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SLOVAKIA GETS INSPIRATION FROM GERMANY

State moves to end consumer-loan fees

BANKING fees remain a hot topic in Slovakia. While Finance Minister Peter Kažimír has called on banks to reassess their attitude to the account fees they charge clients who deposit cash with them, the ministry also wants to have the fees that banks charge for administering consumer-loan accounts examined by the courts. The banks argue that such fees help to cover their costs and that the existing legislation already anticipates the existence of such fees.

Foreigners cannot always make their way around without a Slovak speaker by their side. (Source: SME)

BANKING fees remain a hot topic in Slovakia. While Finance Minister Peter Kažimír has called on banks to reassess their attitude to the account fees they charge clients who deposit cash with them, the ministry also wants to have the fees that banks charge for administering consumer-loan accounts examined by the courts. The banks argue that such fees help to cover their costs and that the existing legislation already anticipates the existence of such fees.

The Fico government was inspired to question the status quo by a verdict by the German Federal Court of Justice in June 2011. The legislation of EU member states in the area of banks and consumer loans tend to be very similar, based as they are on European directives.

Radko Kuruc, an adviser to the finance minister, told The Slovak Spectator that the verdict of the German court is not legally binding for Slovakia. But since the ministry is aware of the fees in question it wants to address the matter and find out whether, based on Slovakia’s existing legislation, banks have the right to charge fees on consumer-loan accounts.

“The Finance Ministry is cooperating with the Justice Ministry within this initiative as the directive on unfair terms in consumer contracts falls under the Justice Ministry,” Kuruc told The Slovak Spectator, adding that Slovak courts have the power to decide whether the charging of fees to administer consumer-loan accounts is in effect an unfair contractual condition.

Experts at the finance as well as justice ministries are discussing the next steps, one of which could be to bring a case before the Constitutional Court.

Miroslav Beblavý, an MP for the opposition Slovak Democratic and Christian Union (SDKÚ), drew Kažimír’s attention to the fees about a month ago.

“My objections [against the fees charged by banks for the administration of consumer-loan accounts] are the same as those of the German court,” Beblavý told The Slovak Spectator.

He explained that the accounts which banks automatically set up when consumers take out loans are not needed by and do not benefit consumers, but are instead primarily for the administrative convenience of the bank, which then proceeds to charge its customers for them via fees.

Beblavý regards such fees as another form of interest, or as a kind of additional fee imposed on a loan.

“This makes the situation non-transparent because the client, apart from the interest rate and the principal also pays such pseudo-fees,” said Beblavý. “Moreover a bank can raise this fee at any time and the client often has no opportunity to move to another bank because of other fees and fines. This is why I think that clients should not cover the costs of such an account.”

Even though the Finance Ministry shares his objections, Beblavý argues that the ministry’s initiative is not properly thought through because the Constitutional Court is supposed to rule on the constitutionality of laws, something which is not relevant to this case, while the regular courts do not rule in the absence of a specific case, which means that someone must first bring one.

Beblavý proposes two solutions. The first would be to make clear in future legislation that such fees are banned. The second would be to prepare a sample charge to be filed by clients who want to bring cases against banks and non-banking subjects.

Banking sector's response

The Slovak Banking Association (SBA) agrees that courts should decide on the matters in dispute.
“Since banks have recurring costs in their administration of loans, the court should decide whether these costs may be covered by fees or will be part of interest rates,” Monika Kuhajdová, a spokeswoman for the SBA, told The Slovak Spectator.

With regards to the ministry receiving inspiration from the German court, Kuhajdová said that since the German court’s verdict stems from German legislation it cannot be directly applied to Slovakia.

“There is a competitive environment amongst banks in Slovakia which means that not all banks charge a fee for administration of loan accounts,” said Kuhajdová. “Since the client can choose a bank which does not charge a fee, we do not perceive that charging a fee for the administration of a consumer-loan account to be a problem which should be collectively addressed.”

Banks in Slovakia typically charge a fee on consumer-loan accounts of up to €48 per year, by means of monthly charges of between €2 and €4. Zuno and mBank, which are both direct banks, do not charge such fees, according to the Sme daily.

VÚB, one of the larger banks, does not charge any fee for provision of a consumer loan or to administer a credit account associated with a consumer loan. However, it does charge a monthly fee of €3.30 for administration of a mortgage account, bank spokesperson Alena Walterová explained to The Slovak Spectator.

Tatra Banka said that the ministry’s initiative is legitimate, commenting that any verdict in the matter would contribute to transparency in the relationship between clients and the bank, spokesperson Marína Smolková told The Slovak Spectator. The fee for administration of consumer-loan accounts is an obligation between the client and the bank agreed upon via a contract and is in line with the current legislation in Slovakia, she said.

A recent statement by the National Bank of Slovakia, the country’s central bank, in which it neither banned nor required such fees, also supports this fact, she added.

Moreover, the law on consumer loans requiring that banks include such fees in their calculation of the annual interest rate anticipates their existence.

“Thus casting doubt on the legitimacy of these fees, to which another legal norm refers, seems to us to be disputable, at the least,” Smolková told The Slovak Spectator.

According to Tatra Banka, there are reasons for such fees. The bank says it uses them to cover the costs of regular investment required in order for its systems to meet constantly changing client protection and risk management standards.

“If the bank includes these costs in its interest rates, clients would participate in them by a different scope according to the size of their loan,” said Smolková. “Such a division would be unfair.”

The German example

The German Federal Court of Justice decided last year that fees for administration of accounts in credit were only in the interests of the bank and not in the interests of clients because they did not bring the latter any benefits, Sme wrote. The court threatened the bank in question with a fine of €250,000 or jail time for its board members if it did not cancel such fees.

Czech lawyer Petr Němec used the argument of the German court in a similar case in the Czech Republic. His bank, Komerční Banka, settled out of court and returned his fee, but argued that his was a one-off case and that it did not plan to cancel fees across the board.

Topic: Finances and Advisory


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