Directorate General Internal Market and Services
Retail financial services and consumer policy
Brussels, 30 October 2011
FIN-NET meeting21 October 2011
1.Â Â Â Introduction
Philippe PellÃ©, Deputy Head of Unit H3 in the Internal Market and Services DG welcomed the participants and particularly thanked Geoffrey Bezzina for his hospitality and the MFSA hosting of the FIN-NET meeting.
He welcomed the representatives of new FIN-NET members from Estonia â€“ the Consumer Protection Board- and from Hungary â€“ the Financial Arbitration Board at the Hungarian FSA. He has also welcomed a candidate â€“ the Portugal Arbitral, as well as an observer from the Swiss Ombudsman for Private Insurance.
FIN-NET members were also informed that the Centre for Mediation of the Croatian Chamber of Economy had asked about the possibility to participate in FIN-NET.
Since Croatia has not yet joined the EU, FIN-NET members were asked whether they agree that the Centre for Mediation of the Croatian Chamber of Economy becomes an observer in FIN-NET. FIN-NET members unanimously welcomed the Centre for Mediation of the Croatian Chamber of Economy as an observer in the network.
2.Â Â Â Recent developments in the area of financial services, consumer protection and redress
(a) Retail financial services
Mr PellÃ© gave an overview of recent developments in the area of financial services and consumer protection since the last FIN-NET meeting.
SEPA. Participants were debriefed about the state of negotiation of the SEPA End-Date Regulation which was adopted by the Commission in December 2010, and is currently under negotiations in the European Parliament and the Council.
Discussions in the Council and European Parliament have substantially endorsed most key features of the proposal. Remaining points for discussion in trilogues concern the issue of single vs. two end-dates, the rhythm of elimination of multilateral interchange fees on SEPA direct debits, legacy mandates for direct debits. Banks would be allowed for a transition period to offer consumers conversion from national bank account numbers to IBAN.
Ongoing discussions in the Parliament and Council relate to details or modalities of the proposal. An agreement is expected by the end of the year.
Mortgage Credit Directive. FIN-NET members were informed that the proposal for aÂ directive on mortgage credit was adopted by the Commission on 31 March 2011. The proposal is currently negotiated in the Council and Parliament.
It aims at creating a single market for mortgage credit with a high level of consumer protection while at the same time promoting financial stability by ensuring responsible lending to consumers.
Mr PellÃ© recalled that the proposal regulates two main aspects: (1) conduct of business rules and protection of consumers in relation to advertising and marketing materials; pre-contractual information; creditworthiness assessments, and early repayment;
(2)Â establishes a legal framework to ensure that all actors involved in the origination and distribution of mortgage credit are appropriately regulated (e.g. credit intermediaries, non-banks.) and introducing a passport for credit intermediaries.
Concerning provisions on ADR, the proposal requires Member States to put in place adequate ADR mechanisms and ensure that providers adhere to them.
Recommendation on access to a basic payment account. Mr PellÃ© also reported about the adoption by the Commission in July 2011 of the Recommendation on access to aÂ basic payment account.
The focus of the Recommendation is to ensure that any consumer who does not have access to payment services through the mainstream offer can open and use a basic payment at a reasonable charge.
The Recommendation contains also a provision on the ADR mechanism. Member States have been asked to take appropriate measures within six months and the Commission will review the situation in a year time.
FIN-NET members have been asked for any evidence concerning access to bank accounts â€“ they have been asked for information about disputes concerning the denial to open a bank account, either a regular bank account or a basic payment account. Members are asked to send this information to the following mailbox: â€¦â€¦â€¦â€¦â€¦.
FIN-NET members were also informed about the self-regulatory initiative on bank fees.
In August 2010, Commissioner Barnier invited the European Banking Industry Committee (EBIC) to identify and implement appropriate solutions to ensure proper understanding and comparability of bank fees throughout the EU.
Currently the European Commission and banking industry are discussing the proposed self-regulatory initiative.Bank account switching.
FIN-NET members were informed about the ongoing monitoring of the implementation of the Common Principles (CP) on bank account switching. Common Principles are an example of the self-regulatory initiative adopted by the European banking industry (EBIC) upon the request of the European Commission.
