UNIUNEA MEDIATORILOR BANCARI

EUROPEAN COMMISSION

Internal Market and Services DG

FINANCIAL INSTITUTIONS

Retail issues, consumer policy and payment systems

Brussels, 4 April 2011

MARKT/H3/IV

FIN-NET meeting 17 MARCH 2011
Minutes

1. Introduction

Mr Muylle, Head of Unit H3 in the Internal Market and Services DG welcomed the participants. He welcomed the representatives of FIN-NET candidates from Romania, Latvia, Estonia, Slovakia and Italia as well as an observer from Switzerland.

2. Recent developments in the area of financial services, consumer protection and redress

(2a) Retail financial services

Mr Muylle gave an overview of recent developments in the area of financial services, consumer protection and redress since the last FIN-NET meeting.

Participants were debriefed on the establishment of a new European Supervisory Authorities (ESAs) for the financial services sector: European Banking Authority (EBA), a European Insurance and Occupational Pensions Authority (EIOPA), and a European Securities and Markets Authority (ESMA). It was stressed that although the new authorities will be dealing with consumer's policy issues they will not be involved in solving of individual disputes between consumers and providers.

Mr Muylle updated members on the stat-of-play of a legislative proposal in the area of mortgage credit; a directive is foreseen for the adoption by the end of March 2011. The proposal has two objectives: (1) to create a single market for mortgage credit with a high level of consumer protections and (2) to promote financial stability by ensuring that creditors, intermediaries and borrowers act in a responsible manner to prevent overindebtedness, defaults and foreclosures. Concerning provisions on ADR, the proposal will request that an appropriate ADR mechanism are in place and will also request that providers adhere to ADRs.

He also reported on another legislative proposal: on access to a basic payment account, which is to be adopted in the coming months. This initiative will aim at ensuring that consumers who do not have a bank account can access basic payment services, since nowadays access to payment services is a precondition to fully benefitting from the internal market and enhancing social inclusion. It was explained that the Commission plans to adopt be a light-touch regulatory initiative. Concerning provisions on ADR, it will require MS to put in place ADR mechanism and ensure that providers adhere to them.

Thirdly, he reported that the European Commission launched a wide ranging consultation on the review of the Markets in Financial Instruments Directive (MiFID). This consultation, which was closed in February 2011, sought views of relevant stakeholders on a range of potential changes to the existing legislative framework of MiFID. The proposal for the review of MiFID is to be expected in July 2011.

Fourthly, European Commission is working on the initiative on packaged retail investment products (PRIPs). The Commission is going to introduce a new cross-cutting legislative instrument for pre-contractual disclosures about investment products and use amendments to existing legislative instruments (the Insurance Mediation Directive (IMD) and MiFID) to achieve consistency in sales rules. The public consultation on PRIPS closed in January 2011. Next steps are expected to be taken by the end of the year.

Lastly, participants were informed of initiatives in the insurance sector, namely ongoing revision of the insurance mediation directive (IMD) and work on the proposal for the insurance guaranties schemes.

(2b) UCITS

The Commission services representative briefly updated the participants on the on-going work concerning the review of the current framework applicable to UCITS depositaries and introduction of new provisions on the UCITS manager's remuneration, with the view of improving the level of UCITS investor's protection (UCITS V). The new proposal will clarify the tasks of UCITS depositary and strengthen its liability towards investors. It will also include cross-sectoral policy developments i.e. remuneration of managers and sanctions.

Concerning UCITS IV the Commission representative have explained consequences of the introduction of the management company passport. He explained that the management company passport would allow the management company to manage the UCITS fund on a distant basis. In such a situation, the management company and the UCITS will be situated in different Member States. UCITS IV directive defines which activity is subject to the laws of UCITS home Member States and management company's home Member States. Along this line, the directive allocate supervisory responsibilities. He concluded that the introduction of the management company passport will require a lot of cross border co-operation between supervisors and may also require more co-operation between ADRs in dispute resolution.

