Articles authored by the members 2022

The Financial Arbitration Board (FAB) operating within the organisational framework of the Magyar Nemzeti Bank (MNB) also hears financial consumer disputes connected to the application of the damage surcharge. In these cases, consumers complain about the rate of the surcharge, the length of the period taken into account or the fact that they have reimbursed the insurer for the damage, and thus although their bonus/malus classification does not change, their premiums increase significantly because of the damage surcharge.  In one of the proceedings before the FAB, for example, the petitioner complained that compared to the motor third-party liability insurance (MTPL) premium calculated by the broker the insurer had applied a multiple increase to his liability insurance premium citing a claim paid five years ago. The petitioner has not caused any damage in the previous insurance period. This was also indicated in the proposal documents, nevertheless the insurer, after checking the claim history, increased the MTPL premium retroactively to the risk inception date.

Pursuant to the provisions applicable to the damage surcharge in the published tariff, the insurer had the right to do so. It cited that the petitioner provided incorrect claim history data and the lower insurance premium in the proposal had been calculated based on that. Thereafter – considering the claims paid in the previous five years – the insurer has rightfully adjusted it. Finally, the insurer and the customer concluded a settlement agreement and terminated the respective contract by mutual consent. The insurance premium paid for the period after the date of termination was refunded to the petitioner. The consumer could then look for an insurance proposal at a better premium on the market.

In another conciliation case, the petitioner complained that the insurer had paid damages against his MTPL contract, which the customer repaid at the insurer’s request within 45 days in order to avoid a negative change in the bonus classification. Nevertheless, for the next insurance period, the insurer significantly increased the MTPL premium. The customer complained about this, and the insurer informed him that it had reinstated his bonus level, but had applied a surcharge due to the claim event, regardless of the reimbursement of the claim amount.

In this case, it could also do so in accordance with the provisions applicable to its premium rates when calculating the premium for the next insurance period. However, in the FAB proceedings – similarly to the first case – the parties concluded a settlement agreement: the contract in question was terminated by mutual agreement, and the petitioner was able to seek a more favourable insurance premium.

Thus, in the cases cited as examples, the insurers calculated the premiums for the petitioners’ policies on the basis of their published tariffs applicable on the starting date of the underwriting period, which they could not depart from due to a statutory prohibition. It is therefore important that when taking out compulsory motor third-party insurance, consumers are also aware of the provisions on the damage surcharge specified in the insurer’s tariffs.

In recent years, the level of the damage surcharge has varied considerably between insurers, ranging from 10 percent to 400 percent of the basic premium, and the length of the period taken into consideration in respect of claim payments may be as long as 7 years.

In 2020, in its executive circular to insurers, the MNB stated that it does not consider it good practice to apply excessive damage surcharges being several times the basic premium (two to three times) as most probably those have nothing to do with the claim statistics. This is because it could override the entire risk-based premium calculation and ultimately make the bonus/malus system useless. Although the legal possibility to apply a damage surcharge remained in 2021, and insurers also used it, the market has become more balanced in terms of the regulation of damage surcharges.

Accordingly, before concluding an MTPL contract or changing insurers, consumers should thoroughly study the insurers’ offer. These should be compared not only in terms of the basic premiums set by the insurers, but also on the basis of all the adjustment factors that may apply upon determining the premium, including the provisions related to the damage surcharge, in order to select the best proposal.

“Published in edited form on the Origo.hu on 5 January 2022.”

In everyday life account- and cardholder customers often prefer withdrawing cash from an ATM, a much quicker, easier way to get cash compared to cash withdrawal in a bank branch (where they usually have to wait longer). The use of ATMs is also encouraged by the current regulation according to which customers can withdraw cash from their designated bank account up to the amount of HUF 150,000 in maximum two transactions per month free of charge from ATMs in Hungary, subject to the fulfilment of certain conditions.

Modern ATMs now also allow customers to make instant deposits to their bank accounts in addition to withdrawing cash. Accordingly, the use of ATMs can be a convenient and cost-saving way for customers to manage their cash, but as with any machine, malfunctions can occur. Therefore, it is worth being aware of what to do if the teller machine does not dispense the amount requested in full or at all, if it swallows your bankcard, or if the account-keeping bank debits a different amount to the account than actually withdrawn.

In one of the cases heard by the Financial Arbitration Board (FAB) attached to the Magyar Nemzeti Bank (MNB), the ATM dispensed the cover of a banknote packet instead of a HUF 10,000 banknote, which the ATM counted as a HUF 10,000 denomination. The customer presented the cover sheet in question in the Board’s proceedings, on the basis of which it was established that during the process of loading the cassette with cash containing HUF 10,000 denomination banknotes in the ATM, the cover sheet of the banknote bundle was mingled with the banknotes due to human error, and the ATM dispensed the cover sheet from this cassette during the transaction in question. In view of this, the bank credited the disputed amount to the petitioner’s account.

In another case, the petitioner tried to withdraw HUF 100,000 from the ATM, which did not dispense the banknotes. Despite this, the bank debited the amount to the customer’s account. The card complaint procedure was unsuccessful, and thus the customer turned to the FAB. In the Board’s procedure, after having reviewed the complaint handling documents, it was found that an incorrect date had been recorded as the date of the transaction in the card complaints procedure, based on which the bank examined the data of another, successful transaction. In the knowledge of the actual, confirmed date, the bank reviewed the case and found that the cash withdrawal had in fact failed. The bank credited the amount to the customer’s account.

An important lesson from these cases is that all relevant information must be provided and all evidence must be presented to the account-keeping credit institution during the card complaint procedure and upon filing a complaint to ensure that the investigation can properly establish the success or failure of the ATM transaction. It is also important that the complaint is reported as soon as possible. Under the rules of the international card brands, the account-keeping bank may initiate the card complaint procedure only within a specified time, during which the bank must start the administration as soon as possible.

According to the MNB’s September 2021 executive circular, from 1 January 2022, the payers’ payment service providers are expected to start taking the necessary measures to process the customer’s claim within one working day of receiving a request for the correction of an unauthorised or authorised but incorrectly executed payment transaction. For example, it should start the complaints procedure in accordance with the rules of the international card brand. However, if the customer is slow to notify the bank of his claim, the account-keeping bank will no longer be able to initiate the procedure. This makes it considerably more difficult, and in many cases impossible, to enforce the customer’s claim.

It may happen that when trying to withdraw cash, the ATM swallows the bankcard. This may happen for security reasons (for example, because the customer was slow to take out the card from ATM) or due to a technical fault of the ATM. An important rule is that in the former case, the bank may only charge the actual and direct costs incurred to replace the card. However, if the card is withdrawn by the account-keeping bank’s own ATM due to a technical fault, it must not charge any fees or costs for replacing it.

Many banks have installed ATMs that now also offer instant cash deposits instead of the traditional cash deposit in envelope. This is a convenient and fast way to make a cash deposit to the payment account linked to the card, where the deposited amount is credited to the account immediately.

However, there are some rules to be followed in this case as well. Instant deposit supports only the deposit of forint banknotes. The ATM does not accept damaged, folded banknotes or unknown pieces of paper, and as such it returns them; if it detects suspected counterfeit banknotes, it withdraws them. When making a deposit, particular attention should be paid to ensuring that the amount and denomination of the banknotes inserted by the customer into the machine match the data displayed by the ATM on the summary screen prior to authorisation. If the customer encounters any discrepancies or problems during the deposit, it should be also reported to the account-keeping bank without delay.

Accordingly, following a failed cash withdrawal, the customer should immediately report the problem to the issuing (account-keeping) bank and initiate a bankcard complaint procedure. This may be done in writing, via a recorded phone call or in person in a bank branch.

If the ATM involved in the disputed transaction is not operated by the customer’s account-keeping (card issuer) bank, but by another financial service provider, the card complaint procedure should still be initiated at the account-keeping bank. According to the rules of the international card brands, the issuing bank contacts the bank operating the ATM within the specified deadline based on the customer’s card complaint. It is advisable to record all relevant data and circumstances (in particular, the location and operator of the ATM concerned, the exact date and amount of the transaction in question) in relation to the disputed transaction on the card complaint form.

If the petition is rejected in the card complaint procedure, the customer should file a complaint with his account-keeping bank. It is important to be able to prove that the complaint has been lodged. Accordingly it should be sent by return receipt or registered mail by post, via a recorded phone call or in person in a bank branch (and in the latter two cases, the customer should request that complaint should be recorded in minutes in accordance with the statutory requirements).

However, it may happen that the bank rejects the complaint as well. In this case, the customer may, after the complaint has been rejected (or if no reply is received within 30 days after filing the complaint), apply to FAB for the remedy of his complaint or, where appropriate, compensation for the financial loss incurred. The circumstances of the dispute can be clarified at the Board (the proceedings of which is free of charge), with the involvement of the bank.

"Published in edited form on the Pénzcentrum.hu on 10 January 2022."

The health fund scheme, set up in the 1990s, helps people who join the fund voluntarily and their close relatives to pay for expenses related to healthcare and illness. Accordingly, funds are a form of savings that covers supplementary health and healthcare services not covered or covered only partially by social insurance, allowing us to prepare in time for an unexpected medical expense or to finance services to protect our health. However, one should always be careful when choosing the right fund and upon the settlement of health services.

What can it be used for?

Certain healthcare products and services can be charged tax-free to an individual health account held with a health fund. This includes, for example, the purchase of medicines, therapeutic equipment, glasses or contact lenses, and the use of various healthcare and medical services, treatments and screening tests. However, other goods and services may be taxable, which means that although those can be paid from the health fund account, personal income tax is payable on the amount. These include herbal teas, holistic medicine products, dental and oral care products and sports equipment.

It is often difficult to decide at first sight which category of goods or services a particular product or service belongs to, whether it is eligible for charging to the health fund account or not. For example, sports clothing or equipment for certain more dangerous sports cannot be accounted for as sports equipment. And certain healthcare services can only be obtained from a provider being in contractual relationship with the fund or with the National Health Insurance Fund, or upon clinical indication.

For this reason, before using a particular health service or buying a product, you should always check the eligibility of the service on the health fund’s website or at its customer service. Failing this, it may easily happen that you cannot pay for the product or service with your health fund card or that the bill for the respective service cannot be charged to the health fund account retrospectively.

Since 2016, health funds have had the option to include the offering of mutual aid fund services by amending their statutes. Upon considering joining or switching a voluntary mutual fund, it should be borne in mind that voluntary mutual funds designated as health and mutual aid funds, may offer a wider range of services to their members. The special benefits offered by mutual aid funds include childbirth allowances, unemployment allowances, sickness allowances, aid at the start of kindergarten and school year. school enrolment aid, utility bills, residential mortgage repayments.

Many health insurance funds also offer their members supplementary health insurance to finance services – providing basic insurance cover – for a monthly premium of a few hundred forints. One may become insured automatically, without making a declaration or with a separate declaration of joining. Base on the health insurance service, the insurer contracted with the fund pays all or part of the healthcare cost specified in the insurance conditions on behalf of the insured in return for a monthly premium deducted from the individual account. That is, in this case, the significant cost of the health service is borne by the insurer rather than charging it to the savings on the member’s account.

It is worth obtaining detailed information on the individual mutual aid services and supplementary health insurance, as these can be of great help in difficult situations, subject to certain conditions. Members may also designate close family members (such as a spouse, child or parent) as beneficiary, and thus their medical expenses may also be charged to the individual account.

It is an important rule that health fund savings can be inherited and, similarly to bank accounts, a beneficiary for the event of the account holder’s death may also be designated. When opting for the latter, the amount on the individual account is paid to that beneficiary upon the death of the fund member. In the absence of such a beneficiary, the payment must be made to the legal heirs, which is subject to the submission of a non-appealable grant of probate.

Benefits and costs

Currently, the key benefit of health fund membership is possibility of tax refund. Currently, a tax refund of 20 percent, up to an amount of HUF 150,000 per year, can be claimed on the amount of the membership fee and top-up payments made by the member as well as on employer contributions, for example as a fringe benefit, which must be calculated together with the payments made to voluntary pension funds. If there is any amount on the health fund account that is not expected to be spent within 2 years, it may be placed on a term deposit account. An additional tax refund may be applied for in the year of making the deposit, the current rate of which is 10 percent.

An additional 10 percent of the cost of preventive screening tests taken at the doctor’s recommendation through a health fund account can also be claimed back from personal income tax. Since the amount of the tax refund credited to the fund account can also be spent on services, a significant amount may be saved on healthcare costs. Given that tax legislation may change, it is strongly recommended to obtain detailed information on the prevailing taxation rules.

The fund places the savings collected on the individual accounts in an investment portfolio of predefined composition and low risk. The return on this also added to the balance of the account.

However, it is important to know that health fund membership also involves costs. A one-off joining fee is payable on joining, followed by a monthly membership fee. The amount may vary by funds. The rate of the regular membership fee (basic membership fee) is set by the funds – usually in a tiered structure – based on the amount of the membership fee paid. Usually, the higher the membership fee, the lower the basic membership fee. In addition, there is a card fee, which, however, is not a regular cost as it is payable only when the card expires or is replaced. Although it is not a visible cost, the investment portfolio management fee also reduces the level of return, and thereby also the amount of the return to be credited to the account.

