20 august 2023, 13:48

Since 11 December 2023, NPF clients may appeal to the FOS in connection with improper transfers of pension savings

The Federal Law “On amendments to the Federal Law “On the Ombudsman for the Rights of Consumers of Financial Services” and to some legislative acts of the Russian Federation” has been passed. The document was officially published on June 13, 2023.

The said law grants the Financial Ombudsman Service (FOS) with jurisdiction to consider appeals from citizens concerning the illegal transfer of their pension savings from the Pension and Social Insurance Fund (formerly, the Pension Fund of Russia) to a non-state pension fund (NPF) or between non-state pension insurance funds, as part of the out-of-court dispute resolution procedure. The law also contains a number of regulations intended to enhance the current out-of-court dispute resolution procedure by the FOS between financial institutions and consumers, to increase the efficiency of consumer appeals consideration and, consequently, to protect the rights of consumers of financial services.

“The Financial Ombudsman Service, together with the Bank of Russia, the Ministry of Justice of Russia, and other involved parties, have been working on these amendments for over a year. The new jurisdictions which this law grants to the FOS will provide legal protection to a greater number of citizens, and the amendments to enhance the activities will render the process of considering appeals more effective,” Chief Financial Ombudsman Yury Voronin noted.

The main provisions of the law will enter into force 180 days after its release date.

Protection of Pension Rights

According to the amendments, starting from 11 December 2023 the Financial Ombudsman will start considering consumers’ appeals against NPFs containing claims for repayment of pension savings to the previous insurer due to non-conclusion of a mandatory pension insurance contract on the grounds that the application on transfer to an NPF or the mandatory pension insurance contract was signed not by the insured person or their authorized representative – the so-called illegal transfers from one fund to another. An appeal with such claims can be submitted to the Financial Ombudsman before a funded pension, fixed-term pension payment or lump-sum payment of pension savings is established if no more than three years have passed from the date when the claimant became aware or should have become aware of the violation of their right.

Furthermore, the Financial Ombudsman may currently consider consumer claims up to 500,000 roubles (except for CMTPL insurance). The amendments remove this restriction on consumer claims to NPFs under mandatory pension insurance contracts and non-state pension provision contracts. This is attributed, among other things, to the fact that citizens are often incapable of correctly assessing their claims in terms of the amount of a monthly pension, since complex mathematical calculations are used in determining the amount of monthly pension and claims are made for the entire amount of pension savings (pension reserves).

The law has eliminated the ambiguity regarding the eligibility of the Financial Ombudsman to consider appeals for the assignment of funded and non-state pension – such claims are now subject to consideration by the Financial Ombudsman Service.

Improvement of the Out-of-court Dispute Resolution Procedure

Practical implementation of the Law on the Financial Ombudsman during the last four years has revealed a number of regulations that need to be amended in order to handle citizens’ appeals more effectively. In this respect, the law contains a number of important changes.

Thus, it reduces from 15 calendar days to 7 working days a period of providing information requested by the Financial Ombudsman from state agencies, local self-government authorities, and other organizations. Such change is motivated by the fact that the current term does not allow obtaining information within the time frame, within which the appeal should be considered by the Financial Ombudsman (15 working days).

In the Financial Ombudsman’s practice there emerge situations when a complete consideration of an appeal requires information from a financial institution other than the one regarding which the appeal was received. The Law stipulates a shortened term for provision of such information – 5 working days (previously it was 15 calendar days).

The Law also grants the Financial Ombudsman the right to request documents and information necessary for consideration of consumers’ appeals from the consumers themselves.

There is a provision for the Financial Ombudsman to replace the financial institution that is the subject of the appeal with another financial institution. Such a right is essential due to the fact that several financial institutions may be involved in the relationship with the consumer and the consumer may not always be able to determine the ‘proper’ side of the dispute on their own.

For instance, a lending institution acting as an agent for an insurance company, when entering into a loan agreement, also enters into an insurance agreement with the consumer on behalf of the insurer. When the insurance services are subsequently cancelled, the consumer often seeks a refund of a portion of the premium and applies to the bank. However, as a rule, the “proper respondent” for such a claim would be the insurer. In these situations, the Financial Ombudsman is forced to deny the consumer’s claim and clarify that a legal relationship has arisen with the insurance company. This delays the process of restoring the consumer’s violated right. That problem has now been resolved.

One of the most important modifications is the clarification of the rule on the suspension of the enforcement of the decision. For example, an insurance company which does not dispute the amount of the insurance compensation calculated by the Financial Ombudsman, but disagrees with the amount of the contractual penalty for breach of obligation, may appeal the decision in court either in full or only in part of the contractual penalty. At the same time, there is no procedure for suspending the Financial Ombudsman’s enforcement partially, which means that the consumer does not receive the insurance compensation he or she is entitled to, for which there is no dispute, and has to wait until the court proceedings are over. The amendments remedy this situation and allow to suspend the enforcement of the Financial Ombudsman’s decision in part.

The amendments also deal with the arrangement of expert examinations by the Financial Ombudsman as part of the appeal consideration, the correction of clerical and arithmetical errors in the Financial Ombudsman’s decision, and other procedural matters.
 

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