In Russia, a method to resolve disputes between banks and customers without having to bring such cases to court may soon be in place. This would allow conflicts to be resolved much faster and with less cost to both parties involved. The arbitration would be impartial and free for the claimants.
The idea for such a system originated with Russia’s Association of Regional Banks. The Association’s vice-president, Oleg Ivanov, thinks that the project may be ready for implementation as early as next year. Establishing the role of a commissioner to defend the rights of bank customers or creating a financial ombudsman is also being discussed. Aside from the association, the International Confederation of Consumers and the Lawyer’s Association are also ready to sign onto the project.
Currently, customers who are dissatisfied with their banks’ services generally turn to the Federal Consumer Protection Agency Rospotrebnadzor, the Central Bank, or another consumer protection agency. However, a court is ultimately the only entity that can hand down a legally binding decision. Courts are literally flooded with such cases and do not have enough time or staff to review each case in a timely manner. For example, last year there were 25,000 cases involving consumer rights in the area of financial services, and this is only the tip of the iceberg – there were likely many more such cases, but some people simply prefer not to waste their time going to the authorities with such matters. In order to review the case in court, the plaintiff and a representative from the bank accused must both be present. Waiting for the decision to be handed down can take months. The court fees may not be very large – perhaps around 10,000 rubles – but the plaintiff also must hire a lawyer whose services are usually quite expensive. Another option is to settle the dispute directly with the bank, but in this case there is no impartial arbitrator.
The proposed system will work like this: the ombudsman will receive a complaint from a bank client, send it to the bank for them to make a counterargument, and then report their response to the plaintiff. The verdict will be made based on these three documents – the initial complaint, the bank’s explanation, and the client’s final remarks, as well as any existing legislation. If the citizen is not satisfied with this process, they will still be able to take the matter to court if they wish. The ombudsman’s decision will be binding for banks; clients’ right to appeal to arbitration will also be outlined in the contracts they sign with the banks. The ombudsman would serve for free and the cases should take at most two to three months to review.
It is expected that in the first stage of the program, the ombudsman will resolve disputes pertaining to consumer credit disputes and then the scope will widen to include issues related to deposits, and then issues related to securities management. According to Ivanov, the two dozen banks which occupy 95% of the market not already held by Sberbank, are ready to join onto the first stage of the project. The number of participants may eventually grow to 200-300 banks.
However, Aleksander Turbanov, the general director of the Deposit Insurance Agency, believes that there need to be legislative changes to obligate banks to recognize the ombudsman’s decisions and to obligate them to participate in the program, just as they are obligated to participate in the Deposit Insurance Program. Also, Turbanov suggests that the new institute could act under the aegis of the Central Bank. One advantage of that would be that it would expand the presence of territorial administrations of the Central Bank in Russia’s regions. This would make the new program even more convenient and accessible. The office of a financial ombudsman could theoretically be financed from three sources: from the state budget, from contributions from the financial market, or from the Central Bank, Turbanov said. In addition, the banking community relies on the support of the World Bank. Ivanov recalls that in 2009, the World Bank and the Ministry of Finance prepared a report on protecting consumers’ rights in Russia’s financial markets. In the report’s conclusion, experts recommended that Russia create the institution of financial ombudsman. Such an institution exists in the majority of developed countries; last year, a commissioner charged with defending bank clients’ rights was set up in Armenia.
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