Accordingly, before choosing a fund, it is advisable to collect information on the charges applied by the individual funds, the contractual service providers of the fund and the range of services the fund provides. First of all, you need to think over what you want to use the money collected on the account for, and how much you want to save for healthcare purposes.

If you change your mind later – for example, because you are dissatisfied with your current health fund or have found a better opportunity – we can switch funds at any time and transfer your savings on your individual account. You can also terminate your membership at any time, in which case the fund will pay the balance of your individual account after settlement. However, it should be noted that the fund may charge a fee for terminating membership or switching funds, which will be deducted from the balance of your individual account.

For whom is it worth joining a health fund?

Health fund membership can be a particularly good savings option for people who regularly spend large sums on medicines, therapeutic equipment or health services for themselves or a close relative. Having regular income is also an important consideration, as the quantifiable advantage of membership is achieved in the form of tax refunds.

However, for those lucky enough not to have health problems yet, it may also be worth preparing with savings for situations when an accident or illness unexpectedly increases their medical costs. Membership may also help you accumulating funds to cover screening tests to prevent or detect more serious diseases early. Health awareness and related self-provision in a family is as important as creating financial well-being, as health is always a good investment.

"Published in edited form on the Origo.hu on 2 February 2022."

Financial conciliation celebrated its 10th anniversary on 1 July 2021. The results of ten years include 53,858 cases, 28,890 hearings, nearly 25,000 procedures, 9,000 settlement agreements and 82 staff members, continuous IT improvements, acceleration of procedures, less paperwork, accurate records and statistics. Communication with financial service providers is fully electronic from 1 January 2021, while financial consumers can initiate the proceedings electronically from 3 January 2022. In short, this is a summary of ten years of work and achievements.

The Financial Arbitration Board (Board) was established and started its operations on 1 July 2011 pursuant to the provisions of the Act on the Hungarian Financial Supervisory Authority (HFSA). Before that, no financial conciliation existed in Hungary. Consumers, if they had any dispute of financial nature and did not wish to turn to court because they hoped for quickly reaching an agreement with the service provider could appeal to the conciliatory bodies having competence based on their place of residence. Although many people have resorted and still resort to financial litigation, these procedures are complex, long and costly. In most cases, such cases can be decided by involving an expert.

The idea of establishing financial conciliation was formulated to ensure the enforceability of the cooperation of financial service providers with their customers and the contribution of competent lawyers and economists with financial experience in financial legal disputes, in a simple, fast and cost-effective way. Such proceedings are fast and free of charge. There is a forum where, with some assistance, the parties can reach a compromise at their own discretion, thereby avoiding litigation and easing the burden on the judiciary.

When the financial disputes were still resolved in the general conciliatory system in 2010, a total of 880 petitioners made use of this opportunity. In 2011 – during the first half-year of the Board’s operation – the Board received already 1,196 consumer petitions, and in the same year 857 cases were closed as a result of the work of the seven acting panels. Of these, 696 cases concerned banks and financial enterprises. 80 percent of the cases involving banks concerned the granting of credits and loans for the purchase of goods, overdrafts, personal loans and credit card debts. Also, claims against financial enterprises related to car loans and financial lease services.

Based on the submitted claims, consumers most often applied for debt relief related to terminated loans, disputed the lawfulness of the terminated loan, the charging of a disbursement fees and the sales related to car loans. In addition, many of the petitioners applied for a contract modification for arrears, prolongation of maturity and cancellation of the mortgage registration. The result of the first half-year of operation is 214 settlement agreements, 39 recommendations and 10 binding resolutions in 203 hearings.

In 2012, i.e. the first full year of financial conciliation, the subject of petitions was partially new. The number of cases increased significantly, and this trend also continued in subsequent years until the adoption and practical enforcement of the “fair banking” rules. Every year had a “hot topic”. In 2012, the claims concerned the application for transferring properties to the National Asset Management Agency (Nemzeti Eszközkezelő Zrt.) and for state interest subsidies, disputes on the exchange rates applied, claims for exchange rate fixation, application of the exchange rate cap, closing of foreign currency credit and loan contracts, or requests for conversion for foreign currency loans into forint. In financial conciliation cases, the HFSA has also imposed fines in the amount of HUF 6.3 million on certain service providers for breaching the duty of cooperation. At that time, there was still much room for improvement in the attitude of some service providers to the new regime.

In 2013, most cases concerned credit and loans, financial lease and car financing services. Citing unfairness of the exchange rate gap and nullity appeared as new requests in disputing the validity of contracts, in addition to various claims for debt settlement due to presumed or actual overpayments.

The HFSA ceased to exist at the end of September 2013, and its tasks were taken over by the Magyar Nemzeti Bank (MNB) on 1 October 2013. Although this organisational change had no material impact on the Board’s operations, it was nevertheless significant for the Board, as it has been operating within the organisational framework of the MNB since then, as an autonomous and independent internal organisation, in accordance with the provisions of the Act on the Magyar Nemzeti Bank, promulgated in 2013. Its operating conditions and financing are provided by the Magyar Nemzeti Bank (MNB), thereby also undertaking the fostering of the efficient operation of the financial intermediary system, as well as the resolution of disputes in a fast, free and most reassuring way for all.

The next two years were a challenging time for the Board: in addition to the 4,181 new cases brought to it, 2014 was a year of preparation for the serious task it had to cope with in 2015. Namely, the legislation adopted in 2014 concerning the forint and foreign currency loans previously granted to consumers made the Board the primary forum for remedying the disputes arising from the statutory settlement and the conversion of foreign currency loans into forint.

The number of new cases received in 2015 was 20,353, compared to 12,921 in the first four years of operation. New rules were adopted, which required new organisation of work, major changes in the organisational structure, different working methods, larger staff, IT and physical infrastructure development, and last but not least, considerable professional preparation. The nature and role of the Board has changed considerably: the reorganisation has been completed, a new case register system has been developed and implemented, where all cases and documents can be stored and searched electronically.

The new role and the enormous tasks also called for the amendment of the rules in the MNB Act, regulating the general operation of the Board, thereby facilitating the resolution of the cases faster and in larger volumes than before (in addition to hearings held by the three-member panels cases now can be also managed by one board member and one minute-keeper). From that year onwards, the Board also dealt with equity cases. Namely, it also wanted to be available to financial consumers who are unable to meet their obligations through no fault of their own, providing financial service providers with an opportunity to consider whether they can and want to make an equitable decision in their case.

In 2016, the Board moved to its current location in the 13th district of Budapest at Váci út 76 and has been holding hearings in its 13 meeting rooms ever since. In the same year, it started to use, together with other European peers, the online ODR Platform developed by the European Commission, which is available to customers in disputes related to financial services contracts concluded online. From that year onwards, the impact of the “fair banking rules” was felt and it was reflected in the number of cases brought before the Board, which then slowly but gradually decreased.

As of 1 January 2017, the MNB Act introduced the institution of mandatory statutory submission, which is unique in the field of conciliation to date. The relevant provision of the Act requires the Board to issue a binding resolution if there is no agreement between the parties, the financial service provider has not made a declaration of submission, an infringement and/or breach of contract by service provider can be clearly identified and the consumer’s claim does not exceed HUF 1 million. The purpose of this rule is to increase the willingness of financial service providers to conclude a settlement agreement and, if they have committed an infringement or breach of contract, to effect a compromise with their customers on voluntary basis.

In the proceedings before the Board, the number of settlement agreements approved by the Board or concluded outside the proceedings is steadily increasing, while the number of its recommendations and binding resolution is steadily decreasing, and no fines have been imposed since 2013. The willingness and ability of service providers to reach a settlement is increasing, as it is evidenced by the fact that around 40 percent of the cases have a positive outcome for the petitioners. In respect of the matters in dispute, consumers are more aware of the relating regulations.

The Magyar Nemzeti Bank’s efforts to steer financial service providers towards focusing more on their customers’ demands, giving them a better understanding of the rules relating to the services they intend to use, and helping them in resolving their complaints concerning services, were also effective. Financial consumers have become more conscious, they pay more attention to the attributes of the various financial products, have a better understanding of their characteristics and functions, they are able to formulate their requirements more accurately and prepare better quality petitions.

The Board is also available to disseminate financial skills to consumers, especially to young people. On the one hand, in each case where a terminating resolution is issued, the acting member explains the characteristics of the respective financial service, draws attention to important things to know and provides useful information to consumers. On the other hand, it also supports young people in obtaining financial knowledge by organising and supporting financial case competitions, by inviting and awarding tenders, and by providing opportunities for internships in dual training and outside that. In the 2021/2022 academic year, it provides a professional programme entitled Academy of Financial Law lectures already for the third year, organised by the Budapest Institute of Banking. So far, nearly 400 young people – partly students, partly practising and graduated lawyers and economists – obtained up-to-date and practical knowledge of the world of finance.

The Board organised annual national conferences on alternative dispute resolution on four occasions – between 2016 and 2019 – each of which was structured around a different topic. In cooperation with the National Office for the Judiciary and with the support of Wolters Kluwer Hungary Kft., it attempted to bring together the trade and present the latest developments in the field of alternative dispute resolution. Unfortunately, the series of conferences was interrupted due to the pandemic, but it may resume soon.

The past decade has brought good results and successes, thanks to the professional work of colleagues working for the Board and in support areas. In 10 years, almost 54,000 cases were concluded successfully with the cooperation of 82 colleagues in nearly 29,000 hearings and nearly 25,000 written proceedings. The biggest achievement was the 9,000 settlement agreements concluded.

I thank all financial service providers and petitioners who were partners in reaching a compromise. I hope that with each settlement agreement we are able to contribute to the maintenance of a long-standing and mutually advantageous partnership between service providers and their customers across the financial sector.

* The author is the Chair of the Financial Arbitration Board of the Hungarian National Bank

"Published in edited form on the ‘Tőzsdefórum’ portal on 8 March 2022."

Since January 2021, the Financial Arbitration Board (FAB) attached to the MNB has the option to deal with financial service providers electronically. Following the removal of the legal obstacles, the development of the application tailored to the needs of consumers has also started, and as a result, from January 2022 the consumer-friendly FAB online application is available to petitioners (in addition to the electronic channel already in use).

This application helps consumers submit their petitions more easily than in the previous electronic interface, directly from the FAB website, without installing any software.

To use the service consumers have to identify themselves through a client gate portal, as it was the case in the previous electronic interface as well. Once identified, the customer can initiate a new procedure or proceed in a pending case. A new petition can be initiated due to a consumer dispute with a service provider, customers may also submit an equity petition or apply for the proceedings of FAB in cross-border consumer disputes.

FAB procedures – with the exception of equity cases – are subject to formal requirements, i.e. the use of certain forms is mandatory. By filling in the form, the customer answers all the questions in the form. The system supports the filling in with information and several useful functions, such as filling in the full company name of the service provider concerned from a pop-up window, automatic completion of the service provider’s registered office or the display of warning windows if the programme detects typos or omissions.

The application also indicates the type of documents to be attached. This means that all the data and annexes required by law and necessary for launching the proceeding, can be made available to the FAB already at the time the petition is submitted. The application also has some convenience features: for example, if the customer stops filling in the form and saves the draft, the system stores it for 60 days, and thus the data already filled in does not need to be re-entered later. In the application, customers can also view the petitions submissions they have previously filed with the FAB.

The experience of almost 2 months since the application went live shows that FAB’s online application has become known and popular among customers. The application is often chosen for communication with the FAB both to initiate new proceedings and for pending cases. Since January this year, 53 percent of the submissions received through the FAB’s online administration interface were new petitions, while the remaining forms were received in connection with pending cases.

However, there are a few things to be considered when the customer opts for electronic administration. For example, it should be noted that in the case of electronic petitions, the FAB delivers the documents to the client gate portal. Accordingly, electronic communication is recommended for those who constantly monitor the e-mails sent to their e-mail address, use it as a daily routine and download the e-mails they receive in their electronic storage space. If the customer fails to do so, it may happen (similar to unclaimed documents sent by post) that the FAB delivers the letter to the customer’s storage space in vain, as without downloading it, the customer will not be informed of its contents at all or will only be informed of it late. According to the law, documents received in the storage space of the client gate portal but not downloaded by the customer within 30 days are deleted.

There are also many consumers who prefer the traditional paper-based administration, as they feel more comfortable with it. The FAB takes their interests into account in the same way as those of its clients preferring electronic proceeding, and thus paper-based postal communication remains available in the proceedings as before. Petitioners can send their petitions to the FAB by post or submit them in person at the MNB’s Customer Service Desk in Budapest or in any government office. In the proceedings initiated on paper, the FAB will continue to send its letters to customers by post.

For both paper-based and electronic petitions, the most important thing is that the petition should be comprehensive and include all the declarations and annexes required for the petition to be accepted, in order to ensure rapid processing. The FAB continues to provide consumers with expert assistance in resolving their financial disputes through its increasing number of communication channels.

"Published in edited form on the Infostart portal on 6 April 2022."

Many disputes arise from failure to notifying the service provider of change of residential or postal address. Financial contracts, be it a loan contract, a bank account contract or a home savings contract, prescribe for the customer to notify the provider of any change of address. Thus, after obtaining the new residence card the first thing a consumer should do is to visit his financial service provider (bank, health fund, pension fund, etc.) and notify it of the new address, each provider separately.