One member noted a misunderstanding of consumers as to the scope of the Common Principles. Another asked whether the scope could not be reviewed and possibly extended to other types of accounts.
The Commission representative confirmed observations that some consumers expect many other services beyond the current account to be switched and remarked that switching can take place between standardised products and services, such as current accounts.
MiFID â€“ on 20 October, the European Commission adopted proposals to revise the Markets in Financial Instruments Directive (MiFID).
These proposals consist of aÂ Directive and a Regulation and aim to make financial markets more efficient and transparent, in particular by improving the oversight of less regulated markets and by addressing the issue of excessive price volatility in commodity derivatives markets.
Main five different themes concern of the proposal concern:
– market structure
– transparency of trading
– commodity derivatives markets
– investor protection
– supervisory convergence.
PRIPS â€“ FIN-NET members were also up-dated on the planned initiative on Package Retail Investment Products, which concerns two strands of work:
product disclosures â€“ a new legislative instrument, introducing a simple, short and comparable ‘key investor information document’
sales rules â€“ Insurance Mediation Directive rule son insurance-based PRIPS is to be aligned with MiFID.
The Commission proposals on product disclosure and revisions to Insurance Mediation Directive are planned for first quarter of 2012.
Implementation of Payment Services Directive â€“ the table with TIPIK Communication Agency assessment of the implementation of articles relating to ADR has been circulated to FIN-NET members prior to the meetings. If members find any discrepancies they are asked to send their comments to the following mailbox: â€¦â€¦â€¦â€¦â€¦â€¦
(b) Up-date by DG Health and Consumers on proposals on ADR and ODRThrough videoconference, DG Health and Consumers representative updated members on initiatives on Alternative Dispute Resolution (ADR) and Online Dispute Resolution (ODR) planned for adoption by the Commission at the end of November 2011.
The main areas which will be addressed in the proposal for a directive on ADR concern:gaps in geographical and sectoral coverageuneven quality of ADR bodies wareness raising both for traders and consumers.
The planned Regulation on ODR aims at increasing confidence in the digital Internal Market. It will envisage the creation of an online platform, which will provide a single entry point at EU level for cross-border disputes concerning e-commerce.
Disputes will be automatically routed to the appropriate ADR. Both proposals- Directive on ADR and Regulation on ODR will be accompanied by a Communication.
A few members raised questions. In response, DG Health and Consumers’ representative explained that although there is a link between the 2008 Directive on certain aspects of mediation and the initiative on ADR, the former concerns court proceedings and does not regulate the issue of quality principles of ADRs nor does it address problems with filling gaps in the coverage of ADRs. As to the question how the online IT tool will direct disputes in those cases where there is more than one ADR competent to deal with them, it has been explained that in such situations parties will be given a choice.
The representative of DG Health and Consumers added that the proposal for a directive on ADR will leave freedom to Member States to decide how ADRs will be structured, with possibilities to have one residual scheme covering all sectors or sector specific schemes.
The G20 High-level Principles on Financial Consumer Protection were presented by a FIN-NET member who had been closely associated to their development.
These principles have been elaborated by the OECD in response to a G20 call to develop common principles on consumer protection in the field of financial services.
Their objective is to give greater importance to financial consumer protection in the measures and policies implemented in response to the crisis. The High-level Principles on Financial Consumer Protection were endorsed by the G20 Finance Ministers and Central Bank Governors at their meeting on 14-15 October 2011 (principles attached). Principle No 9 concerns the complaints handling and redress. The OECD together with the next G20 Presidency (Mexico) will work on the implementation of the Principles.
3.Â Â Â World Bank reports
David Thomas and Francis Frizon introduced a report drafted by them for the World Bank on Resolving disputes between consumers and financial businesses (presentation attached).
The report has two parts: Part 1 â€“ fundamentals for a financial ombudsman forms a practical guide based on experience in western Europe;
Part 2 â€“ describes current arrangements in central/eastern Europe and covers: Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia.
They have explained that the choice of countries was made by the World Bank. Part 1 has been drafted to serve as a benchmark for the comparison of ADRs in 11 countries.
