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A NON-BANKING FACILITY FILES TENS OF THOUSANDS OF LAWSUITS AGAINST STATE

Slovakia has to deal with lawsuits

SLOVAKIA may face tens of thousands of lawsuits filed by the non-bank money lending institution Pohotovosť. The company claims that the courts have refused to seize the assets of its clients with outstanding debts. At around the same time, Slovakia was addressed by the European Commission over several complaints it received from Pohotovosť’s clients over the firm’s extremely high interest rates, the Hospodárske Noviny daily reported on January 25.

People took out loans with very high interest rates.(Source: SME)

SLOVAKIA may face tens of thousands of lawsuits filed by the non-bank money lending institution Pohotovosť. The company claims that the courts have refused to seize the assets of its clients with outstanding debts. At around the same time, Slovakia was addressed by the European Commission over several complaints it received from Pohotovosť’s clients over the firm’s extremely high interest rates, the Hospodárske Noviny daily reported on January 25.

By the end of January the Justice Ministry, which is handling the case, had registered more than 43,000 lawsuits.

“We cannot say at the moment how many lawsuits from Pohotovosť against Slovakia have been filed, since the Justice Ministry is still receiving the suits,” spokesperson for the ministry Jana Zlatohlávková told The Slovak Spectator.

The courts allegedly halted the proceedings since “they are unrealisable” and they could violate the rights of consumers, reported Hospodárske Noviny.

Yet, Jaroslav Fuchs, one of the authorised representatives of Pohotovosť, said that such practices are not ordinary and that they have to claim for the compensation of the resultant loss, the daily wrote.

At about the same time, the European Commission approached Slovakia in response to the complaints it received from the clients of Pohotovosť regarding the company’s high interest rates. Pohotovosť allegedly set the interest rates at 0.25 percent of the loan per day, or 91.25 percent per year, Hospodárske Noviny wrote.

Zlatohlávková said that the ministry has been in contact with the EC since 2010, when they first received a complaint regarding a violation of consumer rights by non-bankingcompanies, but said that the Commission has yet to launch a formal proceeding.

Andrej Králik, head of the press and political department at the EC’s representative office in Slovakia, confirmed to The Slovak Spectator that no proceeding regarding the issue has started yet.

However, if the EC finds that Slovakia has not done enough to protect the rights of consumers, it might file a lawsuit with the European Court of Justice (ECJ), Zlatohlávková told Hospodárske Noviny.

Meanwhile, Pohotovosť also turned to the EU courts in order to “to ensure the compliance of procedures of [Slovak] state authorities with EU law”, Fuchs said.

He said that he expects the courts to rule in the company’s favour.

Non-banking institutions are checked

Králik says that companies providing loans with very high interest rates are not considered credit institutions since they do not accept deposits. Therefore they are not subject to the same kind of supervision at the national level that banks are.

“This case should be resolved at the national level, at the level of bodies involved in prosecution, financial ombudsmen or consumer protection authorities,” Králik added.

In Slovakia the main authority that regularly reviews the methods of nonbanking money lending institutions is the Slovak Trade Inspectorate (SOI). If the SOI finds that an institution has violated the law on credit, it can order the company to bring its policies into compliance with the law, spokesperson for SOI Danuša Krkošová told Hospodárske Noviny.

When asked about possible sanctions for Slovakia if the ECJ accepts the clients’ complaints, Zlatohlávková explained that at this phase the EC cannot propose any financial sanctions on Slovakia. It might do so only if Slovakia was found guilty and if the EC deems the subsequent measures intended to increase consumer protection inadequate.

Yet at the moment there is no need to discuss possible sanctions for Slovakia, since “the majority of disputes are resolved before ECJ proceedings start”, Králik added.

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