Let us suppose that customer can use the same bank branch for dealing with his loan contract, bank account, home savings contract or even with his health fund membership. In proceedings before the Financial Arbitration Board (FAB), petitioners often cite that “but I notified the bank of my change of address, why didn’t they indicate this in all my contracts?”

Even if the consumer notifies the bank of the change of address, the health or pension fund will not be informed of the change of address. In such cases it may be necessary to complete 2-3 notification forms depending on the number of financial service providers the customer has contracts with. The notification must be made by the customer, and thus if he has more than one contract, he should specifically warn the bank clerk of this. Always ask for and keep a copy of the notification form bearing the “received” stamp of the institution. This is how you can prove later on that you have notified the change of address in the event of a dispute.

It is also important to check your bank accounts statements regularly and consider whether you really need the account. Many customers argue at the FAB that “I did not use the account, why did they charge an account-keeping”.

However, banks usually charge the account management fee not on the basis of the turnover. Financial conciliators have been approached on several occasions by people who have not used their bank accounts but failed to close them, leaving them with a substantial account management fee over the years.

Some people also forget to notify the bank of their change of address, and thus their bank cannot reach them. In such cases, since the statements were sent to the old address, it can take years before the customer becomes aware of the forgotten bank account debt.

If you decide to close your bank account, it is important to keep the documents to prove this later. There have been cases before the FAB where petitioners claiming that the account had been closed could not prove it.

In the event of such disputes, the customer must prove that the account has been closed (by submitting a termination notice), and if they fail to do so, they cannot win the case. It is therefore very important to review the status of your accounts regularly and take the necessary measures. It is also important to sort out the status of other bank accounts opened in connection with a loan contract (e.g. a mortgage loan). Those do not “expire” when the loan agreement is terminated, and thus they must be closed separately.

In the case of home savings contracts special attention should be paid to prove it in due course that the savings, increased by the state subsidy, has been used for housing purposes. The legislation sets specific deadlines depending on whether it is used for home purchase, construction, or improvement, or for the prepayment of a housing loan. Thus it is not enough if the customer uses the savings plus the state subsidy by the deadline.

If no proof is provided, the building society sends a formal notice to the consumer and, if this brings no result, it initiates civil proceedings or non-litigious procedure (warrant for payment) for the state aid and interest. In several of such cases taken to the FAB, in addition to the failure to provide proof, the problem was aggravated by the fact that these customers also failed to notify the building society of their change of address. Accordingly, the latter sent its notices to the customer’s old address, which the consumer did not receive.

In these cases, consumers typically turn to the conciliation body when the building society has already transferred the case to the tax authority (NTCA) to collect the state aid as taxes. Due to the preceding final warrants for payment, the FAB could only treat the petitions of the respective customers as equity petitions and terminated the proceedings in the absence of a settlement agreement.

It is also important to make the payments under the home savings contract in due course. If this is done by direct debit, it is advisable to check that it has actually been done. In the FAB proceedings, customers often complained that the direct debits were omitted, and therefore they were deprived of the state subsidy. The proceedings revealed that the reason for the omitted direct debit was either an incorrectly completed authorisation or a lack of funds on the petitioner’s account.

If the consumer finds that the direct debit has not been executed, he should contact the building society and the account-keeping bank as soon as possible to resolve the situation.

If savings are paid by ad hoc transfer, special attention should be paid to the timing of the transfer. Namely, in order to receive the maximum state subsidy, savings should be deposited neither too early nor too late, and it should be also borne in mind that the savings year and the calendar year do not necessarily coincide. For example, if the savings year runs from 1 April to 31 March of the following year, it is pointless to deposit the full annual savings on 1 April and then again on 31 March of the following year, as the payments fall in the same savings year, and the state subsidy is paid only once.

It is also a common problem that consumers try to catch up with the unpaid savings in the second half of the savings year. However, these cases are clearly regulated by the legislation, as state subsidy for payments made in the third and fourth quarters must not exceed 25-25 percent of the annual state subsidy. Accordingly, the extra payments are useless, as no higher state subsidy will be paid for that.

In the case of bank account contracts, by checking regularly the account statements and account histories may help prevent recurring suspicious transactions. In addition to monitoring your accounts, it is also important to keep your bank card and PIN code in a safe place. And if there is an SMS service linked to the account, the messages should not be ignored.

A case was taken to the FAB where more than nine months have passed since the first suspicious transaction before the customer realised that his account was being regularly debited – for small amounts – which he had not initiated. During the conciliation procedure, the customer acknowledged his responsibility in making it possible that these debit entries could have occurred over such a long period of time, as he did not check the transactions on the account regularly. Nevertheless, the consumer still found the situation injurious. The parties finally reached an agreement in the dispute and the petitioner was reimbursed part of his claim by his bank. Although this case ended with a settlement, it is important that customers act with due care to prevent such situations.

The expiry date of bankcards should also be monitored. Unpleasant situations may arise if you realise at the checkout that you want to use an expired card due to negligence. If you have applied for a new card but it does not arrive before the expiry date of the old one, contact your bank and ask about the new card.

It is also worth checking your card limits (for purchases and cash withdrawals) from time to time, especially if you are planning to travel abroad. In the latter case you should also give consideration to notifying the account-keeping bank of the expected use of the card abroad in order to prevent the bank from treating the foreign purchases as suspicious transactions and blocking the card.

"Published in an edited form in the journal ‘Világgazdaság’ on 7 November 2022."

Misunderstandings may arise from the false interpretation of the technical terms. Everyone must have a thorough understanding of the basic technical terms in the financial agreements. For example, in a loan contract, who is the debtor and who is the co-debtor? What does it mean to be a joint and several guarantor? What are the obligations of a mortgager? What is joint and several liability? How can you get out of a specific legal relationship? What happens when a financial contract is terminated? What does a warrant for payment mean, what are the options available to the addressee before it becomes final, and what are the consequences once it is over? What are the burdens and obligations of an enforcement procedure and why is it advisable to avoid it by all means possible?

Make sure you understand the basic technical terms

Another important question is what rules apply to financial commitments concluded by spouses (jointly or separately). In the latter case, for example, if one of the parties conclude a credit card contract, that may lead to unexpected situations within the marriage. This is particularly true if the marriage subsequently breaks up, as the agreement concluded with the ex-spouse when dividing the assets has no effect on the obligations towards the credit institution, i.e. the latter is not obliged to accept it.

In the case of succession, it is important, for example, that the heirs are only liable to creditors up to the amount of their inheritance, but in the case of multiple claims, the order and degree of satisfaction must be also taken into consideration. The grant of probate prepared by a notary lists the known assets and liabilities comprising the estate. At this point, the heirs can still decide whether to accept or reject the inheritance.

However, it may also be the case that a previously unknown claim comes to light only years later, which creates a new situation. The challenges surrounding inheritance are often complicated further by financial service providers, as there are many examples of different practices. In the cases heard by the Financial Arbitration Board (FAB), attached to the Magyar Nemzeti Bank, there is often a misconception that a creditor claim not registered in the probate procedure cannot be enforced later.

It is also very useful to know the statute of limitation and the legal application of it, with special regard to the full consequences thereof.

Financial literacy should also extend to knowing what kind of cooperation and information can be expected from the financial service provider under the law, and what rights and options the consumer has if the service provider fails to comply with those expectations.

Although it may be tempting to deal with your transactions rapidly in person, with the help of a kind and pleasing teller, and the information received may appear thorough, the availability of exact content proven by signed documents significantly simplifies the resolution of a potential dispute later on. Accordingly, it is advisable to make a written document of all declarations made and conditions agreed to by the financial institution and retain those. This is not a question of trust, but merely a useful foresight for the resolution of a possible dispute later.

The decision: taking responsibility

The risk you assume should never exceed your risk tolerance, i.e. you should be able to bear the financial burdens even in a worst-case scenario. Do not fall to temptation or persuasion until such time as the decision is supported by facts. In finance, emotions are very bad advisors!

Unfortunately, most of the serious financial problems occur with the knowledge, or even the consent, of consumers. This is the case, for example, when customers sign a contract (as a guarantor, if applicable) on a commitment that they cannot comply with later, or when they give codes, passwords to unauthorised persons, etc. This is why it is important to have reservations about offers promising large profits or mails appearing to be authentic, in which fraudsters ask for identification codes claiming that they are “your bank”.

Everybody can make mistakes, but fortunately in many cases mistakes can be corrected. If bad decisions have caused financial chaos, it is a good idea to seek help as soon as possible.

If the consumer is unsure about a financial product or service when concluding the contract, it is advisable to ask for the opinion of an objective third party, relative, friend, acquaintance or professional well-versed in financial matters.

If nevertheless an awkward financial situation arises, the first thing to do is to try to sort it out with the bank or financial service provider. And if this does not lead to a satisfactory result, you can go to the FAB. However, it may happen that the legal alternatives are exhausted, in which case there is still one option: a petition of equity. It is important to know that financial service providers are also interested in resolving the situation, which may give a chance for reaching an agreement.

And once the problem is resolved, the most important thing is to learn from what happened! If the price had to be paid, do not let the lesson be lost!

"Published in edited form on the ‘Tőzsdefórum’ portal on 8 April 2022."

The first and most important step is to ascertain whether any call of this content can be real. The panic of losing your money tends to override sound judgement. The best thing to do is to take some time to understand: why were you called? If you do this, you have a better chance of spotting suspicious signs.

Watch out!

Most customers have various banking services of convenience that allow them to receive SMS or mobile app messages on their credit card or account transactions (debits, credits). If no such message is received, but the caller informs you of specific abuse, be careful! Check the caller’s phone number. Unfortunately, there is a way to clone a specific phone number, but experience shows that often the caller’s number only resembles the bank’s customer service number (for example, there are 8 digits after the area code, rather than 7).

Also bear in mind that you can only receive a phone call about unauthorised payments related to your bank account from your account-keeping bank. Banks do not operate a shared customer service and do not transfer calls to each other. Be suspicious about any request to name your account-keeping bank. If you are unsure, disconnect the call and call your bank’s customer service. Urging and sometimes threatening tone, with the prospect of severe sanctions, is a general feature of such calls, but don’t fall for it! Bank staff do not conduct investigative action “following a warm trail” with the police that would require the immediate involvement of customers.

Be suspicious about any request to name your account-keeping bank.

Tricky data thieves

If for some reason you do continue the phone conversation, remember how your bank has identified you in previous phone calls. Banks usually ask for some personal information and some verification questions (e.g. whether you have savings in the bank).

However, in many cases, during the attempted fraud no customer identification is performed, nevertheless many customers still continue the conversation with the fraudsters. In other cases, there was some form of identification, after which the customers felt reassured, assuming that they were talking to a real bank employee, because they knew information about them that only the bank could know. This could include identification by bankcard numbers. In fact, the fraudsters only knew the card details that could be accessed through the customer’s internet or mobile bank remotely (some details of the card number are visible in the systems), and they made the customer to provide them with missing numbers as identification.

In real life banks never ask for all the details of the card or for the authentication codes, usernames and passwords - either for identification or for additional operations. Customers are also not asked to give their name and all their bankcard details “after the beep” to prevent abuse.

Once the fraudsters have gained the customer’s trust, they launch the operations the purpose of which – as they claim – is to protect the customer’s money, but are in fact intended to steal it.

Banks never ask for all the details of your bank card or for authentication codes, usernames and passwords.

Small requests, big losses

In one of the cases brought before the Financial Arbitration Board (FAB) attached to the MNB, the perpetrator made the customer believe that he was on the hot trail: he claimed that the real fraudster was a bank employee who was “in action” on the customer’s account, and that he would send the SMS on the suspension of the card and also call the customer. He was warned not to fall for it. The bank’s fraud filtering system did indeed detect the transaction for GBP 0.72 initiated by the perpetrators, blocked the card and contacted the customer by phone. However, as it was proposed by the fraudsters, the customer told the bank’s real employee that transaction for a small amount had been initiated by himself. The story ended with a loss of a million, as the criminals were now able to initiate another transfer for a large amount.

A recurring feature of the solutions offered by fraudsters is to install a program with several misleading labels (e.g. “antivirus” or “anti-hacking”) on the customer’s mobile phone or computer used for online banking. These programs (such as AnyDesk or TeamViewer) are installed on these devices by deceived customers despite the fact that they are not actually familiar with those and they also fail to check them before downloading.

By installing these programs, fraudsters in fact gain remote and unrestricted access to the customer’s online banking devices. Once installed, the “only” thing to do is to make the customer log in to his online banking interface. In order to prevent customers from seeing what the fraudsters do on their mobile phones, they are asked to turn the phone upside down and cover the cameras on it.

Another recurring element is that fraudsters, in order to prevent the debits cited by them, which do not actually exist, persuade customers to raise their previously low bankcard limit to the highest possible amount. However, this action made it possible to commit an abuse for the highest possible amount rather than preventing it.

Credulity versus protective functions

In a world of different internet security codes and strong customer authentication, one may wonder how these abuses could have materialised. Well, by using a remote access app downloaded to a mobile phone, fraudsters can learn the code received in SMS and take control over the banking applications. In many cases, however, even this was not necessary, as the customers themselves provided the fraudsters with the SMS code at their request, or approved the transactions by authenticating them in the mobile app.

