Today, the National Bank of Serbia (NBS) called for consistent and, as stated, common sense application of the Amendment to the legal position of the Supreme Court of Cassation (SCC) on the admissibility of contracting loan costs, and on the occasion of disclosing numerous untruths regarding disputes on admissibility of fees. those loans.
As in 2018, after the adoption of the Legal Position of the Supreme Court of Cassation on the admissibility of contracting loan costs, now, after the amendment to that position, one sentence from the explanation is used to find some basis for continuing disputes, the statement said.
At that time, it was a sentence that the bank is obliged to state the data on costs in the offer so that the client is not at any time confused about the costs in question, “which in practice led to absurd requirements for the bank to prove the specification and structure of these costs.” is from the NBS.
“Now that the Supreme Court of Cassation has issued an Amendment to the Legal Paragraph in which it explicitly stated that the sentence was misinterpreted, the part of the reasoning stating that this amended paragraph does not affect disputes if the request for annulment is based on the claim that loan costs have been collected in double the amount by retaining a one.time nominal amount from the approved loan and their simultaneous inclusion in the effective interest rate “, stated the central bank.
Regarding the interpretations of this sentence, repeatedly made public, which is based on the position that the bank charged the fee twice if it kept the amount of the fee from the approved loan and included that amount in the effective interest rate, the NBS pointed out “that it is completely incorrect, which can be mathematically verified. “
“We claim this as an institution that is the authorized proposer of the Law on Protection of Financial Services Users, which defines and regulates the effective interest rate, and as an institution that passed a regulation regulating the method of calculating the effective interest rate,” the NBS said.
As an example, they stated that if a loan in the amount of 100,000 dinars is approved, and a one.time loan fee of two percent of that amount is agreed, there are two possibilities that are absolutely the same in terms of their material effect.
The first, as explained, is that the bank pays the entire amount of 100,000 dinars, and that the client then pays the bank 2,000 dinars in compensation, from the funds he received from the bank or from some others.
Another possibility is to shorten those two actions (to offset the claims of the bank in the form of compensation, and the user in the form of the amount of the approved loan) and for the bank to keep the amount of 2,000 dinars, if the client so chooses. In both cases there is no double fee.
“Namely, the collection of neither fees, nor regular interest or principal, is not done through the effective interest rate. Simply, the collection of liabilities under the loan is not done through any interest rate or effective interest rate, but through loan installments and one.time payment of fees and expenses “, stated the NBS.
Unlike the nominal interest rate, the rate used to calculate the amount of interest, by applying the interest rate to the remaining amount of debt during loan repayment (which is constantly decreasing, so the share of interest in the loan installment decreases over time), the effective interest rate is not an accounting category, it does not serve to calculate the amount of interest, fees and the like.
While the nominal interest rate is used to determine the amount of interest, the effective interest rate is obtained from already determined cash flows (principal amount, total interest amount, amount of all fees and expenses, etc.) that are discounted, at net present value.
“Thus, the effective interest rate is an informative rate, which serves to compare total one.time and future cash inflows and outflows, reducing them all to the net (inflow and outflow balance) present value. Therefore, this rate most accurately reflects the total loan price and it is prescribed that when advertising, the effective interest rate is shown more noticeably than other data on the loan “, explained the NBS.
Also, it can be determined mathematically that the claim that interest is calculated on the paid fee is untrue. Interest is calculated on the approved loan amount, and it is up to the client to decide whether to pay a one.time fee from that amount or from some other funds.
The NBS assessed that, when it comes to the flat claim that it is evident that the protection of users of financial services exists only declaratively, “at least it is distasteful that former officials who were responsible for protecting competition, including the banking sector, it is not known that they have successfully conducted any proceedings against the banks, they are now commenting on the results of the NBS in the field of consumer protection “.
It was pointed out that in the previous three years alone, the NBS issued 22 decisions imposing fines on banks, 22 decisions ordering banks to eliminate irregularities and at the same time imposing fines, and six decisions establishing and prohibiting unfair business practices and contracting. unfair contract terms.
