Decisions are made in favour of consumers on cases of MFI charging a commission for issuing a loan (according to the FOS)
The FOS practice in considering consumer complaints against microfinance institutions (MFI) testifies to the unlawfulness of the MFI charging a commission from clients for issuing a loan. Financial ombudsmen make decisions on such matters in favour of consumers, said Chief Financial Ombudsman Yuri Voronin.
Russia has adopted a new procedure for resolving consumer disputes with MFI since 1 January, 2020. Before filing a claim with an MFI, a consumer must contact a financial ombudsman who considers disputes with claims up to 500 thousand rubles. Acceptance and consideration of consumer complaints is performed by the FOS free of charge.
As Yuri Voronin clarified, a third of all citizens’ complaints considered by financial ombudsmen account for the retention of the commission for issuing loans by MFI. Consumer complaints to the FOS demonstrate that when an MFI loan is issued, the contract prescribes methods for issuing a loan, for which the amount of commission is set. For example, a resident of St. Petersburg took a loan of 23,000 rubles, of which the MFI withheld 575 rubles in the form of a commission for transferring funds to the customer’s bank card. After paying off the debt, the customer appealed to the financial ombudsman, who pronounced the commission unjustified and satisfied her claim to return the commission withheld.
“In such cases, when a fee is charged for issuing a loan, MFI explain that such actions are additional services that must be paid for by clients additionally. However, when granting a loan, the action of the lender to issue the loan is his direct responsibility, a standard action, without which the lender could not fulfil the loan agreement,” says Yuri Voronin.
When considering such disputes, financial ombudsmen pronounce commissions unreasonable for both issuing a loan to a bank card and for other methods of issuing funds to a consumer. The illegality of charging a commission for issuing a loan to a bank card is also confirmed by the courts of law, Yuri Voronin continues.
“According to consumers’ complaints, the financial ombudsman can say that the size of the commission is usually set either as a percentage of the loan amount (it can reach 3.5%), or in a fixed amount. Considering the commission insignificant, consumers usually agree to such spending. Many people do not know that the commission is illegal, and they can get it back by appealing to the FOS,” says Yuri Voronin.
Even if the consumer understands the illegality the commission charged, he or she is initially in a weak position and has to agree to a loan on such conditions. “In such situations, a consumer should file a complaint with the microfinance institution demanding the paid commission to be returned. If the consumer is not satisfied with the MFI’s response or it has not been received at all, the consumer has the right to appeal to the FOS,” the Chief Financial Ombudsman emphasises. It is advisable for an MFI to reconsider its work on resolving such claims from clients. It should be borne in mind that in the event that a dispute is considered by the FOS, the financial institution has a statutory obligation to pay a contribution to the fund for financing the FOS activities, the amount of which may significantly exceed the size of the commission, sums up Yuri Voronin.
The FOS considers disputes only of a property nature, and the consumer can appeal to the FOS with a monetary claim against an MFI, for example, to collect overpaid interest on the loan. An MFI client, prior to contacting the FOS, must comply with the claim procedure by sending a corresponding claim statement to the MFI. In case of disagreement with the response received from the MFI or failure to receive any response within the prescribed time limit, the consumer sends an appeal to the FOS. The term for considering the appeal is regulated by law and is 15 working days. MFI’s clients can learn more about the procedure for filing complaints on the FOS website www.finombudsman.ru.