Financial ombudsman to help solve disputes with financial institutions
The law ‘On Financial Ombudsman’ has passed its second reading in the State Duma. This draft law was elaborated by the Ministry of Finance and agreed with the Bank of Russia. The bill was given its first reading in the State Duma back in 2014.
The financial ombudsman institution will help build the system of out-of-court dispute settlement between households and financial institutions in cases the claim is up to 500 thousand rubles. Households will be able to promptly receive professional legal advice of the financial ombudsman free of charge to solve their disputes with financial institutions. The financial ombudsman will handle disputes a financial consumer and a financial institution have failed to settle under the pre-action protocol.
A pre-court appeal to the financial ombudsman and his decision will be legally binding. Should a consumer or a financial institution disagree with the ombudsman’s decision or be dissatisfied with it, they are free to go to court.
The Bank of Russia will fund the Financial Ombudsman Service during its first year of operation. After that, financing will largely come from financial institutions. Their contributions will depend on the number of households’ appeals against each specific financial institution.
The financial ombudsman will not consider cases undergoing a mediation procedure or those on which a court ruling has already been passed. The financial ombudsman will also be able to commission an independent expertise (evaluation) of the dispute subject matter.
The law is supposed to first be applied to insurance companies engaged in motor insurance. They may start cooperation with the financial ombudsman 90 days after the law becomes effective and must do that 270 days after. Later on, the new system is to be joined by other insurers (other than those providing exclusively obligatory medical insurance), microfinance organisations (from 1 January 2020), and consumer credit cooperatives, pawnshops, credit institutions and non-governmental pension funds (from 1 January 2021).
The Bank of Russia will keep a register of financial institutions obliged to cooperate with the financial ombudsman. The regulator encourages institutions to join the system of out-of-court dispute settlement voluntarily and ahead of time.
International experience shows that the financial ombudsman institution can increase the speed and quality of typical dispute settlements between financial institutions and their consumers and improve customer satisfaction.