They have stressed that the description of individual ADRs comes from questionnaires and information provided by individual schemes. They have thanked all those who have provided information.
It has been stressed that comments of FIN-NET members are essential to complete the report. FIN-NET members have been asked to send any comments in writing to Francis Frizon .fr and David ThomasÂ by 21 November at the latest.
FIN-NET members were also reminded that next year the ombudsman standards will be discussed at INFO 2012 â€“ the next annual conference of the worldwide network of financial ombudsmen, which will be held in Copenhagen on 18-20 September 2012.4.
Individual ADR schemes(a) Presentation of new FIN-NET members. Keit Hints presented the Hungarian Financial Arbitration Board, run by the Hungarian Financial Services Authority (presentation attached).
Andres Sooniste presented the Estonian Consumer Complaint Committee, operating at the Consumer Protection Board (presentation attached).
(b) Tour de table: any significant changes to coverage/constitution of existing members.
Poland he representative of the Polish Banking Ombudsman updated members about the ongoing discussions on three different aspects:
(i) broadening of the coverage in order to deal also with disputes submitted by SMEs
(ii) raising the upper limit of claims up to EURÂ 2Â 000 and
(iii) following the implementation of the Payment Services Directive â€“ broadening of the scope to include also payment services providers other than banks.the representative of the Arbitration Court at the Polish FSA informed about plans to introduce a new Consumer Arbitration Scheme, obliging businesses to take part in the proceedings before the Arbitration Courts.
Czech Republic â€“ the representative of the Czech Financial Arbiter informed that since 1Â JulyÂ 2011, the scope of the Czech Financial Arbiter has been extended to cover also consumer credit and collective investments.
Further extension into insurance is planned for 2012. He informed also that the structure of the Czech Financial Arbiter has changed and it is now located under the umbrella of the Ministry of Finance.
Romania â€“mr.Marian Berar a representative of The Union of Banking Mediators the RomanianÂ confirmed that there are no Alternative Dispute Resolution schemes in Romania and informed about problems that private mediators face.
Commission â€“ asked for updating information provided on FIN-NET website.
5.Â Â Â Exchange of experience and practices on important issues faced by FIN-NET members
(a) The representative of the UK Financial Ombudsman Service provided a presentation about their handling of mass claims, in particular mass claims related to Payment Protection Insurance (PPI).
In the UK, mass claims are dealt with either by the Ombudsman or the Regulator. Half of mass claims over the last ten years dealt with by the Financial Ombudsman Service concerned six main themes, one of them being PPI.
In 2010-2011, 206Â 000 new mass claims were received and 51Â % of them concerned PPI. It has been also stressed that the regulatory approach is adopted in the case of large scale issues concerning (i) widespread or regular failure, (ii) failures relate to breaches of law or regulation where consumers suffer loss or damage actionable by court proceedings (presentation attached).
(b) The representative of the Complaint Service of the Bank of Spain made a presentation about cases concerning Interest Rate Swap products sold together with a mortgage loan with the objective of protecting the client against increases of the interest rate.
The number of cases received by the Complaint Service was very high: 2906 cases in 2010, numbers falling in 2011. These products were sold on a massive scale by credit institutions. When assessing cases, the Complaint Services needed to asses whether the interest rate swap was sold as an investment product or a banking product and whether it fell under the stricter MiFID investment rules or under banking rules.
Consequently, it was also necessary to decide which authority was competent â€“ the Bank of Spain or CNMV.
Investigation proved that these products were mis-sold and consumers were not provided proper information (handout attached).
Other FIN-NET members reported about similar mis-selling cases â€“ in Italy a lot of mortgages were sold with an insurance covering the risk of increase in interest rates.
In Portugal, cases of mis-selling of interest swaps by one Spanish bank were also noted. In France, a few claims arose concerning mortgages denominated in Swiss franc.
(c) Discussion on the relationship between regulators/authorities and ADRs
Francis Frizon introduced the topic by recalling the situation in France, where aÂ supervisory authority (Prudential Regulatory Authority) deals with consumer protection.
