The Central Bank believes that there are fewer unfair banking practices; human rights activists do not agree with this
In the first quarter of 2024, complaints about misselling to the Bank of Russia decreased by 70%. This was announced by the head of the regulator’s Consumer Rights Protection Service, Mikhail Mamuta. His statement was published on the Central Bank website. Misselling refers to unfair sales practices when, under the guise of one service (for example, a deposit), the client is provided with another (most often some type of unnecessary insurance). However, consumer rights advocates do not share the regulator’s optimism and believe that bankers continue to massively impose unnecessary services on consumers, actually “pumping” money out of them for this.
According to Mikhail Mamuta, the Bank of Russia began to record a trend towards a decrease in complaints about misselling in 2023. Their decrease is associated with the actions of the regulator, which has long been making efforts to stop this unworthy practice among its wards. “The Bank of Russia has the authority to stop sales if misselling does not stop after an order is sent to a market participant,” Mamuta emphasized. “In addition, many large market participants have refocused on customer-centric business models.”
However, human rights activists were skeptical about the regulator’s statistics and suggested that they could be distorted by changes in the behavior of victims of misselling. The International Confederation of Consumer Societies (ConfOP) indicated that they have not seen a decrease in the number of complaints about misselling, but other structures that protect victims of financial crimes have provided more detailed explanations.
“In my recent interview with MK, I stated that I have 2,000 applications from victims of misselling in my work. However, I did not take into account data from all victim groups that work with me. The curators of the groups later gave me more accurate information: the total number of applications from those who applied is about 11 thousand. Even if some of the applications were “double-written” (written several times), we are talking about such large groups of people that it is already difficult for me to work. There are so many victims of misselling that in order to effectively help them, I had to organize them into groups. I receive such a stream of complaints that I am no longer able to process them alone, and this has never happened before.
Why the Central Bank of the Russian Federation notes a decrease in complaints by 70%, I will try to explain, based on my experience with this type of crime. Let me remind you that for a long time the Ministry of Internal Affairs refused to record requests from victims of telephone scams, pointing out that there was “no event” of a crime, because the citizen voluntarily gave his money to the scammers, trusting their persuasion. And what is not recorded is not included in the statistics.
I would like to note that some deputies also complain to the Central Bank of the Russian Federation about the problem with misseling. So, I got acquainted with some of the regulator’s answers that were given to representatives of the legislative branch. The essence of the answers is simple: the citizen signed the agreement voluntarily, so there is no violation here. It turns out: the citizen was deceived in a qualified manner, so he has nothing to complain about. If this logic is continued, then the regulator’s statistics will be distorted by its own view of the problem.
The second explanation is due to the fact that once people receive a response from the Bank of Russia, they do not try to contact them again. These 11 thousand victims that I’m talking about, over the past two years, filed applications with the Central Bank of the Russian Federation and received answers that there were no violations, and their flow of applications, accordingly, became smaller. My groups of victims, after receiving a one-time response from the Central Bank of the Russian Federation, simply decided to move on and began to complain to the Presidential Administration.
The third distortion of the Bank of Russia statistics is due to the fact that the victims, at least those who complained to me before contacting the regulator, wrote a collective complaint, but it was not accepted, since it violates the rules of the law on personal data, which must be observed in case of a return response regulator on citizens' appeals. In other words, some of the requests were simply not registered.”
The only human rights organization that also records a decrease in the number of complaints about misseing, although they provide other figures, is the project of the All-Russian Popular Front “For the Rights of Borrowers.” But they note that they are contacted for misselling much less often than for other forms of violation of the financial rights of citizens.
“Our experience with consumer complaints shows three trends. Firstly, there have actually been fewer complaints about misselling. And we attribute this both to a real reduction in unfair practices on the part of market participants and to a change in consumer behavior. Despite the fact that, unfortunately, consumers continue to ignore the need to carefully study the contents of the documents they sign, increasingly, clients have stopped shifting all responsibility for this to market participants. For about a year now, we have been noticing that appeals do not consist of emotional messages about the need to ban everything, punish everyone and immediately fine them. Nowadays, more and more often, the consumer is aware of his mistakes and is interested in how and where he can solve the problem with minimal losses for himself. After all, according to the law, the consumer’s signature in the contract means his agreement with the terms.
Secondly, we note that in most cases consumers no longer confuse misselling and imposition. This also indicates a relative increase in the level of financial literacy and consumer consciousness.
