Banks to face increased fines for violating consumer rights
Fines can be up to 1% of equity but no less than ₽1.0 million. This high threshold is envisaged for gross violations of consumer rights when a credit institution fails to comply with Bank of Russia orders to eliminate violations and continues to use unfair practices.
Today, the State Duma has passed a law on increasing fines against banks violating financial consumer rights.
If a bank commits a violation for the first time, the regulator will advise such a bank to rectify it. Upon a repeated violation, the credit institution will receive an order and have to pay a fine of up to 0.1% of its equity. However, if the credit institution does not comply with the order, the fine may be increased to 1% of its equity.
‘The Bank of Russia has repeatedly identified gross and numerous violations of consumer rights by some market participants. It was easy for them to pay fines, as they gained much more from using unfair practices – their profits amounted to hundreds of millions of rubles. Therefore, we proposed an approach whereby it will be economically unreasonable for banks to commit such violations. We hope that if market participants realise that any violation will entail a significant penalty, exceeding their unfair profits, they will refrain from using such practices. This is exactly what the regulator strives for – to ensure the absence of violations of citizens’ rights rather than to punish violators,’ said Mikhail Mamuta, Head of the Service for Consumer Protection and Financial Inclusion.
The regulator will decide on an amount of the fine based on the number of transactions where consumer rights have been violated, the extent of damage caused to consumers, and unfair profits received by banks. Banks will be subject to increased fines for using the most toxic and unacceptable financial market practices, such as hard selling of additional services when issuing loans, unjustified refusals to provide loan repayments holidays, and others.