Customers saw all the details of the transaction before the perpetrators requested it: the name of the beneficiary, the amount and currency of the transaction, and they still had no suspicion. In addition to revealing all the details of the card, the fraudsters also made customers to provide them with the code, which – as they claimed – was necessary because once the customer approved the transaction, the transaction was frozen, blocked or the funds were placed on a “secure police account”. Customers with a control service noticed that their account balance decreased immediately after the operation. Their doubts were lulled by claiming that the money had been temporarily placed under protection and that the bank would later transfer it back it from the “secure account”.

That is, the main argument of the fraudsters was that they were protecting customers’ money, and this is why savings had to be transferred to a secure account. The story they tell is that all banks keep a secret sub-account for their customers, which is not in the customer’s name, because – as the fraudsters say – it cannot be. Furthermore, as the maximum amount of money that can be transferred to this sub-account is HUF 2 million, and thus the number of sub-accounts depends on the account balance.

In the knowledge of the account balance – which was not known to the fraudsters, but the customer disclosed it – the customers recorded the details of the transfer to one or more sub-accounts, according to the instructions of the fraudsters. In all cases, it was a bank account outside the customer’s bank, with an unknown beneficiary, and the comments field had to include “gift” or other similar comment. Subsequently – in the cases taken to the FAB – customers transferred the money, assuming that they secured their money. In fact, they may have just lost it.

What can be done against phone fraudsters?

Banks keep their customers informed about the latest phishing attempts and methods used for committing bank fraud via their own website, email, netbank or push messages sent via the bank’s mobile application. It is advisable to read these messages and keep yourself informed. Spare no time to read the messages you receive from the bank! Check whether the content of the message you receive in SMS or via mobile app, and the transaction it contains, is something you really wanted to do. Let’s be cautious! It is worth doing so in every respect.

The frauds were successful because customers also provided the fraudsters with the SMS codes at their request.

"Published in edited form on the Origo.hu on 27 April 2022."

The remittance of the savings from your home savings account, a large bonus at work or the receipt of unexpected funds is an excellent opportunity to use it to pay off your loan. It is worth checking the legal and contractual terms and conditions when making a prepayment or final repayment of the loan to avoid pitfalls, problems and possible extra charges. Those who have encountered such problems usually turned to the Financial Arbitration Board (FAB) attached to the MNB in connection with unexpected fees, lengthy administration, inadequate information or the amount to be repaid. When making prepayments and final repayments, not only the relevant law but also the provisions in the individual loan contracts should be taken into consideration, as those may often complicate the matter.

The consumer must notify the bank in writing of his intention to make a prepayment or final repayment. In respect of the specific form and timing of the notification, it is worth reading the banks’ product notices. And if you have already notified the bank of the intended repayment, you had better make the payment, otherwise you will have to notify the bank repeatedly later on. It may also give rise to a dispute if, after notification, the prepayment is not made for some reason.  In a real case, the petitioner notified the bank of the intended final repayment, filled in the final repayment declaration, but failed to make payment. Months later, he paid the amount indicated in the new statement of debt, but by then his declaration expired. The customer cited lack of information as a reason. Finally, the dispute was settled before the FAB, and the bank reimbursed part of the interest incurred.

The bank must provide the customer with the necessary information within 5 working days of the notification of the intended prepayment. In the case of consumer loan contracts concluded after 21 March 2016, the law also provides that if the consumer indicates his intention to make a prepayment, the lender must provide the consumer with a quantification of the consequences of prepayment or information on the prepayment costs on paper or on another durable medium. It is important that consumers do read through the notices thoroughly and make the prepayment to the specified account number at the time and in the amount specified. The amount of the outstanding debt is of particular importance in the case of a final repayment, as the full amount of the debt must be paid in order to close the loan.

But what can consumers do if they disagree with the content of the notice or later on it turns out that it contained incorrect data? In some cases, the debt was paid on time and in the amount shown in the statement, but the final repayment did not materialise because the amount notified by the bank was – wrongly – lower than the actual debt. In one of these cases, the consumer and the bank also reached an agreement before the FAB: the customer acknowledged that his debt was indeed higher and the bank admitted that it had provided incorrect information. The customer paid the outstanding debt and the bank did not charge any additional fees or interest for the “late payment”.

It is not always enough to pay the full amount of the debt, because usually there is also a fee for prepayment and final repayment. These can vary and the law only sets maximum rates: 1.5 percent of the prepaid amount for mortgage loans and 1 percent for the certified consumer-friendly housing loans, a product being extremely popular these days. However, prepayments may also be free of charge: for example, in the case of prepayment of certified consumer friendly housing loans from building society savings.

Debtors seeking assistance at the FAB also often dispute the fee charged for final repayment fee. A consumer was told at the branch that he was entitled to a final repayment free of charge, and the teller in the branch also indicated this on the final repayment declaration, nevertheless a fee was charged. Although later on the debtor making the final repayment accepted that the fee was justified, as he had been informed of it in advance. Had he been properly informed, he may have decided otherwise in respect of the final repayment. Finally, the bank refunded the fee charged for final and the dispute was closed with a settlement agreement.

It is common for banks to make allowances at the time of signing the contract: this may include the waiving of the disbursement fee, reimbursing the appraisal fee or the fee for the notarial deed. However, they may stipulate in the contract, for example, that in the case of a final repayment within a certain period (for example three years) or a prepayment of a large amount (for example more than half of the loan amount), the fees waived at the time of the contract will be enforced.

In a dispute, the bank asked the customer to pay almost HUF 100,000 in addition to the outstanding debt upon the final repayment of the loan. The customer complained that he had not been informed of this in advance. The final repayment process was protracted and for several months the bank branch was unable to tell how much should be paid to close the contract. Finally, the bank explained the fees and costs waived and the specific contractual provision under which it had the right to charge these items. In the end, an agreement was reached on the exact amount to be repaid, the service provider forbore from the repayment of the fees waived under the campaign and also reimbursed the consumer for part of the interest incurred due to the protraction of the final repayment process.

In the case of a prepayment, the bank must account for the amount paid within 5 working days of the payment, at the latest. In this case, the instalment usually decreases. However, the consumer may prefer keeping the instalment unchanged and rather shortening the maturity. In this case, however, additional costs may arise, for example, in connection with the contract amendment, notarisation, etc.

A consumer turned to the FAB because, although he had done everything lawfully and, in his opinion, his contract allowed him to do so, the shortening of the maturity that he had opted for, had not materialised. However, the bank claimed that shortening of the maturity had been subject to special assessment and a contract amendment. Namely, in their case the dispute concerned a specific contractual provision, which was settled in a settlement agreement both in terms of the prepayment and the shortening of the maturity.

The new instalment after the prepayment may also be the source of the problem. The bank informed the customer of an incorrect amount before the prepayment. However, the notice sent after the prepayment already stated the correct amount, also supported by the credit institution numerically. The consumer accepted the new information, but complained that he had been misinformed beforehand and this may have influenced his decision. Finally, as part of the settlement agreement, the bank refunded the prepayment fee charged.

These numerous examples show that it is worth acting circumspectly regarding the prepayment and final repayment of the loan to avoid any major or minor pitfalls. It is important to read the information received thoroughly, peruse the contractual terms and verify the data. Consultation with the bank should preferably take place in writing, if possible, and the copy of the documents submitted should be retained. The complaint, if any, first should be filed with the bank. Consumers may initiate the FAB proceedings, if the bank rejects the complaint.

"Published in an edited form in the journal ‘Világgazdaság’ on 5 May 2022."

Today, almost all bank account holders have a debit card linked to their account. Bankcards are almost identical in appearance and functions, but there is a significant difference between them depending on whether they are debit cards or credit cards. Based on the experience of the proceedings before the Financial Arbitration Board attached to the Magyar Nemzeti Bank (MNB), consumers are often unclear as to the difference between the two types of cards and the pitfalls of using a credit card.

A debit card is a cash-substitute payment instrument linked to a bank account, which can be used to make purchases or withdraw cash from your payment account. In this case, we are spending our own existing money. When using a credit card, as its implied by the name, the bank gives you a loan up to the amount of the credit facility specified in the contract, which you have to pay back regularly (usually monthly). There is no card application fee, but the cardholder’s issuing bank charges a fee for holding and using the card.

A credit card is most often used for buying goods or services. In this case, funds are used from the credit facility linked to the card in the amount of the product or service purchased, and no other fees are charged for the transaction. When you use the card, the bank sets a settlement period (usually one month), which ends on the day of balancing the account. The amount used from the credit facility to make purchases during this period must be repaid within the next grace period, which is a deadline set by the bank (usually 15 days).

If the full amount is repaid by the end of the grace period, the amount spent is free of charges and interest. The interest-free credit applies only to purchases made with the card, not to cash withdrawals. The interest charge arises if the cardholder fails to repay the full amount used during the grace period, by the end of the grace period, at the latest. If he repays only the minimum amount defined by the bank – usually 5 percent of the utilised credit facility used – the bank will charge interest on the utilised amount.

If the customer fails to pay this as well, he will have to pay interest and default interest as well, which is extremely high compared to other loan products. In this case, the annual percentage rate of charge (APR), i.e. the annualised percentage of interest and charges, may be as high as the central bank base rate plus 39 percentage points.

If the credit card is used for cash withdrawal, the temporary interest-free period applicable to purchases shall not apply to withdrawals. The bank will always charge high interest on the withdrawn amount, and in some cases extra costs as well, and thus it is definitely not a good idea to use credit cards for cash withdrawals. There were cases where a customer withdrew HUF 1,000 using a credit card, for which the credit institution charged a cash withdrawal fee of nearly HUF 600.

Purchases made by a credit card usually rewarded by the issuing bank with some kind of allowance or bonus. The most common practice is the refund of a certain percentage of the purchase, which is credited to the customer’s credit account or to a collective account. Particular attention should always be paid to the exact conditions under which the credit institution provides such bonuses. For example, it may specify the type of purchases eligible for a refund and the maximum amount of refund.

In some cases, the cardholder may define the scope of these allowances/bonuses (e.g. refundable purchases) or the use of the collected, refunded amount. Taking advantage of and using these bonuses requires careful consideration, but with good judgment, the refund may be as high as the annual credit card fee or even more. This practice fosters the activation and use of the credit card.

If this special card is used in a way that after the spending period the full amount used is repaid by the end of the grace period – considering the interest-free use and the allowances/bonuses enforced – the benefit realised may exceed the fees paid. This is only possible if the payment deadline is strictly observed.

Similarly to the debit cards, attention should be paid to setting the card limit for credit cards and requesting SMS notification or push message after the purchase about the transaction, the amount used and the available credit facility. This is advisable, because there have been several cases where the card was stolen or fraudulently obtained. This should be reported to the bank immediately and the blocking or stopping of the credit card should be requested.

There are also several credit card products that come with a hire purchase loan agreement. It may happen that although you have not used your card and repaid the amount under the hire purchase agreement, you still have an outstanding debt, which increases month by month and the bank asks you to repay it.

It should be borne in mind that not using the credit card does not mean that you will not be charged for fees and costs under the contract. In this case, credit institutions deduct the fees incurred (e.g. annual card fee, account management or closing fees, SMS fees, etc.) from the credit facility. This generates a payment obligation, on which interest will be charged, if not repaid by the deadline. Special attention should be paid to the type of other obligations and contracts involved, for example, in an interest-free hire purchase loan.

Experience shows that when credit card products are sold, only the benefits are highlighted and the costs incurred are mentioned only by handing over or referring to the announcement or list of conditions. There have also been cases where, after signing the contract, the customer realised that he received a credit card instead of a new debit card for his account, the bank charges a fee for cancelling it. Cancellation is free of charge only after a certain period of time or upon paying a significant amount.

In all cases, the relevant announcement or list of condition forms an integral part of the contract concluded, and thus not being familiar with it does not exempt the customer from the payment of the fees charged. The information given orally when concluding the contract, or the lack of it, usually cannot be verified later on and it is difficult to prove in a potential legal procedure.

Hence you should be careful and always check the terms and conditions of the contract before signing it, and obtain information about interest rates, costs and the details on any discounts that may apply. Moreover, you should regularly monitor those during the term of the contract, as they may change unilaterally.

For detailed information on the use of credit card products see the Financial Navigator publication of the Magyar Nemzeti Bank, while the MNB’s Credit Selection Programme provides help in comparing individual credit card products. If you need advice or professional assistance, you can contact the nearest office of the Financial Navigator Advisory Office Network in the county seats. For the contact details and opening hours visit the MNB website.

"Published in edited form on the Origo.hu on 11 May 2022."

Money cannot buy you happiness. This is a statement that certainly many of us agree with, but others dispute it or at least shake their heads in disapproval. On the other hand, it is a fact that a shortage of money may overshadow happiness, and thus having your finances in order may also give you peace of mind and foster happiness.

The decisions people make in their daily lives are influenced by both emotional and rational considerations. What is the role of these in establishing, maintaining or terminating a customer relationship? Are you sure that it is a good thing if emotions prevail over common sense?