Thirdly, the consumer understands that his rights were violated and his expectations were not met after a while. In cases of misselling, the client expresses dissatisfaction only if his ideas about the profitability of the product do not correspond to the result. This usually occurs within a period of one to five years after signing the agreement. The reasons may be that the client cannot receive the full amount of his contributions ahead of schedule, or has not received the expected income. By the way, the same trend is observed when a consumer cooperates with an illegal lender: as long as the consumer has no mutual claims with the illegal, he remains a regular client of the “gray” or “black” lender. But as soon as difficulties and complaints arise, citizens begin to write claims, complaints and statements. If we talk about misselling, the reduction in the number of complaints received by us in 2023 compared to 2022 is about 50% in annual terms.
It is worth noting that our statistics of requests regarding misselling may differ from the regulator’s data, since victims of fraud, clients of illegal creditors and hopeless debtors interested in the possibilities of the bankruptcy procedure turn to us for help and advice much more often. But the Central Bank has statistics on requests to the Consumer Rights Protection Service and much greater opportunities in terms of test purchases.”
At the same time, the Central Bank itself is aware of the scale of the problem and intends to tighten control in this area, including changing legislation. Chairman of the Bank of Russia Elvira Nabiullina spoke about this in the State Duma on April 13, emphasizing that the regulator advocates increasing fines for banks for “unfair enrichment” and deceiving clients, up to 1% of capital. The head of the Central Bank of the Russian Federation emphasized her decisive attitude when answering questions at the regulator’s press conference, which took place almost two weeks later. She acknowledged that the banking industry still suffers from the shameful phenomenon of misselling, although complaints about it have become less frequent. So far, unfortunately, the Central Bank of the Russian Federation does not have enough powers to prohibit banks from selling products for which they do not provide people with enough information. There are fines, but they are small, especially in comparison with the profit that banks receive from misselling. “You can make a million violations and pay a million rubles,” Nabiullina explained. — This is not very sensitive for a large bank against the background of profits. Fines for dishonest enrichment and deception of clients should be increased to 1% of capital.” And this will require a new law.
Trying to understand the true scale of the sanctions applied to banks, MK asked the regulator what exactly had been done and what the efforts had led to. In its response, the Central Bank of the Russian Federation once again emphasized that last year the number of consumer complaints about misselling decreased by half and in the first quarter of 2024 the trend continued. Banks took into account the powers of the Central Bank of the Russian Federation to stop sales if, after instructions sent to them, misselling does not stop. In addition, credit institutions were fined. “Last year we issued fines to banks related to misselling in the amount of 5 million rubles, and at the beginning of 2024 — in the amount of 7 million rubles,” explained the official response from the Central Bank. — As for how fines are imposed. If a violation is detected during our control activities (control purchase), it is punishable by a fine, even if it is only one. Moreover, if we identify a violation during remote supervision, then we first send targeted recommendations, and if they are not followed, then penalties.”
The Bank of Russia emphasizes that its goal is not just to reduce misselling in credit institutions, but wants to completely eradicate this phenomenon in the financial market, as well as impose additional paid services. “A bank with a large client base earns such amounts from selling additional services that it is easy for it to pay a fine when we discover that these services are imposed,” the Central Bank explained its position. — Now the maximum fine is 1 million rubles. That is why we want to increase fines several times in order to make such violations economically unprofitable.” On this issue, the regulator was supported by deputies of all factions during the discussion in the State Duma of the annual report of the Central Bank of the Russian Federation.
At the same time, human rights activists argue that talking about fines is not enough, because we are talking about a real criminal offense. “The regulator’s proposed method of punishing banks for misselling — introducing fines from the bank’s turnover — is only one of the necessary steps that must be taken,” says Pavel Medvedev. —A fine occurs after some act is recognized as a crime. Therefore, the main thing is to recognize what is happening as a crime falling under Article 159 of the Criminal Code of the Russian Federation (“Fraud”). And continue to act in accordance with the norms of existing legislation: bring those responsible to justice.”
Recall that at the end of last year, the total profit of Russian banks amounted to about 3.3 trillion rubles, which became a new historical maximum. Russian credit institutions managed to achieve this result under the conditions of sanctions and the ongoing SVO. However, even such phenomenal income is apparently not enough to voluntarily stop unfair practices in relationships with clients: additional measures are required from the Central Bank and the State Duma. Unfortunately, it turns out that without changing the legislation in Russia, it is impossible to stop the deception of consumers by “bandits in expensive suits”, and misselling is carried out, among other things, by very large banks with well-known brands and multimillion-dollar incomes.