This raises a question of the relationship between ADR schemes and supervisory authorities. There are countries in which the ADR is run by the supervisory authority, but even if this is not the case, the question is whether ADR schemes are expected or required to report about their activities to the supervisory authorities.
The Maltese Consumer Compliant Manager is located in the Malta FSA. However, it is aÂ separate entity.
The Maltese ADR can refer cases to the supervisory authority, and thus, its role can to some extent be assimilated to that of a whistleblower warning the supervisor about breaches of regulations/laws.
The complainant is informed that the case will be referred to the supervisory authority. However, s/he does not receive direct feedback on the supervisory/regulatory action undertaken as a result.
The only problem is the lengthening of the proceeding which may be a cause of concern with regard to the respect of the rules of good administration and has raised debate with the Ombudsman.
Similarly in Hungary, the Financial Arbitration Board is run by the Hungarian Financial Services Authority.
It is an independent body with powers to notify the HU FSA which in turn has legal power to fine the financial service provider, which tends to facilitate cooperation of financial service providers.
In France, the Ombudsman of AMF provides two types of services:
(i) answers queries, which can be also referred to other AMF divisions;
(ii) provides mediation, the procedure of which is confidential. The Ombudsman submits an annual report to the Board of AMF.
The French insurance mediator is very strong on applying the principle of confidentiality and does not provide the supervisor any information concerning names of businesses or subjects of complaints.
It does, however, provide an annual report, in which specific important issues are disclosed.
In Belgium, the situation differs, the Service de MÃ©diation Banques â€“ CrÃ©dit â€“ Placements is totally independent from the public authorities and provides the competent authorities with statistics.
The Insurance Ombudsman, which is also an independent institution, provides the competent authority with statistics every three months, and the authority can ask for additional information.
Both the competent authority and the Ombudsman can take measures against the company.
The Danish Mortgage Credit Complaint Board, as a private scheme, cannot refer breaches to the FSA but it sends all its decisions to the competent authority (including names of businesses and consumers).
In the UK, the Financial Ombudsman Service, which is totally independent from the supervisor, provides the supervisor with statistics (including names of businesses) every six months.
The discussion revealed that the arrangements concerning the relationship between ADR bodies and supervisors vary very substantially among members.
(d) Exchange of experience on dealing with cases which involve fraud attempts both from the consumer and the financial services provider
Francis Frizon introduced the topic by referring to the situation where a business, which suspects fraud on the part of the consumer, decides not to fulfil its contractual obligations for that reason.
As a result, a consumer may complain to the Ombudsman and the Ombudsman faces a difficult situation, where a business has not disclosed the information about fraud to the Ombudsman but the Ombudsman needs to take a decision.
The representative of the UK Financial Ombudsman Service noted that the UK Ombudsman can decide not to investigate the cases related to fraud as these should be handled by courts. It is not the role of the Ombudsman to fight fraud.
The representative of the Swiss Ombudsman shared his experience of dealing with cases involving fraud, like false signatures. He also noted that in some case the public prosecutor is involved.
Members discussed the issue of confidentiality in cases related to fraud and the need to inform authorities as well as the prosecutor. Francis concluded discussion on the topic of fraud by explaining his approach: when the insurance company claims that the consumer committed fraud and thus the company decided not to pay, he asks the company to go to court if they have evidence about fraud and if not, to fulfil the obligations of the contract.
(e) Implementation of the Commissionâ€™s Recommendation on harmonised reporting for consumer complaints â€“ presentation by Malta Financial Services Authority of its IT system.
A new reporting and case management system, designed to comply with the Commission Recommendation 2010/304/EU, will start operating from 1 January 2012. It will allow consumers to file a complaint and all supporting documents online.
The system will also allow the Maltese ADR to handle the case and communicate with consumers online. Consumers would be able to download all documents, including the final decision.
If other FIN-NET members were interested to learn more about the new case management and reporting system, they could send their enquiry to email@example.com.
6.Â Â Â AOB
Next meeting is scheduled for 20 March 2012 in Brussels.
FIN-NET said farewell to David Thomas and thanked him for all his contributions to the work of FIN-NET.
The Union of Banking Mediators of Romania