Since the start of the year, the Consumer Protection Commission (CPC) has penalised nine banks for misleading advertising. The announcement, published on the CPC website on April 10, did not name the nine banks because, according to the law, they can appeal in court against the penalties. If the court confirms the CPC decision, by law, the banks will face penalties between 1000 and 3000 leva.
The CPC found that the nine banks had failed to put information about the effective annual rate (EAR) in their consumer loan advertising materials. EAR is the total cost of a loan to the consumer expressed as an annual percentage of the amount of credit granted. It takes into account one-time fees, the servicing of the loan and standardising the way the rate is expressed.
The lack of information on EAR, according to CPC, was a form of misleading advertising because it did not give customers the opportunity to calculate the total cost of a loan. The CPC based its conclusions on its daily monitoring of adverts published in print and other media. The CPC recommended that consumers look not just at the annual interest rate but also the EAR and the fees collected by the bank for servicing the loan.
The CPC also inspected the contracts banks signed with consumers. They found that some banks had clauses that put consumers in unfavourable positions; such as the unreasonably high penalties consumers were asked to pay banks when they failed to fulfil their obligations. The CPC has asked banks to remove these clauses, but at the same time admitted that often consumers did not read the contracts they signed.
In one case, the CPC said that a client had wanted to pay all his debt to a bank and close down his credit card. He was not informed that he needed not only to physically destroy the card, but also to file a written request to do so. Because he failed to do the latter, the bank did not close his account. Eventually the bank accepted the client’s complaint to the CPC as a form of written request and closed the account.
The CPC moves are a result of Bulgaria’s EU membership and the European Union’s unfair commercial practices directive, adopted on May 11 2005 and applicable since December 12 2007.
According to the directive, “national courts or administrative authorities have enough power to order advertising to cease, either for a certain period or definitively. They can also order its prohibition if the advertising has not yet been published, but publication is imminent. A voluntary control by the national self-regulatory bodies can also be carried out”.
In Bulgaria, this has been put into practice with the latest development in the Hild case.
On March 11, the Supreme Administrative Court (SAC) rejected both complaints filed by Hild Bulgaria against a CPC decision, the court said. Hild filed complaints against a CPC decision to ban two of Hild’s adverts: a TV spot and a flier.
The Hild case has been going on for more than six months and highlights flaws in Bulgarian legislation that allow varying legal interpretations on one subject, depending on which side of the line one stands.
Hild Bulgaria is a company that has marketed to Bulgarians over the age of 65. The company offers pensioners the option of transferring their properties to Hild in exchange for lifelong monthly allowance and cash in the bank. The Hild Bulgaria advertising campaign started in October 2007 on all national TV channels with a prime time advertisement featuring some of Bulgaria’s most famous actors, all in their late 60s. The campaign made Hild the prime target of the Financial Supervision Commission, which claimed that Hild was not acting according to the law because it had offered services similar to those of an insurance company without being registered as one. A letter sent to Hild by the FSC said “the service of paying annuities, or pensions for an indefinite time in the future, after Hild has received the rights over the property of the people involved in the contract, has the characteristics of life insurance services performed by an insurance company, for which Hild has no licence”. The CPC said that Hild’s adverts were misleading, imposing a ban on them. On March 11, the SAC confirmed the Sofia Administrative Court’s ruling rejecting Hild’s complaints. The SAC said that Hild had presented insufficient evidence that its interests were damaged by the ban imposed on the adverts by the CPC. Hild said that indeed its services were similar to those of an insurance company, but at the same time, included more than enough differences.