Establishing a customer relationship, such as opening an account, making an investment or taking a loan, is usually associated with positive emotions. We are confident that we choose the right product and we will get what we expect. Disappointments later on can be avoided by obtaining detailed information beforehand. This is particularly true for long-term financial decisions, such as taking a housing loan, choosing a long-term investment purpose or taking out pension insurance. It is a good idea to investigate all available options carefully, understand the terms and conditions, and the legal environment. If necessary, do not be shy at asking for expert advice, or having an inspiring conversation with friends and family who may have already been in a similar situation. However, too much information can also be confusing. We live in a digital world, flooded with a large volume of data through a number of different channels. Make sure that you identify the knowledge necessary for making a decision. It is also important that you obtain information from a reliable source. For example, the website of the Magyar Nemzeti Bank (MNB) (www.mnb.hu) is one of those authentic sources of information on financial topics, providing objective information on market participants and their products, such as e.g. the certified consumer-friendly loans and insurance products.

The possession of money is associated with positive emotions, while the lack of it with negative ones. Financial market participants are aware of this, just like those pursuing illegal activity. Usually they do not tell lies in their advertising, but they can mislead consumers by highlighting only the positive aspects of the product. Be suspicious if the offer is too attractive: a risk-free investment and overly high yield are usually unrealistic promises. You are right to suspect that the provider of such a product or service is not a legal market participant. The purpose of the Warnings on the MNB’s website is to protect consumers from such service providers, which have already come to the attention of the MNB during its market surveillance activities.

Usually phishing criminals also seek to manipulate your emotions. When approaching you with alarming news about your financial situation (“your bank account has been accessed without authorisation” or, to the contrary, with holding out bright prospects of an unexpected and very attractive opportunity (“you have won a huge amount of money, all you have to do is...”), they want you to provide them with your personal data, password, PIN code or click on a link without thinking, out of a sudden emotional impulse. The best way to avoid these pitfalls is to increase financial awareness. If you are aware of the methods used by fraudsters, you will not be caught unprepared by a phishing letter or phone call, and a conscious financial consumer would prudently check the truthfulness of the information by contacting his service provider.

In an ideal world, you are satisfied with the financial service or product you have chosen: you have got what you expected, the “consumer experience" has been realised. However, when problems arise, negative emotions may prevail: annoyance, disappointment, frustration, anger, even shock and fright.

In such heated situations, it is important not to let emotions determine the way forward. The necessary and possible steps must be taken rationally. This is also important because consumers are typically left alone with their feelings: on the other side of the “counter”, the financial service provider manages complaints in a basically rational, unemotional way.

This article focuses on the emotional aspects of financial consumer decisions. Accordingly, it is worth clarifying the notion of financial consumer. Practically, this is a natural person who manages his private financial affairs (not related to his business or economic activity) with a bank, insurance company or other financial institution.

If a disagreement about a financial service cannot be settled directly with the service provider in a satisfactory way, the customer can complain to the financial institution. If his complaint is rejected, he can take the matter to the Financial Arbitration Board (FAB), which is a potential forum for resolving financial consumer disputes. The aim of the FAB proceedings is to resolve the situation amicably and foster an agreement between the parties. More information about the process is available on the MNB, or directly on the FAB website. As its name suggests, the purpose of FAB is conciliation. In addition to the professional approach, it allows for personal clarification of the disputed issues, and also provides room for expressing emotions, reconciling grievances and “blowing off steam". If this yields no result either, the FAB decides the dispute in justified cases.

The Financial Arbitration Board is also characterised by an emotional-intellectual duality. On the one hand, it investigates and clarifies professional (financial, legal, economic, numerical, etc.) problems, on the other hand, it deals with conflicts, also paying attention to the human side of the problems and trying to help the parties to find a realistic solution together.

"Published in edited form on the Origo.hu on 25 May 2022."

Even if no bodily injury occurs – which can cause irreversible damage – the owner is left with a smashed car after the accident. This is rather depressing for owners, while it is also uncertain who will pay for the damage.

In Hungary, the Act on Compulsory Motor Third Party Liability Insurance (MTPL) states that all registered keepers of motor vehicles with a permanent establishment in Hungary are obliged to take out an insurance policy to cover losses caused during the operation of the vehicle. This obligation is observed by all but a few rare exceptions, since everybody knows that if they have caused an accident, the insurer will pay for the damage to the vehicle that is not at fault.

After a damage, insurers may rightfully impose certain sanctions (e.g. degrading in the bonus/malus scheme, damage surcharge) on the party at fault. Due to this, some drivers at fault do not always accept responsibility for causing the accident and take every opportunity to escape negative legal consequences. It is therefore very important that the driver actually not at fault is "on the alert” after the accident has occurred and is prepared for the possibility that the other party may try to hold him liable in the claims settlement procedure for the accident or damage that he did not cause.

Given a narrow street in the city centre, there is a battle for parking spaces. Car A sees a free space and starts to move right backwards between two cars. Then comes the unexpected loud crack from behind. Now he looks carefully behind him and sees that the rear of his car crashed into vehicle B behind him.

The two drivers inspect the damage. Let us assume there is no dispute between the parties, the driver of car A apologises and says he accepts his responsibility. The driver of vehicle B is happy to acknowledge this fact and they agree where to fill in the blue-yellow accident report form. They arrange a time and a place where they can do the administrative work more calmly, as the drivers behind them are already upset.

The driver keeps his word and they meet. However, he may – having re-evaluated his situation – tell the driver of car B that he does not accept responsibility because he was not reversing but rather the other car crashed into him. Here, a dispute is likely to arise between the parties, the civilised solution of which is to describe only the fact and mechanism of the accident as they see it.

It is also possible that the driver of car A still accepts responsibility and they record it in the accident report. In the following days (within 30 days under the MTPL Act), the driver of vehicle B reports the claim to the insurer and the claims settlement procedure starts. At this time the owner of the car not at fault is already convinced that the insurance company will settle the claim.

However, the insurer of the party causing the damage notifies him that it would not settle the claim because it is of the opinion that the accident had been caused not by the party insured by it. The owner of car B is engaged in a dispute with the insurer, and it turns out that the driver of car A withdrew his acknowledgment of liability during the claim settlement procedure, and thus the insurer believes that it was not a reversing accident, but that car B slid into car A. In this case, not only the car of the owner the car not at fault has damaged, but also his sense of justice.

Now let’s see what the party not at fault needs to do to avoid this unpleasant disappointment. His most important task is to record the damage, regardless of the hoot by the cars behind him. After getting out of the car after the accident and ascertaining that indeed material damage has occurred, use your mobile phone for recording all relevant circumstances. Take photos of the damaged vehicles from all sides, as well as of the accident scene in the wider area.

The most important is to document the damage to the vehicles, the position of the vehicles relative to each other, and other circumstances that help to establish the mechanism of the accident. This can significantly simplify the claims settlement process later on. If you have the opportunity, you should also look for witnesses who can later make a declaration on the circumstances of the accident.

The parties may then leave the accident scene to complete the accident report in a calmer environment. According to the MTPL Act, in addition to the basic information on the vehicles and their insurers, this must include information on the relevant circumstances of the accident.

It is only an option and not a statutory requirement to record whether either party accepts responsibility. The declarant is not prohibited from withdrawing later on the declaration on the acceptance of responsibility, if any. The question of liability for damages will be decided by the insurer, on the basis of a statutory mandate, in many cases independently of the declarations of liability. Accordingly, such declaration is not conclusive. The most important thing is that the damage after the crash is recorded. A well-documented claim is the basis for a fair claim settlement.

Following its introduction in March 2020, the moratorium on payments has made the financial burden more bearable for many consumers amid the difficulties caused by the pandemic. From 1 November 2021, the moratorium was available only to debtors belonging to priority social groups (e.g. pensioners, the unemployed, public employees, borrowers with children), and only if they applied for it on a dedicated form within the statutory deadline.

The same applies to the extension of the moratorium until 31 December 2022. And those who opted out cannot re-enter the moratorium. But what should be the main considerations for a pensioner whose credit card debt is affected by such a moratorium, or for a parent with young children who uses the moratorium’s protective umbrella, for example in connection with a housing loan? What is the right choice? Opt out or stay?

In cases where the financial means of a consumer belonging to one of the above categories do not make it possible to continue the repayments at all, the question does not really exist. Utilisation of the moratorium until 31 December 2022 still grants a respite for payments. But what if your income would allow you to pay the instalments? What long-term effects should you be prepared for due to utilisation of the moratorium?

The lengthening of the maturity – an important effect of the moratorium – can be perceived the most in the area of housing loans. Perhaps by now all those concerned know that the debt continues to accrue interest also during the term of the moratorium. The customer has to pay this interest in interest-free instalments rather than in a lump sum. What does this mean in terms of maturity? Housing loans are annuity loans, which means that the amount of the instalments is constant, but the principal-to-interest ratio within the instalments is continuously changing, since the outstanding principal decreases in parallel with the amount of interest charged on the principal.

The moratorium changes this repayment schedule, as it takes into account an additional factor. This is the interest accrued during the moratorium period, which must be paid in equal monthly instalments, i.e. spread equally on a straight line basis. That is, a small part of the instalment that will be used for the interest accrued during the moratorium. Of course, in addition to this the monthly transaction interest still needs to be paid, and it is also an important rule that the instalment amount must not exceed the original instalment amount specified in the contract. It is easy to see that in order for the original instalment amount not to increase, the third element of the instalment, i.e. the principal, must decrease.

Let us see an example: let us assume that (without a moratorium) your original instalment would be HUF 150,000, of which HUF 100,000 would be the principal and HUF 50,000 the interest. However, after the moratorium, you will have to start paying off the interest accrued during the moratorium. If this is e.g. HUF 7,000 per month, the monthly transaction interest will be HUF 50,000 (since it is payable on the existing principal debt), added to it HUF 7,000, i.e. the interest amount spread on straight line basis. Together this is HUF 57,000.

However, since – according to the rules of the moratorium –the monthly instalment payable must not exceed the amount paid until the ordering of the moratorium, i.e. HUF 150,000, the principal will decrease monthly by a much lower amount than HUF 100,000. As the principal reduction is smaller, the remaining outstanding principal will be larger than if the original schedule – i.e. without the moratorium – had remained in place. This is a recurring pattern, month after month, until maturity. Accordingly, the interest accrued during the moratorium, the maturity and the overall the interest payable will increase proportionally to the time spent in the moratorium.

In the case of contracts linked to the reference rate, additional criteria should be also taken into consideration. In this case, the interest rate on the contract is variable, for example linked to 3-month BUBOR, plus a interest spread. The reference interest rate changes periodically (every 3 months, every 6 months, etc.), but if the contract so provides, the interest spread also changes periodically; the latter is referred to as the interest spread period.

As there are no repayments during the moratorium, i.e. the principal is not reduced, interest is charged on this (non-declining) principal. While the interest rate on fixed-interest housing loans does not change, the reference rate is a continuously variable rate (which has been rising steadily recently) until the freezing of interest rates.

Although at present the interest rate freeze capped the reference rate at the level of 27 October 2021 until 31 December 2022, it should be borne in mind that in the event of a future lifting of the interest rate freeze, the contractual interest rate prevailing then shall be payable on the outstanding principal debt not yet due. Thus not only has the principal (i.e. the basis of interest calculation) not decreased as a result of participation in the moratorium, the interest rate has also increased compared to March 2020.

However, if you opt out of the moratorium and start paying the instalment, the amortisation of the principal can commence. This means that the higher interest rate payable in the event of the potential lifting of the interest rate freeze will be charged on a lower principal amount, thereby reducing the amount of the interest payable.

If you contemplate taking a refinancing loan now or later on, the settlement of the interest accrued during the moratorium – augmenting upon remaining in the moratorium on payments – could increase your burden further. As regards its title, this amount is classified as interest payable on the transaction. In the case of refinancing, the entire debt arising from the existing contract (including interest accrued during the moratorium) must be settled. If you ae unable to do the latter from your own resources, the amount of the refinancing loan will have to include this as well. However, while the interest accrued during the moratorium on your original loan was payable in interest-free instalments, in the case of loan refinancing this amount will already be a principal debt (as this be advanced to you by the refinancing loan), on which you will have to pay transaction interest. The longer time you participate in the moratorium, the higher this amount.

It is advisable for consumers who already had arrears when they entered the moratorium, albeit their contract has not been terminated, to enquire about their options in due course. Although these loans are also covered by the moratorium, once it is terminated, the debtors concerned will be in a complex and difficult situation.

Not only will they have to start paying the instalments again, but they will also have to settle the overdue debt. Once the moratorium is lifted or you opt out, the legal consequences of late payment, such as default interest, will apply again to debts that became overdue before 18 March 2020. These debtors should therefore thoroughly consider opting out and whether they have any solution for this situation. Contact your bank as soon as possible and negotiate at least about the settlement of the debts that have become overdue already before the moratorium.

In the case of open-ended loans – such as credit card contracts and overdrafts – it is also important to assess your situation in relation to the moratorium. In the case of these contracts the moratorium applied only to the debt outstanding on 18 March 2020, after which the credit card/overdraft facility continued to operate under the standard rules. In relation to interest accrued during the moratorium, in autumn 2021 the law prescribed a recalculation, whereby the moratorium interest rate was set to 11.99 percent.