Concerning implications of UCTIS IV Directive for the FIN-NET arrangements as well as for the Memorandum of Understanding, one FIN-NET member reported on the proposed implementation of that directive and raised a question of how it could influence the operation of FIN-NET. He highlighted the issue of handling cross-border disputes when UCTIS will be regulated in the Member State A and the management company in the Member State B. He reported on the planned implementation of UCITS IV in the UK which would extend the jurisdiction of the UK ADR in the situation when:

- UCITS regulated in another Member State is managed by the management company's branch established in another Member State but the home-state regulator of the management company is the UK competent authority,

- UCITS regulated in the UK is managed by the management company's branch from another Member State and the management company is also regulated in another Member State.

A discussion followed but no other FIN-NET member raised similar concerns.

3. Public consultation on ADR

The Commission services representative updated members on the work carried out by DG SANCO in respect to ADR. She referred to the public consultation on ADR, which was launched on 18 January 2011. She also briefly summarised the outcome of a public hearing on ADR held together with the European Parliament on the March 16 and updated members on the follow-up to the consultation.

She recalled that the initiative on ADR is of great importance for the Commission and is included in the Single Market Act. Commission is working on the initiative which will increase the confidence of consumers in the single market by ensuring easier, faster and cheaper out-of-court resolution of disputes. The main areas, which need to be addressed concern: gaps in geographical and sectoral coverage, adherence of traders to ADR and awareness raising both for traders and consumers. The need for ADR schemes is growing especially given the increase in online shopping. The Commission's legislative proposal is scheduled for the end of the year. It is possible that the Commission will present a package: a framework directive on ADR to fill in the gaps in the coverage and ensure that ADRs comply with the principles in the ADR Recommendations and a Regulation on online dispute resolution, as foreseen in the Digital Agenda.

Francis Frizon, who represented FIN-NET at a public hearing, informed members about the conference and stressed that FIN-NET should be an important source of experience on cross-border dispute resolution. Other members agreed with the need to raise awareness about ADR among consumers, e.g. by obliging operators to inform consumers about ADRs.

Members discussed operation of ADRs schemes and reported on practical problems related to ADR, including: the lack of resources and training, the lack of commitment of traders/service providers to ADR schemes, especially in case of on-line services, the overlapping competences of ADRs (when there are a number of ADRs for the same sector and services) on the one hand, and gaps, on the other hand.

The Commission services representative emphasised that the Commission approach is aimed at improving existing systems with aim of enhancing their effectiveness and efficiency. She also noted that the Commission is not intending to establish a pan-European ADR as the principle of subsidiarity has to be taken into account.

A few FIN-NET members expressed their regret that the network did not manage to agree to send a common reply to the consultation.

4. Public consultation on collective redress

The Commission services representative debriefed members on the Commission’s public consultation on collective redress. The consultation was launched on 4 February 2011 and will last until 30 April 2011. The consultation will attempt to identify common legal principles that should underpin collective actions across the EU. As foreseen in the Commission Work Programme, the Commission will adopt, by the end of 2011, a Communication aimed at presenting the general principles relating to collective redress and future policy lines.

Members discussed challenges of collective redress and one member explained how politically sensitive the issue of collective redress is in his Member State.

5. Recommendation on FIN-NET

A discussion paper on the possible initiative on enhancing functioning of FIN-NET was sent to members prior to the meeting. Mr Muylle draw attention to the number of issues that could be addressed in the initiative on FIN-NET: addressing gaps in FIN-NET coverage, raising consumer awareness of ADRs and FIN-NET and reviewing of FIN-NET Memorandum of Understanding (MoU). He also raised a question whether MoU, which governs operation of the network, should become obligatory.

