Product in a bag – Newspaper Kommersant No. 171 (7372) dated 09/16/2022

The Bank of Russia is going to strictly ask financial institutions in case they reveal mass misselling. The regulator will be able to oblige them to return funds to the client or suspend the sale of a financial product. However, experts doubt the effectiveness of the proposed solutions, noting that the document requires more precise wording.

The Central Bank published an instruction registered by the Ministry of Justice, which regulates the measures that it will apply to financial institutions to combat misselling. The regulator’s requirements to suspend sales or return funds spent to customers will relate to financial products that are subject to systematic violations. The decision on measures will be taken by the Central Bank Financial Supervision Committee within no more than 90 days from the date of detection of the violation. The organization will have the opportunity to appeal the application of measures of the Central Bank. If it repeatedly admits “criminal proceeds” during the year, the regulator “has the right to impose a ban on identification by a credit institution.” The directive shall enter into force ten days after its publication.

“Misleading a person can occur both through the fault of a particular manager, and as a result of systemic violations of the rules of sales and disclosure of information. As a result, a person either does not understand the risks of the purchased product at all, or takes it for another, more reliable one, ”explains Mikhail Mamuta, head of the consumer rights protection service of the Central Bank. The Central Bank believes that now it will be easier to stop such sales until the violations are corrected.

However, it is precisely in determining whether this is a systematic violation or a one-time case in a particular department that the whole difficulty lies, experts emphasize. “The practice of misselling is often not an official policy, but the result of “excesses” and violations on the ground. A plan descends into the branches, which is not always possible to fulfill, and employees are forced to resort to misselling, ”explains Oleg Skvortsov, Chairman of the Board of the Association of Russian Banks. According to him, in the documents of the Central Bank, the difference between the situation when misselling turns into the policy of a credit institution, and the situation when a single violation occurs on the spot, is not clearly indicated. There was also no difference in potential punishments. “The lack of answers to these questions may lead to additional restrictions for banks, often disproportionate violations,” Oleg Skvortsov believes.

The interviewed lawyers also doubt the effectiveness of the measures, noting that much will depend on the activity of the consumers themselves. “Far from all clients of financial institutions can immediately understand that they are being misled and imposed something,” says Pavel Ikkert, managing partner of the law firm Ickert and Partners. There is very little court practice on misselling, and it is often losing for the client, says Ekaterina Tokareva, partner at the Pen & Paper Bar Association. The Central Bank is trying to use measures that are not too repressive, but also quite tangible, the lawyer believes. However, Pavel Ickert emphasizes, “misseling remains a serious source of income and banks will strive to keep it.”

Polina Trifonova