Last year, in 85% of the negotiations conducted between consumers and banks, the parties accepted the solution rendered by the ABDRC conciliators. The trend of the last months sees a lower number of accepted solutions. Now, only 80% of negotiations concluded with parties “making peace”. The refusal of consumers to take up on an offer or solution was the main reason for which 65% of these negotiations failed. The enclosed document tackles the causes of these refusals, plus a number of examples of solutions proposed by conciliators, but turned down by the parties. There are also some pieces of advice that the ABDRC conciliators give to consumers, banks and NBFIs.

7 October, Bucharest. Year-to-date, we have seen as many as 433 negotiations kicked-off between consumers and banks/NBFIs with the assistance of the Alternative Banking Dispute Resolution Centre (ABDRC). Of those involving banks, as many as 223 negotiations concluded with reconciliation of the parties, whereas in 51 cases no outcome was agreed upon by the parties. As to NBFIs, only 13 negotiations casefiles were opened, and in 8 of them, the parties did not reconcile. The refusal of consumers to take up on an offer or solution was the main reason for which 65% of these negotiations failed. In 25% of the cases, the banks refused the proposal made by conciliators, whereas in 10% of them both parties were unhappy with the solution rendered by conciliators. Thus, while the parties accepted the conciliators’ solutions in 85% of the negotiations conducted last year, over the last couple of month, this was seen dropping to 80%.

Cases where negotiation failed due to consumers refusing the solutions rendered by conciliators:

• • ➢  Having conducted negotiations intended to restore a fair balance under two lending agreements, the conciliator proposed that both loans would be converted from CHF into RON, subject to a 17.5% discount for the loan 2008, and 25% for the other one of 2007. After conversion, the interest rate for both loans was to be Consumer Loan Reference Index (CLRI) + 3.5%, but the consumer turned down the proposal.
  • ➢  To this added a reduction in the management fee from 0.12% down to 0.06%, which would have generated savings of CHF 1,050. The agreement further provided also for the possibility that the loan would be restructured should the consumer experienced financial difficulties.
  • ➢  In a conciliation case which found the parties in foreclosure proceedings, the consumer refused to be reduced the principal by 50% and rescheduled the balance over a 7-year term with 0% interest. The 50% reduction offered by the bank amounted to RON 41,100.
  • ➢  This consumer, a former employee of the bank he/she negotiated with via ABDRC, requested that the monthly-charged management fee (approx. EUR 40/month) was removed, and the cumulative amount thereof from 2008 to date was repaid to him/her. The bank agreed to have this fee removed, but only for a 12- month period, which was the reason for the consumer turning down the proposed solution.
  • ➢ As to the attempts of direct settlement between consumers and commercial banks (off the ABDRC conciliation process), one consumer turned down an offer of approx. CHF 60,000, and preferred to pursue court proceedings to have his/her dispute with the bank settled, we learn from the information provided by the lending institution.

There are also instances where the solution is found unacceptable by traders. This is prevailingly seen with NBFIs. In case of a consumer claim for repayment of the management fee and interest adjustment, the conciliator proposed a number of measures: flat interest rate; repayment of the financing fee of CHF 2,500 by writing down the current principal with this amount; repayment of the management fee paid to date and its removal from then on. While the consumer accepted the conciliator’s proposal, the NBFI representatives advised that they were unable to make the concessions proposed by the conciliator, arguing that the loan-related fees were lawful and there was no justification for having such removed.

“I urge consumers to stop benchmarking their claims against other cases settled via ABDRC because each case has its particulars, just as banks relate to each consumer differently. Please be reminded that the record amounts observed further to negotiations are amounts written off/down from the principal due by consumers in extremely difficult

social and financial situations. I suggest all consumers to size their expectations from banks with realism and balance, and to carefully weigh any proposal received from conciliators before turning them down. First and foremost, they should think that not all consumers who file applications with ABDRC effectively end up negotiating with banks, but also that by turning down an offer they assess as insufficiently favourable to them, they are only left with the alternative of pursuing court proceedings, where the time and money costs are incomparable higher. The banks too should show more availability to negotiate via the Centre adapt their offers on a case-by-case basis. The bank representatives sitting down at the negotiation table should be granted more flexible mandates in preparation of what is going to happen early next year when the regulations that suspended/delayed loan repayment would not be effective any longer. We expect to receive more negotiation applications next year, and the banks should be prepared for this.”, says Alexandru Păunescu, President of ABDRC Steering Board.