Malgorzata Feluch recalled that there are already directives in the area of financial services mandating creation of ADRs and the question arises how to ensure that all ADRs responsible for dispute resolution in financial services join the network and co-operate in solving cross-border disputes. Mandating membership in FIN-NET would certainly address the issue of gaps in FIN-NET coverage. She also raised a question whether FIN-NET MoU needs to be revised. The MoU outlines the mechanisms of handling cross-border complaints, the role of the nearest scheme and the assistance to be provided by the nearest scheme to the consumer, the role of the competent scheme, the language of the dispute settlement and obligations concerning exchange of information and provision of information to the Commission services. Access to the Memorandum of Understanding and the network is open to any scheme which is responsible for out-of-court settlement of disputes in financial services, provided it complies with the principles set out in the Commission Recommendation 98/257/EC of 30 March 1998 on the principles applicable to the bodies responsible for out-of-court settlement of consumer disputes. The question was asked whether mediators who are complying only with the Commission Recommendation 2001/310/EC (applicable to ADR bodies that bring parties together to convince them to find an agreement) should be also eligible to join FIN-NET. A question was also raised whether action at EU level enhancing functioning of FIN-NET was needed and whether it should be binding or not.

Members reflected briefly on the presented issues. They were of the opinion that the there is a need for action in the area of financial services. Some of them stressed the need to enhance confidence of consumers in the internal market for financial services by enhancing both domestic and cross-border dispute resolution. One member insisted that there is a need to ensure that ADRs cover the whole financial sector and they join the network. The issue whether FIN-NET Memorandum of Understanding should become binding raised some controversy.

One member proposed a peer pressure as an alternative to mandating all ADRs operating in financial services to join the network: FIN-NET members could get in touch with those ADRs which are not members and by explaining how the network operates and what benefits its membership brings encourage them to join the network.

Some members were of the opinion that EU legislation mandating creation of ADRs could be effective in addressing gaps in the coverage. Members also agreed that there is a need to bring all existing ADRs into the network. Some remarked that there is also a need to ensure that the network functions efficiently.

The Commission representative emphasised that FIN-NET can only function properly if all sectors and Members States are covered.

It was agreed that FIN-NET members will submit written replies to questions raised in the discussion paper by 15 April at the latest.

9. Exchange of experience and practices on important issues faced by FIN-NET members

Two FIN-NET members (Commission de Surveillance du Secteur Financier Luxembourg; Bundesverband Öffentlicher Banken Deutschlands, Germany) shared their experience in handling cases.

The representatives of the CSSF explained the role of its scheme. She explained that CSSF is a mediator and its decisions are not legally binding. Its approach is based on firstly asking client to seek solution with the management of financial institution and only when no solution is found, the CSSF intervenes. Some examples of litigation handling in 2010 were presented.

The representative from Bundesverband Öffentlicher Banken Deutschlands (VÖB) – Association of German Public Sector Banks presented its conciliation procedure: preliminary proceedings at the customer complaints office (Kundenbeschwerdestelle - KBS) and the procedure with the Ombudsman. The representative of VÖB stressed that the culture of litigation has changed recently and now they try to see if similar cases have taken place in other Member States or at the European level. He also presented some practical examples of case handling, including challenges posed by the circumstances of the case, the arguments made by the financial entity and the final outcome.

7. European and national developments concerning ADR schemes

A Commission services representative gave a presentation on the implementation of the Commission Recommendation on the harmonised methodology for classifying and reporting consumer complaints and enquiries. It was followed by a tour de table concerning its implementation by FIN-NET members.

It has been explained that consumer complaints are a key indicator of the Consumer Markets Scoreboard. The Commission has developed technical support to facilitate the transfer of data on consumer complaints to the Commission services. In addition, an IT software tool has been developed by the Commission services. This software tool can be provided free of charge to complaint bodies that are willing to adopt the methodology and provide data to the Commission. This software tool is suitable for complaint bodies that currently do not have complaint classification software, or have relatively simple software. Organisations who would like to change their IT systems can apply for financial support from the Commission – a grant scheme will be published in April. FIN-NET members will be informed of it.

