PROPOSAL OF THE BOARD
FOR AVOIDING PROBLEMS RELATED TO MOTOR VEHICLE LOANS AND LEASE TRANSACTIONS
The disputes often arise due to inadequate information, the resolution of which may be facilitated by giving clear, easy to understand responses and explanations without use of technical terms. The Board recommends the financial service providers to make efforts to use communication that provides customers with uncomplicated, simple and easy to understand answers on the merits of their question.
CASES OF DEBT MANAGEMENT COMPANIES
The Board commences the proceedings against debt management companies – subject to the existence of certain statutory conditions – if it can be clearly established that the purchased receivable arose from a financial service legal relationship between a financial service provider supervised by the MNB and the consumer.
In these cases the legal predecessor financial service providers terminated the contract due to the petitioners' default, thus the amount became due and payable in one sum, and thereafter it was assigned. The cases brought to the Board were primarily related to personal loans and credit card transactions, but mortgage equity withdrawals and overdraft facility transactions also generated a high number of cases. Petitioners often objected to the assignment. They cited that they did not conclude a contract with the debt management company, nor did they consent to the assignment, hence it was illegitimate, and based on this argument they stated that they were unwilling to make payments to the debt management company. They requested that the assignor financial service provider should buy back the receivable. In these cases, petitioners, after having been informed of the rules of assignment, were cooperative in most of the procedures, with a view to resolving the real problem, i.e. their payment difficulties.
In the procedures initiated against debt management companies, petitioners essentially disputed the amount of the claims and petitions were aimed at possible ways of settling the debt. In order to ensure eased payment terms and payment by instalments petitioners often filed equity petitions. In equity cases debt management companies usually did not rule out payment by interest-free instalments in view of the petitioners' health, social and income situation. A large number of proceedings ended with a settlement agreement between petitioners and debt management companies. In the concluded settlement agreements it could be observed that debt management companies often forgave substantial part of the debt, particularly when a large amount was paid in one sum.
In several cases petitioners initiated procedures at the Board both against the legal predecessor financial service providers (bank, financial enterprise) that concluded the original contract and the debt management companies. In these cases petitioners also disputed the pre-assignment situation and the procedure of the legal predecessor, including the legitimacy of the termination, the amount of the assigned debts and the composition thereof by title, the recognition of the payments; in some of the cases they also complained of the absence of information on the assignment, the failure to send a payment warrant, and in several cases they raised the defence of the statute of limitations.
In some of the cases petitioners were not aware of the fact that any discount from the outstanding debt – after the assignment – may only be provided by the assignee debt management company.
There was also a case in which the financial service provider transferred the claim by assignment to a debt management company during the procedure conducted at the Board. In these cases, although the procedure commenced against the legal predecessor financial service provider, it cited that any legal declaration in respect of the debt and the settlement thereof can only be made by the legal successor financial service provider, i.e. the debt management company. Financial service providers, being sufficiently cooperative in these cases, ensured that the assignee appeared at the hearing and made a declaration on the merits, thereby supporting the possibility of conducting a successful procedure.
In a smaller number of equity procedures initiated against debt management companies, petitions were withdrawn. This was mostly attributable to the fact that during the hearing debt management companies informed petitioners of the documents and confirmation necessary for assessing their situation, so in view of them they can become eligible for some form of discount. After receiving this information, petitioners agreed to submit the instruments specified by the financial service providers and simultaneously decided to withdraw their petition to ensure that they can repeatedly initiate the procedure of the Board if necessary.
Settlement agreements could be reached for the closing of transactions also in cases, in which petitioners argued that the debt was barred by the statute of limitation – maybe already before the assignment thereof to the debt management company – and asked to declare the debt barred. Financial service providers, if they were unable to confirm by documents that the defence of the statute of limitations was ungrounded, often accepted the petitioners' position and undertook not to enforce the claim in the future and cancel it from their records.
In cases in which debt management companies were not cooperative, the conclusion of settlement agreements during the procedure was rather difficult. In some of the procedures the representatives of certain financial service providers were not authorised to make decisions even in those cases in which petitioners wanted to agree, without decreasing the amount of the debt, on the payment thereof by amending the deadline or the amount of the monthly instalments.
PROPOSAL OF THE BOARD
FOR CASES RELATED TO DEBT MANAGEMENT COMPANIES
In view of the fact that debt management companies enforce claims originating from terminated contracts, and becoming due in one sum, the interest burden of which is higher than earlier, it is particularly important to emphasise that the respective consumer should contact the debt management company as soon as possible, and make efforts to conclude an agreement for the settlement of the debt he does not dispute, whereas in respect of the disputed debt, he should initiate a complaint procedure and only upon the failure of which he may turn to the Board.