08 december 2021, 18:39

Chief Financial Ombudsman addresses Council for Financial Market Development under the Federation Council

Chief Financial Ombudsman Yury Voronin addressed a meeting of the Council for Financial Market Development under the Federation Council of the Federal Assembly of the Russian Federation, which was dedicated to topical issues of consumer protection in the financial services market. In his report Yury Voronin presented the results of the activities of the Financial Ombudsman Service, and also made several proposals to amend the current legal framework to improve the work of the institute of out-of-court dispute resolution between financial institutions and their clients.

For the operation time of the institute of out-of-court dispute resolution (since 1 June 2019), the Financial Ombudsman Service (FOS) has received 417,832 appeals and issued 237,813 decisions. Instead of 25 standard days, an appeal is processed in 16 days on average, which is absolutely unprecedented in terms of processing speed compared to similar bodies in the world, Yury Voronin said.

«The Financial Ombudsman Service has succeeded and taken its place in the financial consumer protection system. But our practical work has also revealed imperfections in the created mechanism, which need to be removed in order to improve the quality of protection of rights and interests of consumers of financial services,» the Chief Financial Ombudsman went on.

According to Yury Voronin, legislative amendments are necessary to expand Financial Ombudsman’s competence in resolving financial disputes. In particular, it is proposed to empower the Financial Ombudsmen to reduce the statutory or contractual penalty in case of its apparent disproportion to the consequences of the breach of an obligation on the part of a financial institution as well as to charge compensation for moral damage. «Now the Financial Ombudsman has to collect the penalty in all cases without exception to the full extent. As a result, financial institutions having in fact agreed with the Financial Ombudsman’s decisions still have to go to court to have their penalties reduced. Almost half of all the decisions contested by the financial institutions have been forfeit reductions,» Yury Voronin explained.

The absence of the right to claim compensation for moral damage creates a negative effect of incomplete protection of the infringed right at the pre-trial stage, said Yury Voronin. «And in almost half of the cases the consumers win, they are forced to go to court after the Financial Ombudsman’s decision to claim compensation for moral damage,» the Chief Financial Ombudsman said.

Part of the proposed changes relate to non-state pension provision. In particular, it is proposed to include in the Financial Ombudsman’s competence the consideration of disputes about illegal transfers of pension savings, consideration of claims about assignment of non-state pension, and also to exclude limitation on the amount of claims in disputes of consumers with non-state pension funds (at present the limit is 500,000 rubles).

As regards the process of consideration of appeals, it is proposed to empower the Financial Ombudsman to send enquiries to consumers of financial services relating to consideration of their appeals; to suspend the term for consideration of appeals in case of sending enquiries to the Bank of Russia, state authorities, etc.; to extend the term for provision of documents and information requested from a financial organization if such an organization has produced proof that it is unable to provide the requested documents and information within the time period established by law.

The Council for Financial Market Development supported the proposals to expand the Financial Ombudsman’s competence on the whole, but considered it necessary to hold additional discussions with legislators and civil society institutions.

The members of the Council also considered some of the other changes proposed by the Chief Financial Ombudsman to be worthy of contemplation. In particular, this concerns the initiative on the inadmissibility for financial institutions to submit evidence to the court that has not been submitted to the Financial Ombudsman. This does not apply to cases where it has been justified that it is objectively impossible to provide them to the Financial Ombudsman at the pre-trial stage of the dispute resolution process, similar to the procedure currently in place for providing evidence to the court of appeal. The members of the Council also support the idea of inadmissibility of recovery in favour of the assignee of costs incurred in connection with appealing to the Financial Ombudsman Service as well as recovery from the consumer and the Financial Ombudsman of legal costs of financial institutions associated with contesting Financial Ombudsman’s decisions.

The Council also agreed to explore the possibility of further extending the Financial Ombudsmen powers in a number of ways. These include lifting the limit on the amounts and types of claims handled by the Financial Ombudsman; interacting with financial market entities not currently required to organise interaction with the Financial Ombudsman Service; going beyond the financial market (e.g. dealing with social insurance disputes, bankruptcy of individuals).

The Council also noted a high social significance and relevance of the proposals of the Financial Ombudsman Service to extend the list of types of income that cannot be enforced. Thus, Chief Financial Ombudsman Yury Voronin proposed to extend the immunity for recovery of pensions received by borrowers, but intended for persons, whose representatives they represent; maternity (family) capital funds; subsidies for payment of housing and utilities, as well as compensation of expenses for payment of housing and utilities.

Members of the Council for Financial Market Development, taking into account the work done by the Financial Ombudsman Service, as well as a significant reduction in the burden on the judicial system, stated that the institution of the Financial Ombudsman has proven to be a quick and simple mechanism for protecting the rights of consumers of financial services.

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