This rate has significantly reduced the outstanding accrued interest on the respective contracts. Another relief provided to these debtors is that they can settle the recalculated debt in 12 monthly instalments, rather than immediately. When your money is tight, negotiate with your bank on the instalments. This is important, because if you fail to pay the agreed instalments after opting out, the bank will collect these instalments by debiting those to the credit line, as you are no longer protected by the moratorium. In other words, in the case of credit cards and overdrafts, late payments after opting out can significantly increase your debt.

The situation is more difficult if you have several contracts in moratorium and your capacity to pay the instalment is limited. For example, if the moratorium covers your housing loan, credit card debt and hire purchase loan, you should give consideration to opting out of the moratorium immediately or later on in respect of at least one of your loans.

In this way, if your financial situation permits, you may be able to settle a small debt (e.g. a credit card debt) in full by the end of this year, thereby avoiding that suddenly you are faced with a large monthly payment obligation. You may be able to do this, for example, through a special agreement with your bank, which may provide you with preferential terms. Accordingly, it is important to negotiate with your financial service provider on the procedure of opting out.

You should consider not only whether you will be able to make the payments immediately after opting out of the moratorium, but also think about the whole term. For example, how old you will be when the loan expires according to the new maturity after the prolongation? How will this affect your long-term plans, savings, or perhaps your pension savings? What are your future plans for this period? The fact that part of your disposable income will be “tied up” by the instalment for the prolonged term may impact a future purchase of real estate, a large investment, home improvement or even the possibilities of your expanding family. It is not all the same whether this is for 20 or 23 or 25 years. The momentary advantage may generate a number of problems in the long run, ultimately putting you in a difficult situation.

Opting out of the moratorium is a complex decision, greatly influenced by the financial and income situation of the debtor. Accordingly, always do consider the long-term effects as well. To make the right decision, it is essential to consult your bank and monitor your contract on an ongoing basis. Conscious planning may help you avoid a difficult situation later. Accordingly, assess your options and remember that there is a reason why the saying goes: “Don’t put off until tomorrow what you can do today”.

"Published in edited form on the Pénzcentrum.hu on 25 May 2022."

Those participating in the moratorium now and would like to opt out, do not have to do anything, as only those need to make a declaration who wish to stay. If you make no declaration, you no longer will be eligible for the moratorium and will have to start repayments. If you wish to stay, you must make a declaration to this effect on the standard form by 31 July 2022. What are the options for those who want to opt out of the moratorium but not being sure that they can pay the instalments?

Irrespective of the type of the contract covered by the moratorium, the first step is always to check the notification letters, account statements and moratorium notices sent by the bank. Especially in the case of credit card debts, the Financial Arbitration Board (FAB) often hears the argument that “I did not even know about the debt” or “ did not receive a statement”. Many people forget that if they have requested an electronic statement when they signed the contract, they are waiting for these statements on paper in vain. This is the first thing to clarify, if you do not receive the statements on paper. Then size up whether your financial and income situation allows you to start paying the instalments. In connection with this make prior enquiries at your bank as to the payment obligations you will be faced with if you opt out of the moratorium. It is also worth asking about the impact of opting out – even 1-2 months later – on your debts and future burdens. In addition to the foregoing, prepare a family budget by taking stock of your income and expenditure. This helps you to see the amount that you can use for the monthly instalment without overstretching your liquidity. For example, the Household Budget Calculator of the Financial Navigator can help you plan your monthly budget.

If your financial means allow, you may want to consider taking on a higher instalments. In this way you may as well fit it into the original term, and although you will have to pay higher instalments, the maturity and ultimately the total interest you pay will be lower. In an Executive Circular the MNB formulated an expectation toward the banks that they should offer customers the possibility to amend their contracts free of charge if the customer – with a view to shortening the extended maturity – is ready to pay higher monthly instalments, and to provide them with this opportunity at least until 31 December 2022. It should be noted that the resetting of original maturity is subject to an income verification. The statutory payment-to-income ratio (PTI) applies here as well, other costs may also arise.

If you have a larger amount of money at your disposal, you should also consider prepaying the interest accrued during the moratorium in addition to opting out. In connection with this, the aforementioned Executive Circular of the MNB also expects banks to exempt consumers from the fees until at least 31 December 2022.

Even if you are not necessarily convinced that you will be able to fulfil the payment obligation after opting out of the moratorium, it is still worth asking your bank whether there is a possibility to renegotiate the contractual terms and conditions, or to elaborate solutions tailored to your situation. The solution may be to agree a new maturity date with the bank and amend the contract accordingly. Enquire about the schemes potentially available, especially if you have a housing loan contract tied to a reference rate. If it is possible to fix the interest rate, it is worth considering this option as well, as although the interest rate freeze tackles this issue for the time being, once it is over, interest rates will change again. As an individual solution, there are a number of other possibilities for combining these options, such as interest rate fixation with additional extension of the maturity, prepayment with interest rate fixation, prepayment partially from own funds combined with loan refinancing, etc. And if you still cannot find a mutually acceptable solution with the financial service provider, you can turn to the Financial Arbitration Board after an unsuccessful complaint procedure with the bank. In the FAB procedures several settlement agreements have been concluded in cases related to the moratorium, which concluded with debt forgiveness, resetting the maturity or, for example, the possibility of interest-free instalments. Of course, consumers still have the possibility to initiate the FAB procedure while they participate in the moratorium, before they opt out. Accordingly, they can make their decision on opting out depending on whether they can reach an agreement with their bank on the settlement of the debt.

One of the petitioners, whose credit card debt had increased significantly over more than 2 years, also resorted to the FAB proceedings. He wanted to find a solution to his difficult situation, but could not reach an agreement with the service provider. His low pension did not allow him to pay off the debt or to pay a higher monthly instalment. During the FAB procedure, the bank offered the petitioner an interest-free payment option, payable in monthly instalments that was still affordable for the petitioner. Accordingly, the agreement of the parties was able to settle the situation in a predictable manner for the long run, taking into account the possibilities of the customer, in a way that facilitated the gradual reduction of the debt without jeopardising the petitioner’s subsistence.

In another case, the petitioner also applied to the FAB in connection with a credit card debt. At the time, he still participated in the moratorium on instalments. He also had spending after the start of the moratorium, i.e. 18 March 2020, which were not covered by the moratorium. Since he did not pay those either the bank also charged him for the contractual interest and fees, which increased his debt significantly. The service provider was open to negotiation and waived more than HUF 100,000 from the debt, while the petitioner agreed to settle the remaining debt in one sum.

There were also cases where the parties were able to agree on how the maturity and instalment would change if the customer opted out of the moratorium later on, and the bank even made an approximate calculation (containing the anticipated figures).

In another case, the petitioner also wished to receive comprehensive information on his options before opting out of the moratorium. The parties discussed the situation in detail, but as the petitioner had no specific ideas on how to settle his debt, he finally decided to visit the bank branch.

However, there have also been cases where debtors have already opted out of the moratorium when they resorted to the FAB. They have typically faced increased burdens after the end of the moratorium, which may as well have jeopardised their daily subsistence. In one of the cases, the petitioner complained that due to having opted out the combined amount of the instalment of the debt accumulated during the moratorium and the minimum amount payable by him in respect of the balance utilised outside the moratorium overstretched his liquidity. Here too, the parties were finally able to agree on a monthly payment schedule that the petitioner was still able to pay and also resulted in a substantial reduction of the debt.

One petitioner turned to the FAB because, when his current account was closed, he realised that he had a moratorium debt arising from the overdraft facility linked to the account. He stated that he was not aware of this debt, and thus he disputed it. At the hearing held by the FAB, the petitioner understood and acknowledged the debt. However, due to his low pension and difficult financial situation, it was not possible to settle it immediately in full. The bank was open to providing him with the option of interest-free instalments, and the monthly instalments were adjusted to the petitioner’s pension and other expenses.

It should be noted that even if paying off the debt seems to be unfeasible, a solution can still be found. Accordingly, if you are unsure whether to continue participating in the moratorium or start paying the instalments, you should try to find an individual solution with your bank. Plan ahead so that you can make informed financial decisions for the near and, in many cases, for the distant future.

"Published in edited form on the Origo.hu on 25 May 2022."

The price of certain durable goods may exceed the means of the family budget, and then many people resort to trade credit. It also happens that the consumer does have the money for the goods, but because of the favourable or seemingly favourable terms of the credit product, he decides to resort to the trade credit available in the stores. What should you look out for in such a case, how can you avoid future problems and what can you do if you cannot agree with your financial service provider?

First of all, there is a difference whether the problem relates to the product purchased or to the trade credit. Warranty or guarantee claims concerning the technical appliance can only be made to the seller of the product. It is also important to know that the cancellation of the loan contract does not affect the contract concluded for the product purchased. Disputes of this nature can be referred to general conciliation bodies.

The Financial Conciliation Board (FAB), attached to the Magyar Nemzeti Bank, deals with financial consumer disputes. For example, in the case of a consumer dispute relating to a trade credit or a “hybrid” credit card contract combined with a trade credit, the FAB procedure can be initiated if the complaint procedure with the financial service provider is unsuccessful.

Experience shows that disputes arise mainly in connection with purchases made with credit cards. In addition to traditional credit cards, hybrid products allow consumers to make purchases against the credit facility, pay in instalments and at the same time conclude a trade credit contract, usually under favourable terms. The latter transaction is separate from the credit card, with individual maturity, interest rate and instalment. Most of the problems taken to the FAB arise from this duality. So what should you look out for?

Many consumers claim that they did not even know that they signed a credit card contract when they concluded the contract, they just wanted to buy a new fridge, they did not want a credit card, just a preferential trade credit. There were also complaints from consumers that there was not enough room for reading the contract, the lighting was poor, or the contract was in small print. Perusal of the contractual documents is of utmost importance, as they involve a financial commitment. It is worth asking about the available loan products in person, online or over the phone, or reading the available leaflets, already a few days before the purchase.

Before signing the contract, you should clarify whether it is merely a trade credit or a product combined with a credit card. This is because although the terms of a trade credit combined with a credit card may be favourable, the credit card is typically a product that incurs high interest. Moreover, other fees and charges may apply according to the terms of the contract, be it a card fee, default interest, postal money order fee, SMS service fee or closing fee.

For some schemes, the first annual card fee is waived, but it may also happen that the card fee is charged depending on the utilisation of the credit facility or it is not charged if there are no credit card transactions. Many people also realise only later that they have to pay a card fee because they have basically signed a credit card contract. In one case, the consumer realised that the financial service provider had debited the annual card fee to the credit card two years after the contract was signed. The customer claimed that he only wanted to conclude a trade credit contract and not a credit card contract. In the financial service provider’s opinion the debiting of the card fee was lawful, but waived it on an equitable basis. Thus, the parties were able to settle this dispute with a compromise.

Many problems also arise from the late payment of the trade credit instalments. In such cases, various fees such as default interest and debt management fees may be incurred, which, together with interest on late payments, may amount to several thousand forints per month.

In the case of credit cards combined with a trade credit, if the contract provides for it, the bank will deduct the instalments from the credit card in the event of default. In this case, the favourable terms of the trade credit will no longer apply to the instalment. And you also use the credit card, the amount to be repaid increases further, as not only the trade credit instalments must be paid, but also the balance of the credit card. The use of a payment protection insurance also increases the monthly amount to be paid.

Therefore, if you decide to conclude a credit card contract combined with a trade credit, it is important to keep track of the debt and regularly check your bank statements. It is also important to pay the monthly amount due, because even a few days’ delay may result in a large interest and fee charge.

In one of the cases taken to the FAB, the consumer used his credit card continuously in addition to the trade credit, but paid the instalments irregularly and failed to settle his full monthly obligation on several occasions. As a result of this, the late payment fees and default interest charged have significantly increased the debt. The bank made a settlement offer in the case, but the consumer did not accept it. He continued to dispute the outstanding debt, but he could not substantiate his position, he had indeed failed to make the payments duly, and thus his claim was unfounded.

There was also a case where a customer paid the trade credit instalment on postal money order by the deadline, but still had to pay default interest. Many people forget that the date of making the payment on postal money order is not the same date when money is received by the bank (the latter is considered to be the date of payment). Accordingly, the postal money order must be sent at least two working days before the deadline for the instalment to reach the bank. Different fees may also apply to different payment methods. It is therefore worth considering whether payment by postal money order, ad hoc transfer or direct debit is the most appropriate option, and when signing a contract, ask about the costs and information about each payment method.

It is particularly important to bear in mind that the credit card contract is not terminated automatically when the trade credit is repaid. In the case of combined contracts, only the trade credit part is terminated, the underlying contract, i.e. the credit card, remains in place. If the consumer does not wish to keep it, it must be terminated separately.

In one of the cases taken to the FAB, the consumer realised only after the hearing and consultation that the settlement of the trade credit part of the transaction did not terminate the contract and the credit card account remains in place. It was also turned out that the consumer did not want to keep the credit card, but was not aware of the termination procedure. Finally, the agreement of the parties also covered the termination of the entire contract in addition to forgiving part of the debt.

It should also be borne in mind that in these combined contracts the structure of the account and debt statements is more complex than usual. Two or more transactions may appear on them simultaneously. In addition, a credit card can be linked to several trade credit contracts, which often make it more complicated for consumers to keep track of their payments.

