The FOS releases the 2020 Activity Report with data on financial institutions
The Financial Ombudsman Service (FOS) has released a report on its activities in 2020, which contains, among other things, information on the handling of citizens’ appeals in relation to each financial institution.
According to Chief Financial Ombudsman Yury Voronin, the report has been prepared in accordance with the requirements specified in Article 13 of the Federal Law «On the Ombudsman for the Rights of Consumers of Financial Services». The document contains generalized information about appeals of consumers considered in 2020 by financial ombudsmen and decisions made on them with indication of names of financial institutions in respect of which they were addressed. The report also contains information on execution of Financial Ombudsman’s decisions by financial institutions, on appeals against the decisions and results of such appeals.
«Publication of such information illustrating the number and validity of consumers’ claims against particular financial institutions is a mechanism for regulating behaviour of financial market participants that encourages companies to resolve disagreements with their clients before they apply to the Financial Ombudsman. This information was first issued based on our performance in 2019, and we already see a positive trend in a number of areas based on the 2020 results,» Yury Voronin notes.
The difference between this report and the previous one is that the current document reflects information for the entire calendar year and covers the full work with appeals for all types of insurance and microfinance.
«When addressing the data in the report one ought to take into account that the absolute values concerning, for example, the number of appeals of consumers of financial services do not represent the real frequency of appeals in respect of a particular financial institution. It is only natural that large financial institutions with the largest number of insurance contracts should receive the largest number of claims. However, in order to give a complete picture, the ratio of the number of claims to the number of claims made against a particular financial institution should be analysed. This indicator will demonstrate more clearly and objectively a financial institution’s attitude towards its clients,» Yury Voronin believes.
The Chief Financial Ombudsman points out that it is for the first time that the report discloses information about the amounts recovered from financial institutions following the Financial Ombudsman’s decisions decisions. In 2020 the amount of satisfied claims of consumers of financial services in accordance with the FOS decisions amounted to RUB 4,203,504,500, including RUB 4,203,253,100 appeals against insurance companies and RUB 251,400 against microfinance institutions. The largest amount of the recovery of RUB 4,009,353,000 came from MTPL. «Until now, we have only indicated the average amount of claims, but now we have decided to switch to disclosing the amounts that FOS recovers from financial institutions when consumer claims are satisfied,» says Yury Voronin.
In 2020, the Financial Ombudsman Service received 187,386 appeals from consumers of financial services, including 186,140 for insurance and 832 for microfinance. The top 10 insurance companies accounted for 74.2% (138,027 appeals) of the total number of appeals from consumers to the FOS, the top 10 MTPL insurers accounted for 62% (115,366 appeals) and the top 10 MFIs accounted for 47.4% (394 appeals). According to the Bank of Russia, there were 5,827,836 claims for insurance contracts with individuals in 2020.
Thus, for every 12 CMTPL insurance cases there was one consumer appeal to the Financial Ombudsman Service.
Last year’s appeals resulted in 114,907 decisions, including 114,730 for insurance and 177 for microfinance. The top 10 insurance companies accounted for 77% (88,329 decisions), the top 10 MTPL insurance companies accounted for 69.7% (79,937 decisions) and the top 10 MFIs accounted for 70.6% (125 decisions).
«One of the indicators that indicates a financial institution’s interest in resolving a dispute with a client is the number of decisions to stop considering a claimant’s appeal due to its failure to provide the information required by the FOS to consider the dispute,» Yury Voronin continues. In 2020, the share of such refusals in the total number of decisions was 5.2%. Separately in insurance, this proportion was also 5.2% (5,909 decisions to terminate for this reason) and in microfinance, 18.6% (33 decisions).
«It is quite encouraging that there is a positive trend in this indicator compared to 2019, as in 2019 the proportion of such terminations was 7.8%. Thus, certain market participants excepted, financial institutions, mainly insurance companies, have become more responsible in their interactions with the FOS,» Yury Voronin says.
The second important indicator of financial institutions’ work with their clients is the share of executed Financial Ombudsman’s decisions. The Service has received information from financial institutions about the execution of 30,181 decisions, which is 70.6% of all Financial Ombudsman’s decisions, on full or partial satisfaction of consumer claims made in 2020. This included an execution rate of 70.7% in insurance (30,160 decisions) and 31.3% in microfinance (21 decisions). In 2019, this indicator was at 65%.
In turn, Head of the Ombudsman for financial services consumers support Service (OFSC) Olga Kraynova reported that in accordance with the law on the financial ombudsman, in case of disagreement with the Financial Ombudsman’s decision, a financial institution has the right to appeal against such a decision in court. As of 01.04.2021, 16,272 (38.1%) of 42,728 decisions on full or partial satisfaction of consumer claims made by the Financial Ombudsman in 2020 were appealed in court by financial institutions: 16,218 by insurance companies and 54 by MFIs.
«In 69% of the cases, the appeal is made for one purpose only: to reduce the amount of the penalty on the basis of Article 333 of the Civil Code. The thing is that in accordance with the Civil Code the decision to reduce the penalty is only made in court. There is no provision for the Financial Ombudsman to apply this rule when making the decision. This has an undesirable effect as even if the parties agree with the Financial Ombudsman’s decision they have to turn to court,» Olga Kraynova explained.
Based on the results of consideration of appeals of financial institutions against the Financial Ombudsman’s decisions made in 2020, courts rendered 10,363 decisions (as of 01.04.2021). Courts changed the Financial Ombudsman’s decision in 5,078 cases, out of which in 4,603 cases (91%) appeals contained claims for penalties to be reduced. Courts upheld the Financial Ombudsman’s decisions in 4,860 cases, of which 2,865 (59%) involved claims by financial companies for penalties to be reduced. The Financial Ombudsman’s decisions were overturned in 425 cases, of which 170 cases (40%) contained a claim for reduced penalties.
Olga Kraynova added that the 2020 Activity Report contains information on revenues and expenditures of the Fund for financing the FOS activities. So, the Fund’s income in 2020 amounted to RUB 1,823,978,000 (positive balance of expenses and income of RUB 98,477,000), including RUB 1,653,182,000 from contributions of financial institutions, RUB 115,943,000 from placement and investment of funds in the financial market, RUB 54,853,000 from fees for processing appeals of third parties, to which the consumer’s right to claim against a financial institution was assigned. The Fund’s expenses amounted to RUB 1,725,501,000, of which RUB 1,659,556,000 were expenses for the maintenance of the Service and RUB 65,945,000 were income tax settlements.
The Report is available on the FOS official website (as of 31.05.2021) in the ‘About the Service’ section. You can read the report here.