In several dozen cases, the banks, it was stated, eliminated the irregularity after the findings, so it was not necessary to make a decision, and in hundreds of cases, the irregularity was eliminated during the procedure.
When it comes to control procedures, in the last two years, six written warnings and five fines were issued, and in addition, the NBS sent dozens of circulars to banks, indicating how banks should apply certain provisions of regulations which are regulated financial services.
It is added that, since there is a general trend of abuse of rights promoted by those who earn from mass disputes, the NBS cannot publish the content of its decisions, findings and other documents through which it takes corrective measures against banks.
It was also assessed that it is worrying that former holders of public positions in charge of protection of competition cannot recognize what the relevant market of banking services is, so they do not understand that the NBS is not a participant in the banking market.
It is reminded that the NBS does not provide any banking services to citizens or the economy, while it participates in the foreign exchange market as a monetary authority, because it uses the purchase and sale of foreign exchange in that market as one of the monetary instruments for maintaining relative stability of the dinar exchange rate.
It was also pointed out that the central bank, in its role of monetary authority, uses (reverse) repo auctions of securities in order to influence the liquidity of the banking sector, and not to compete with banks in the market.
The NBS also referred to, as they stated, incomplete information when it comes to comparative court practice regarding credit fees.
They pointed out that the Federal Supreme Court of Germany had determined that the one.time procedural bank fee was inadmissible, but not because the bank had not proved the costs in question, ie their amount and structure, and not because the fee was doubled by retaining the amount and including it in effective interest rate – but because in the opinion of this court the price for capital must depend on the maturity of the loan, which is not the case with a one.time fee.
Namely, this court interpreted the definition of the loan agreement from the German Civil Code (which still partially differs from the domestic Law on Obligations) in relation to our Supreme Court of Cassation and drew the aforementioned conclusion from it.
The statement also stated that the German court acknowledged that the change in case law on this issue leads to retroactivity, and therefore limited the request for refund of the fee to a period of three years from the day the fee was paid, while the Supreme Court of Serbia did not find accordingly to limit the retroactivity of domestic case law.
The NBS thinks that it is interesting that the German court still allowed the contracting of bank fees in the case of the state bank KfW, with the explanation that this bank gives loans on better terms than the market, so it can collect costs, although it does not affect the reasons for which that court found to be procedural compensation in itself inadmissible.
At the same time, the decisions of the supreme courts of the Czech Republic, and especially Austria, are deliberately skipped, even though Serbian civil law is based more on Austrian than on German, the Central Bank of Serbia stated.
It is added that the supreme courts of these countries passed completely different verdicts, which unequivocally confirmed the right of banks to collect credit fees and costs.
With regard to the judgment of the EU Court of Justice in the unified proceedings in cases C 224/19 and C.259/19, although this is not a format in which it is possible to adequately describe the views of that court, it was pointed out that there are numerous differences between domestic and Spanish law, where in domestic case law judgments are not based at all on the unfairness of the contractual provision on compensation, but on the principles of the law of obligations.
In that judgment, the Court of Justice itself specifically pointed out the specificity of the Spanish regulation which implemented the European Directive on Unfair Contractual Provisions (93/13). The judgment states that the contractual provision of the credit agreement concluded between the consumer and the financial institution ordering the consumer to pay the processing fee may create a significant imbalance in the rights and obligations of the contracting parties, when the financial institution does not prove that the fee actually corresponds. services.
However, if we take into account the previous judgments of this court, as in case C.621/17 – the word answer does not mean that the amount of compensation must be equal to the costs in each individual case, but that the compensation is a consideration for the services actually provided, that is, the activities of the bank.
The NBS concluded that nowhere in comparative practice is the position taken that the costs of the loan are collected in double the amount, if a one.time nominal amount from the approved loan is retained and at the same time included in the effective interest rate.
“The reason why there is no such attitude is comparatively simple – because it is absurd,” the NBS said.