Slovakia: Bank vs. Consumer – Latest Legal Developments on Consumer Protection of Bank Clients
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Slovak Banks are currently subject to legislative restrictions and consumer claims, mainly for charges and arbitration clauses.
In Slovakia in the past years, banks have been the target of various legislative measures taken by the government due to the certain view (shared by part of the public) that banks are the “bad guys” trying to squeeze money from everyone and that they must be regulated as much as possible. The adopted governmental measures include a relatively high banking levy and specific restrictions on the provision of services to consumers, such as the provision of basic banking products.
In addition to these general legislative measures, two trends are currently affecting the provision of banking services in Slovakia.
Charges for loan account maintenance
It all started in Germany, where some court decisions implied that a charge for loan account maintenance breaches consumer protection legislation. Although these decisions were not so clear about prohibiting such charge, they have triggered a series of lawsuits by bank customers seeking money back from the banks, and banks in Germany have thus ceased to apply such charges.
A similar decision was then adopted in the Czech Republic, starting widespread debate on the legality of such charges. Consumers in Slovakia then started seeking a remedy because the Czech and Slovak legal systems are highly connected, and because the German and Czech rulings were based on similar legislation (to an extent). But Slovak banks countered the charge by pointing out that clients agreed to it upon signing the respective contract.
At the beginning of 2013, the regional court in Prešov ruled that charges that do not provide added value to consumers are unlawful. However, since this ruling regarded non-banking entities, Slovak banks once again refused to follow it.
This situation resulted in governmental action, which came in the form of the amendments to the legislation on banks, building societies, and the provision of consumer loans (ie, loans by non-banking entities). These amendments include the general prohibition of a charge for loan account management and maintenance. Such a charge is permitted only if the client is provided with some service not linked with the actual provision of the loan and if he consented in writing to such charge. These services could theoretically include the provision of a loan account statement, determination of outstanding loan amounts, or changes of provided securities.
The amendments became effective as of 10 June 2013. The amendments do not deal with already paid charges; therefore, further lawsuits are expected and the story may continue.
Arbitration clauses in agreements concluded with consumers
In Slovakia, banks must offer clients a conclusion of arbitration clause, with the competent court established by the banks (Stály Rozhodcovský súd Slovenskej bankovej asociácie). It became a widespread practice to use such clauses. But this practice recently started to be restricted due to various court decisions in favour of consumers in cases of conclusion of arbitration clauses in banking agreements.
Therefore, in order to have a valid and enforceable arbitration clause in Slovakia in agreements with consumers, banks must observe at least the following rules as stipulated by the recent court rulings:
- Individual negotiation regarding the arbitration clause must be held with the consumer. The Slovak Supreme Court ruled that an arbitration clause concluded with the consumer must be a result of the free will of both parties. Free will especially requires information about the possibility of an option between multiple solutions and details about what that choice means in particular.
- Validity of conclusion; that is, whether the arbitration clause has all the required parts and was concluded properly. In this respect the Slovak Supreme Court ruled that when an arbitration clause had not been concluded validly, arbitration court did not have competence to hear the dispute. It was irrelevant that the party that objected to the absence of an arbitration clause (the consumer) subsequently acknowledged the arbitral award and failed to seek its annulment before the competent Slovak court. Such arbitral award is not an eligible enforcement title.
- Validity of remaining clauses if arbitration clause is held null and void. Generally, in case where more clauses are held invalid, the court usually holds the entire agreement invalid.
According to publicly available information, the Slovak Ministry of Justice is planning to restrict arbitration clauses in banking agreements to certain chosen arbitration courts and subject to in-depth informing of consumers. But the outcome of such measure cannot be predicted and further changes are possible. In addition, the legislation on arbitration proceedings in Slovakia has itself several problematic issues resulting in a non-standard arbitration environment in Slovakia. So the Ministry is planning to rebuild the entire arbitration legislation as well.