In one of the cases taken to the FAB, five different trade credits were linked to the petitioner’s credit card, all of them with different loan amount, maturity and transaction interest rate. The consumer complained about his outstanding debt, and it was not clear to him either which of his debts were reduced by the instalments he had paid. The hearing held by the FAB provided the parties with the opportunity to discuss the matter in detail. Finally, the parties eventually reached a compromise in the dispute, which included the forgiving of more than a third of the outstanding debt.

These examples also show that consumers should monitor hybrid credit card and trade credit products in a complex and comprehensive way. If you finance your spending from a loan, take time to peruse the contract and clarify the basic questions: which payment method is the most appropriate, what happens if you default on an instalment, what costs should you expect and what are the main things to know about terminating the contract.

And if you experience an “unusual”" or unexpected event after concluding the contract (for example, you receive a credit card that you did not want or you are charged an unexpected fee), it is worth investigating and contacting your financial service provider as soon as possible. Concluding a trade credit or credit card contract is as important as choosing the new TV, fridge, etc. Devote enough time to it!

"Published in edited form on the Origo.hu on 17 August 2022."

What if someone you care about asks you to act as a surety for their loan or pledge your property as collateral for their loan? It is very difficult to make the right decision. If you refuse, the existing good relationship or friendship may be at stake. However, if you agree to act a surety or mortgagor, assuming that person you stand surety for is reliable and will surely repay the loan, later on you may pay a high price for the favour you did for your relative or friend.

The cases taken to the Financial Arbitration Board, attached to the MNB, show that it is important, first and foremost, to be aware of exactly the obligations entailed by agreeing to act as surety or mortgagor and the consequences of it.

The lending activity of credit institutions is governed by strict rules. They may grant loans in the amount and under conditions that properly ensure that the debtor is able to repay it and that, in the event of default, the claim is enforceable against the collaterals.

In the case of consumer credit, such collaterals typically include demand guarantee, mortgage on property or independent lien. It covers many types of credit, from consumer personal loans through mortgage loans to subsidised housing loans. A consumer is a natural person who acts, borrows or provides collateral not in connection with his undertaking or economic activity, and thus a consumer may also act as a surety or mortgagor.

The bank usually also verifies the income of the surety, and may ask for proof of employment or income. If the credit assessment is favourable, the bank concludes a loan contract with the debtor and a guarantee contract with the surety. With the latter, the surety undertakes to perform the obligations of the debtor toward the bank, if the debtor defaults. Demand guarantee means that the guarantor cannot expect the bank to first try to recover the debt from someone else, such as the debtor.

The bank is obliged to inform the consumer acting as surety of his rights and obligations as guarantor and of the specific risks arising from the situation of the debtor or the nature of the obligation known to it, prior to concluding the guarantee contract. The guarantor’s obligation to pay is proportionate to the obligation or debt for which he has undertaken the guarantee and may not become more onerous than undertaken.

However, this does not mean that the guarantor does not have to bear the consequences of the debtor’s breach of contract, such as default interest or other costs related to the enforcement of the claim. When the surety is provided by a consumer, the maximum amount up to which the guarantor is liable for the debtor’s debt must also be specified in the surety agreement. It is reassuring that the bank cannot demand a higher amount than that.

Let us see two examples. You undertook a demand guarantee; the debtor pays for a while and then defaults on his payment obligation. You receive a demand for payment from the bank to pay the debt. As a demand guarantee provider you must pay the arrears of the debtor by the deadline set by the bank, at the latest. In such cases, we are entitled to a claim for reimbursement by the debtor.

If neither the debtor, nor you - as a guarantor – pay, the bank is entitled to seek satisfaction from your total assets up to the amount of the receivables from the debtor plus incidental charges, not exceeding the maximum amount specified in the surety agreement. It should be noted that in the case of a demand guarantee, the bank is free to decide whether to ask the demand guarantee provider or the debtor to settle the debt. In the absence of voluntary performance, the bank may enforce its claim by legal means, and enforcement proceedings may be initiated against you on the basis of an enforceable instrument (which may be a notarial deed of execution, a final order for payment or a final judgment). As a demand guarantee provider, you are liable for the debt with all your assets and any assets you own can be seized.

If you provide your real property as collateral and you are “only” a mortgagor in a loan transaction, and the debtor defaults on the payment, you may lose the property you offered as collateral. The solution may be to sell the property, which is subject to the consent of the creditor. Ultimately, the creditor can recover its claim by selling the collateral property in an auction as part of the enforcement procedure, which is the least favourable solution for the mortgagor, partly because of the enforcement costs and partly because of the price realisable.

In either case, it is advisable to contact the bank as soon as possible and try to settle the debt with the debtor.

In summary, the most significant risk when acting as a surety or mortgagor is that the debtor fails to pay his debt. In this case, the fact that it was not you who used the loan amount and that you did not see a penny of it, did not benefit from the loan and that only assumed the obligation as a favour, does not influence the enforcement of the claim against you. If the debtor is persistently late with the instalments, the lender may terminate the contract and demand payment of the debt in one sum. In such a case, the default interest, the debt management costs, and the costs of enforcement in the case of enforcement proceedings, will further increase the amount to be repaid.

The guarantor’s data may be transferred to the Central Credit Information System (CCIS), making it more difficult or impossible for him to get a loan later. The mortgagor could lose the property offered as collateral for the loan, and thereby possibly also his dwelling. A demand guarantee provider may as well lose “everything”, as he is liable for the debt with all his assets. All this should be weighed carefully before assuming any obligation.

"Published in edited form on the Origo.hu on 14 September 2022."

According to the Act on Consumer Credits Act, during the term of the loan contract, upon request the lender must provide the consumer with a statement of the debt in the form of an repayment schedule, free of charge. In the case of mortgage loans, the lender must provide information on the debt in the form of a repayment schedule once a year or on the interest rollover date, free of charge.

The law also prescribes that the repayment schedule must include the instalment amounts, the frequency and terms of repayment, and any other elements (e.g. fees, commissions, charges) other than the principal and interest of each instalment. In the case of receivables managed by debt management companies, the MNB formulated its expectations regarding information to debtors in a recommendation.

In the case of statements, the first step is to check whether the contract contains data for the entire term from the date of the contract, or whether it is e.g. an annual loan reconciliation/information letter or a balance statement/statement of debt for a specific period or date.

You get the most comprehensive picture of your debt, if the statement covers the whole term and includes both debits and credits (i.e. items increasing and decreasing the debt), broken down by title (cost, interest, principal).

It is worth checking the amount of the expected monthly payment (i.e. the instalment) and the payment amounts included in the statement, in addition to the initial principal debt. If the monthly instalment amount is different from what you expect, make sure that you ask the bank about this. If you notice that a payment is missing or shown in an amount other than you have paid, always notify the bank or the debt management company in writing and send a copy of the deposit slip, credit transfer slip, postal money order, etc. confirming the payment.

In a case taken to the Financial Arbitration Board (FAB), the petitioner complained, among others, that although the bailiff had issued a garnishment on his income in the enforcement proceedings against him and deductions were continuously made, the debt management company recognised not all payments as items reducing the outstanding debt. He claimed that almost HUF 700,000 has not been accounted for, and also attached a statement of this. During the procedure, the debt management company acknowledged the receipt of the items specified by the petitioner, but some technical error had occurred. However, the necessary adjustments were already made during the FAB proceedings and the debt was reduced accordingly.

This was not only the result of the FAB proceedings; the parties also concluded an agreement for the payment of two-thirds of the debt outstanding after the correction in interest-free instalments. This also shows that a consumer even without relevant financial education can do a lot for the settlement of his issues.

In addition to the instalments paid, you can also check how they are accounted for. The Civil Code prescribes an order of settlement, from which the bank or the debt management company may, but not obliged to, depart in favour of the debtor. Therefore, if the payment is not sufficient to settle the entire debt, the sequence of the settlement shall be cost, interest and principal.

If, for example, the monthly instalment is not paid in full, the payment is first used for the settlement of the cost (if any), then the interest and only the remaining amount reduces the principal. It is also possible that you make regular payments to the debt management company, but nevertheless the principal debt does not decrease. The reason for this may be that the payments are used for reducing other debts (interest, costs).

The next important issue is the interest charged on the transaction, which may be examined both in terms of percentage and amount. The percentage rate of the transaction interest is specified in the contracts, nevertheless it may happen that the bank applies a different rate. One reason for this may be that, in the case of a variable rate contract, the interest rate will also change due to changes in the reference rate, compared to the initial rate in the contract. Another reason for the discrepancy could be the cancellation of the preferential interest rate. If you have a contract where the bank provides you with preferential interest rate subject to certain conditions (e.g. certain amount is credited monthly to your account), if this preferential interest rate is cancelled, the interest rate (and therefore the instalment amount) will be higher than before.

Thus if you notice a change in the interest rate percentage, make sure that you ask for the reason. With regard to the amount of interest, it should also be taken into consideration that loan contracts are annuity-based, which means that the amount of the instalments is the same, but the principal-to-interest ratio within the instalments varies continuously over the term.

Since the ratio and the amount of interest within the instalment are steadily decreasing during the term, it is often cited in the FAB proceedings that “I have already paid the interest for the whole term in advance.” There have also been cases where the customer has asked for a refund of interest after the final repayment, stating that due to the final repayment he repaid the debt faster. He cited that he had already paid interest for the whole or a significant part of the term, and thus he was entitled to an interest refund, as the contract was terminated before the original maturity.

These petitions are unfounded. The monthly instalment is comprised of the principal and interest (in addition to any handling fees). The business terms and conditions contain the interest calculation formula. It should be noted that the interest component is the interest charged on the principal due at the end of the previous month (typically shown as capital not due in the statements). The interest calculation formulas applied by financial service providers most often calculate with a 360-day year. Months are taken in into consideration as 30-day months, but in some cases the formula calculates with the number of calendar days in the past period (e.g. 1-31 March = 31 days).

Also check the statement to see if any default interest has been charged. When doing this, examine whether all payments have been made on time and that the expected instalment has been paid in full. Have you received any notice about the delay and have you omitted anything? If you still think that the charging of the default interest is not justified, you should report this to the service provider.

It is also recommended to review fees and costs incurred. If you have a question about any of these items, always ask the bank or the debt management company administrator for information. It is worth reading the bank announcements and terms and conditions, as these are the documents that specify the various fees and charges. These are also available on the banks’ websites, but sometimes it is difficult for consumers to navigate among the different documents applicable to different contracts and with different validity. If in doubt, ask for clarification!

Reading all those documents is undoubtedly time-consuming, but it will help you clarify your outstanding debt and avoid disputes. Although at first glance it may seem difficult to interpret a statement, even a consumer without financial expertise can find out a lot about the changes in his debt. And if you still dispute any item, you can negotiate with the financial service provider in the FAB procedure after an unsuccessful complaint procedure.

"Published in edited form on the Pénzcentrum.hu on 12 October 2022."

The withdrawal of the yield on the individual pension account of a voluntary pension fund member is tax-free after a 10-year waiting period. In a case taken to the Financial Arbitration Board (FAB), attached to the MNB, on 25 March 2020 a voluntary pension fund member – relying on the data shown in the account statement of his individual account and the results of the voluntary pension fund at the end of 2019 – submitted to the voluntary pension fund an application for the payment of the yield after the 10-year waiting period.

When the member received the amount of the yield and the relevant statement, he realised that the yield on his individual account had decreased by more than HUF 300,000 compared to the end of the previous year. In the proceedings before the FAB, the petitioner complained that the amount paid to him did not correspond to the yield indicated in the statement of his fund account and that he was not informed in time, before the yield was paid, of the exact amount and the reason for the change.

During the procedure, the fund noted that it operated a selectable portfolio scheme and a register based on units of account, and thus its members could have obtained information in advance on the website of the voluntary pension fund. The daily prices for the portfolio that includes the personal savings are available on the pension fund’s website, in the knowledge of which the petitioner can decide whether to request further information and submit an application for the payment of the yield based on that or to desist from his intention.

The petitioner submitted his application to the voluntary pension fund for payment of the yield at a time when he could have already heard from the news that returns on investments had fallen significantly both in the international and the domestic markets due to the COVID-19 pandemic. In the interest of its members, the voluntary pension fund also published a notice on its website a week before the submission of the application, warning members of the impact of the COVID-19 pandemic and the greater fall in yields.

The FAB found the petition to be unfounded, as the yield on the petitioner’s savings in the selectable portfolio was calculated in accordance with the legislation and the provisions of the internal regulations of the voluntary pension fund. When an application for the payment of the yield is submitted, it is calculated and paid not on the basis of the annual statement, but after the receipt of the application, for future date (accounting date). Between the two dates, the price of the portfolio containing the savings of the member may change significantly.

Voluntary pension savings are investments the return on which is defined based on the price prevailing at a future date. Accordingly, the investment result of the portfolio containing the member’s savings cannot be determined in advance. For this reason, the petitioner could not have received any prior information from the respective customer service about the amount of the yield to be paid on the savings on his individual pension account. The pension fund was not obliged to contact the petitioner for any other reason either after receiving the application in order to pay the yield.

Recently the financial conciliators dealt with several cases where the petitioners were members of a voluntary pension fund operating a selectable portfolio scheme and a register based on units of account. The favourable yields they saw during a long period of membership unexpectedly turned negative, i.e. the amount of savings in their individual pension account decreased.