What do conciliators involved in negotiations say:

Nela Petrișor, ABDRC conciliator: There are some causes that, to my mind, lead to all these consumer refusals. For instance, some people are waiting for other legislative amendments that would maximize the benefits they can obtain from banks. The rigid attitude and radical stance of the two parties, with none of them willing to give in to their initial position, is another cause. Then, there is also the case when we run on different lanes: on one hand, we try to negotiate a solution in ABDRC, and of the other hand, the bank negotiates the very same solution and even puts it in place with the consumer, without advising the Centre. In the end, both parties withdraw from the procedure on the ground that they managed to find a solution alone. But this is, too many times, the very solution discussed in ABDRC. There are also consumers who use their younger relatives to approach ABDRC, and then forget about it, and it is very difficult for us to reach and talk to them. We need to put an end to their case because there is nobody answering our calls or emails.

We recommend consumers to stay in touch with the consumer and live by the old saying “a bird in the hand is worth two in the bush.” It is better to take up on the solution, even if as an one-off settlement. In difficult times, like these ones, it would be wiser to say “yes” instead of “no”.

Camelia Popa, ABDRC conciliator: One of the refusal causes is the unrealistic offers made by certain banks. For instance, a bank offers a 30% write-down of the principals to consumers who undertake to repay the balance 70% over the next three months. The fact that consumers except to be successful with all their claims and are not willing to negotiate is another cause. This does happen despite the fact that most them are not even aware of what the addenda they signed in time provide. Also, they compare their case with other cases settled by ABDRC, which are not similar to theirs, and many do not experience a social or financial hardships that would substantiate their claims. Many build on the assumption that the banks generally repay some money, and rely only on this. For instance, there are cases where the banks applied minimum interest rates to certain consumers pending the latter recovering financially, with the banks due to recover the uncollected interests then. It is just that some consumers would rather not have this happening, but enjoy the same reduced interest rate.

I would advise them to find out what they have signed off in time, and make reasonable claims. If these are claims open to discussion, they will eventually be successful. I recommend the banks to stop putting forward standard offers, and look more closely into each case. This would allow us to explain to consumers why they are charged certain fees or are increased interest rates. It would be better for banks to provide this information useful for consumers, even if no agreement is reached in the end.

A new mandate for ABDRC’s Steering Board

After the first five years of operation, three of the ABDRC Steering Board’s members were reconfirmed for a new term of office. These are the representative of the National Bank of Romania, Alexandru Păunescu, the representative of the Romanian Association of Banks – Luminița Malanciuc, and the independent member – Simona Vâlceanu. The new representative of the National Consumer Protection Authority in the Board is Valentina Veronica Mitran-Piticu, the vice-president of the Authority. Consumer associations have not yet appointed a representative to sit in the Steering Board. The President elected for the first year of office in the new Board is Alexandru Păunescu. We remind you that the Board operates under a 1-year rotating presidency system.

About ABDRC: ABDRC is an entity set up under a European Directive, and intermediates, free of charge and in not more than three months, negotiations between consumers and banks or NBFIs, for contracts/agreements in progress. Consumers from any county of the country may file applications with the Alternative Banking Dispute Resolution Centre (ABDRC) filling-in an online form directly on the website www.csalb.ro. When the bank accepts to enter the conciliation negotiation procedure, a conciliator is appointed. ABDRC works with 19 conciliators, of the best specialists in law and with relevant experience also in the financial and banking field. Everything is settled amicably, and the understanding between the parties has the power of court judgment. More information about the work of the Centre is available by phone at 021 9414 (charged a normal rate).