The presentation was followed by discussion of FIN-NET members concerning the utility of the tool. About one third of FIN-NET members have decided to use the tool. The Commission tool was considered by some as very limited because national schemes have more classifications. As it was pointed out by some members, there is a problem with downloading the tool, and some shortcomings of technical data. Members posed a question about the timeframe concerning the availability of the final version of the tool. They were informed of an indicative timetable in April. Also, they were updated that the final version will not introduce any major changes, covering only a limited scope of technicalities.

6. Study on the use of age, disability, sex, religion or belief, racial or ethnic origin and sexual orientation in financial services

A Commission services representative presented the outcome of the study. The study analysed the use of the factors such as gender, age, disability, racial/ethnic origin, religion/belief and sexual orientation in the provision of financial services. It collected reported complaints of discrimination in this area. The study results confirmed the existence of problems of discrimination in the provision of financial services that need to be addressed through adequate measures. Recommendations for action at EU, national and industry level were given.

The presentation was wrapped up with the following questions:

Does your ADR: know about and work with the national equality body in issues regarding discrimination in financial services?

Does your ADR deal with complaints concerning problems that occur prior to the conclusion of a contract (e.g. denial of an insurance policy)?

FIN-NET members reflected on the questions giving practical examples of discrimination cases in the insurance sector linked to age and health factors. The member from Belgium reported that if a person does not have life insurance, he/she cannot get a mortgage loan. Members exchanged practices of national legislation preventing discrimination.

8. Individual ADR schemes

(a) Tour de table: any significant changes to coverage/constitution of existing members.

UK member informed about the reorganisation of the regulatory apparatus by the government and announced that Caroline Mitchell will become FIN-NET member as David Thomas is retiring.

LT member announced that the Parliament adopted a new law on consumer credit which enters into force on 1 April 2011. The law provides that decisions of the Consumer Protection Authority will be binding for all financial institutions. The Consumer Protection Authority will have a possibility to fine up to 35,000 euros. It will cover all credits up to 70,000 euros and provides that the APRC cannot exceed 250 %.

FI member indicated that there were changes in the law in the beginning of 2011 and now there are 5 members instead of 8, representing no interest groups any more.

(b) Presentation of candidate schemes: Romanian Uniunea Mediatorilor Bancari (Mr Marian Berar, Vice president) and the Consumer Rights Protection Centre from Latvia (Ms Baiba Vitolina, Director).

The representative of the Romanian ADR gave a brief overview of the activities of Uniunea Mediatorilor Bancari. Members were informed that Romanian Uniunea Mediatorilor Bancari consists of 5 to 10 mediator's offices in the most important cities which are affiliated with branches. Cases handled covered unfair contract terms, extra charges, and inability to repay. A fee for initial mediation is charged to one or both parties involved. He also stressed that a request for mediation can also be submitted during court procedures.

The representative of the Latvian ADR presented the responsibilities and the scope of activities of the Consumer Rights Protection Centre in Latvia, highlighting major problems it encounters in practice. CRPC is the civil authority under surveillance of the Ministry of Economics, which enforces the protection of consumer rights and interests.TheCRPCdeals with consumer dispute settlement in the area of financial services, namely unfair commercial practices, unfair contract terms, consumer credit. The CRPC representative indicated that a few years ago they had many actions against banks because of non-conformity of their contracts with the law. This has considerably decreased due to the intervention of the ADR scheme. Members were informed that the operation of CRPC is based on the Consumer Rights Protection Law and activities of CRPC are regulated by the Statute of CRPC.

(c) Non-EU ADRS – discussion of the status of observers and quests.

Non-EU ADRS are invited to participate as observers and guests. French members were supportive of that idea but it was concluded that agreement of the Steering Committee is needed beforehand.

10. Any other business

Link to the Commission grant possibility will be passed on to members as soon as published in April.

Presentations will be circulated to members.

The next FIN-NET meeting will take place on 20 October in Brussels, in case where there are no volunteers to organise it in their country. FIN-NET members interested in organising the autumn 2011 meeting are invited to contact the Commission services by mid-May.

Membership of the Steering Committee - a written call or interest will be circulated to members.