This may have been unexpected for the petitioners because they had invested their savings in a low-risk or risk-averse portfolio. They did not initiate any change of portfolio during their membership, as most of them did not want to expose their savings to higher risks. Many of them also placed their savings in their individual pension accounts in a safe, classic portfolio.

They have concluded from the name of the portfolio or its composition that the portfolio they have chosen is risk-free, i.e. so safe that negative returns are excluded. This is why they were surprised when they received at the beginning of the year the statement on their individual voluntary pension fund accounts and the results of the fund at the end of 2021. This is despite the fact that the pension funds concerned have tried to use as many channels as possible to inform their members that a negative return shown for a certain point in time could turn positive again in the future in a favourable investment environment. Namely, as long as members do not request a payout, they will not realise the negative return on their savings.

There were also cases where the petitioner, after receiving the statement on the year-end result, was so worried about the negative returns that he initiated the termination of his voluntary pension fund membership, despite more than 10 years of membership and favourable investment returns. Moreover, although he initiated the termination of membership after the 10-year waiting period, he was not yet eligible for pension benefit, due to which the payment exceeding the yield was taxable.

Those petitioners who, after receiving the account statement for the end of 2021, initiated the termination of their membership – as eligible members – claiming a lump-sum pension benefit instead of consulting their own pension fund in advance, also came off badly.

Pension fund member should be aware of the fact that upon applying for a lump-sum pension benefit, the member has the option to specify the date of the payment. In the absence of this, according to the law, the voluntary pension fund keeping a register based on units of account can take the 10th working day after the receipt of the application as the accounting date as the latest date, provided that all the data and documents necessary for the assessment of the application are available.

If, for example, the petitioner has not submitted himself to the identity verification required by the anti-money laundering legislation (i.e. has not duly completed and signed the identification form) or has not notified and proved a change in his documents to the voluntary pension fund, the settlement accounting date is calculated from the date of receiving the missing data in full rather than from day after the date of receipt of the application by the voluntary pension fund.

In the conciliation procedure, these petitioners complained that the portfolios in which they invested had realised negative returns, whereas in their view this could not have happened because of the composition of the portfolio. Voluntary pension funds have pointed out in these proceedings that even the low-risk or risk-averse portfolios are not risk-free and may also incur losses temporarily due to the adverse investment environment. Voluntary pension funds do not undertake any capital or yield guarantee. They also emphasised that if a member requests a payment from his individual pension account, the savings will be accounted for at the price prevailing on the accounting date specified after submitting the application. If on that date the investment performance of the portfolio happens to be unfavourable, the member will immediately realise the loss through his withdrawal request.

The mere fact that at the moment the yield on a selectable portfolio of a voluntary pension fund is negative does not mean that the institution has acted unlawfully and failed to proceed with due care when managing the savings of its members. Adverse changes may occur (e.g. COVID-19 pandemic, Russia-Ukraine war), which negatively affects investment performance. In the absence of evidence of unlawful conduct, proven damage and a causal link between the two, no compensation can be awarded, and thus the FAB closed all cases where the claim for compensation was not justified based on the available evidence.

However, in two cases, the FAB’s decision approved the settlement agreement between the petitioner and the pension fund concerned. In one of the cases, the pension fund sent the call for supplementation not in line with the provisions of its internal regulations to the petitioner who applied for a lump-sum pension benefit. In the other case, the member submitted a pension benefit application to his voluntary pension fund for the withdrawal of part of the savings in his individual account. In connection with this, he contested the establishment of the pension benefit accounting date and the settlement made by the voluntary pension fund. Finally, the parties reached an agreement and, after settling accounts with each other, the petitioner’s membership was terminated as he joined another voluntary pension fund.

What is the lesson drawn? Manage your funds prudently! Decisions on the savings you have accumulated over many years should not be based purely on the voluntary pension fund account statement for the current year. Find out as much as possible through various channels in advance about the use of your savings. Unlike in the case of pension insurance, there is no contractual maturity date for savings in an individual account. As a member of the fund you can decide on your own (in accordance with the law and the internal rules of the voluntary pension fund concerned) when, how and in what amount you withdraw your money.

This prudence is particularly important in adverse investment periods. Voluntary pension funds are ready to provide information to their members in person, over the telephone and in writing on the possibilities of using the savings (e.g. applying for an equity loan; withdrawing only the yield after the 10-year waiting period; withdrawing a certain part of the amount in the member’s individual pension account as a person eligible for pension benefit and terminating the payment of contributions; or continuing to invest the amount accumulated in the individual account by suspending the payment of contributions when the member reaches retirement age.)

"Published in edited form on the vg.hu on 17 November 2022."

Ideally, everything goes according to plan and the child(ren) you want are born. After the first child, your loan will be interest-free for the entire term (you will still have to pay the guarantee fee) and you can apply for the suspension of the instalments. If you have two or three children, 30 percent or even the total outstanding principal may be waived, i.e. you will be entitled to a corresponding amount of subsidy.

However, there may be cases where, although all the conditions seem to have been met, you are still not eligible for the subsidy. In the cases specified in relation to the loan in the relevant decree, the metropolitan and county government offices have jurisdiction, and thus applications for legal remedy and equity petitions must be also submitted to them. For other issues, conciliation with banks can be conducted at the Financial Arbitration Board (FAB) attached to the MNB. Cases related to the prenatal baby support loan were taken to the FAB already soon after the introduction of the scheme. These were often concluded successfully and favourably for the customer.

The FAB’s experience shows that customers most often complained about the banks’ procedures in relation to the suspension of instalments. The petition for suspension must be submitted to the bank and it is also the credit institution who establishes whether the eligibility conditions are met on the basis of the certificates provided.

A recurring problem taken to the FAB was that although customers applied for the suspension of the instalments in the branch and submitted the required documents, the instalments were still deducted. There were cases where the customer realised that there was no trace in the bank’s system of any proof of the child’s birth or of the request for the suspension of the instalment. In the complaint procedure, they stated that – given the time that had passed – they were unable to reconstruct the circumstances of the application and what was said orally, and thus they could investigate the case solely on the basis of the available information and documents. The also emphasised out that once the statutory deadline has passed, the application can no longer be submitted successfully. However, in the course of the proceedings before the FAB, the credit institution settled the situation in view of the circumstances and subsequently recorded the request for the suspension.

In another case before the FAB, the customer also complained about the omission of the branch teller in connection with the application for child support. According to her petition, after the birth of her second child, she visited the branch to suspend instalments and apply for child support. There she was given a form to fill in and a list of documents to be submitted and was told to come back later to do the paperwork. The form and the documents were subsequently submitted, but she found later that the bank had not suspended the instalment nor had it processed the application for the support. This is because according to the credit institution’s records the application had not been submitted.

The bank asked the customer to send the bank the document countersigned by the bank; nevertheless the subsequent enforcement of the support is not possible. Thus in this case the customer acted with due diligence and in accordance with the advice of the teller, observing the deadline, but was still unable to benefit from the reduction of the principal she was entitled to. Accordingly, it was necessary to take this case as well to the Board for dispute resolution.

Apart from the incomplete or missing documents sometimes changing family circumstances may also pose difficulties. Cases concerning the provisions of the relevant decree on divorce and remarriage, which entered into force in June 2020, appeared at the Board this year. According to these provisions, if the person eligible for the support remarries within 5 years from the disbursement of the loan, following the divorce or annulment of the marriage, and the new spouse meets the conditions set out in the Decree, the interest rate subsidy, the suspension of the instalments and the child support may be enforced.

If the beneficiaries have already repaid the prenatal baby support loan after the divorce and either party remarries afterwards, the subsidy will no longer be available to either party. However, if the debt is still outstanding and one of the parties remarries within 5 years after the disbursement of the loan, the allowances connected to the prenatal baby support loan will be available again. 

In one of the cases taken to the FAB, the couple concerned concluded the prenatal baby support loan contract, and after less than a year, their marriage was dissolved and the loan was converted into a market rate loan. The petitioner initiating the dispute resolution(ex-husband) wanted to remarry soon, which would be not only his second marriage but also that of his new partner.

He asked the lender bank several times whether he can repeatedly receive an interest-subsidised loan if he remarries and has children. Each time he was told that this was not possible, as this was the second marriage for both of them. As a result of the information received from the bank he prepaid a larger amount. The petitioner learned after his remarriage that he had been given misleading information and complained that due to this he had lost the prepaid interest-subsidised loan.

The parties conducted a negotiation at the FAB, as a result of which the credit institution agreed to reverse the amount of the prepayment. However, the case did not end there, as the newlywed couple asked the bank to release the ex-wife from the contract and to involve the new wife as a debtor. After lengthy negotiation, the contract was finally amended to this effect. On this basis, the new wife (as the party joining the loan) familiarised herself with and acknowledged the original contract and joined it as a joint and several co-debtor and agreed to meet the payment obligations in full from then on. They also agreed to terminate the underlying contract with the ex-wife (as the party withdrawing from the loan).

These examples show that circumstances may arise which could lead to a loss of subsidy, even if the conditions are seemingly met. Although the majority of prenatal baby support loan cases have ended with positive outcome at the FAB, the following issues should be borne in mind to avoid (legal) disputes later:

Obtain detailed information on the things to be done when your commitment to have children is fulfilled and on the applicable deadlines already when you sign the contract.

If you choose to go to the branch, be aware that it may be difficult to reconstruct what was said there. It is therefore advisable to obtain this information (for example, in writing or in a telephone conversation recorded by the service provider) in such a way that it can be verified later, if necessary.

There is no need to submit a separate application for the interest subsidy. Applicants are eligible for it – unless provided otherwise – from the date of concluding the contract during the entire term of the loan. However, a separate application should be submitted for the suspension of the instalments and for the child support subsidy; i.e. it is not enough to notify the bank of the birth of the child(ren).

Act with due care when submitting the application. On the one hand, this must be done by the deadline for establishing the eligibility, and on the other hand, the necessary documents (as defined in the Regulation and in the individual contract) must be also submitted. The submission of the document, instrument, declaration etc. can be proved subsequently, if e.g. we ask for copy bearing the “received” stamp of the bank branch. This is particularly important because the burden of proof lies with the customer. If the teller in the branch refuses to issue such copy, you can lodge a complaint either at the branch, or later over the phone or by e-mail, or you can also send the respective documents to the bank by post.

"Published in edited form on the Origo.hu on 23 November 2022."

When organising a trip, you may contemplate taking out two types of insurance. Travel insurance is for the duration of the trip and usually covers accident, sickness and luggage damage, but may also include liability, car assistance, legal expenses insurance, etc. Perhaps the most useful part of it is that it provides a continuous telephone service to organise emergency medical care when needed, overcoming the difficulties resulting from not knowing the place or the language. The second one is the trip cancellation insurance, which covers you from the time you book your trip until the start of your trip and reimburses cancellation costs if you are unable to travel for an unforeseen reason.

For both insurances, the insurer will only pay compensation for the occurrence of the claim events specified in the contractual terms and conditions, up to the limit amount allocated to those i.e. it will not reimburse all the damage incurred. The two insurances can be taken out separately and there are also products where a combination of the two is available in one policy.

These can be taken out individually (e.g. online through a broker or in person at the insurer’s customer service) or by joining a group insurance. It should be noted that, in the latter case, you are in direct contact with the policyholder (for example, the travel agency organising the trip), and thus the insurer is not liable for any incomplete information. It is important that the insured person must still be in Hungary when the contract is concluded, otherwise it will not enter into effect.

It may come very expensive if you do not read the contractual terms and conditions

In cases concerning travel and trip cancellation insurance taken to the Financial Arbitration Board (FAB), many travellers who took out individual policies online only looked at the price of the insurance to ensure that it was favourable and reviewed only the table containing the benefit amounts. Although they ticked the appropriate online box to confirm that they had read the terms and conditions, in fact they did not read them.

When joining a group insurance, passengers typically read the product information (a short and clear summary of the terms and conditions of the contract) provided by the travel agency or sent electronically, but sometimes they only signed a document acknowledging receipt of the information.

Some people embarked on a larger family trip with travel insurance coming with their bankcard, based on information provided over the phone many years ago, without checking the cover and limits before starting the travel.  

None of the aforementioned groups perused the detailed terms and conditions of the contract, thus they were not aware of the claim events specified therein, upon the occurrence of which the insurer pays benefits. 

To avoid problems later, it is advisable to choose the insurance carefully, considering the type of trip (e.g. travelling by plane or car may require different insurance contents), the theme of the trip (e.g. skiing, diving, exotic holidays may entail different special requirements), and your individual characteristics (e.g. you will be working while travelling, and thus you take your laptop or professional photography equipment with you etc.). Furthermore, it is always advisable to check the detailed terms and conditions of the insurance to avoid any unpleasant surprises.

Existing illness can be a reason for exclusion, alcohol consumption can justify exemption

You should also know that there are some risks that insurers exclude from their coverage for understandable reasons, or circumstances in which they may be exempted from their obligation to provide benefit. A typical case of exclusion is when you are forced to cancel a trip or you need medical treatment during the trip due to a pre-existing medical condition diagnosed before the risk inception. The insurer may be exempted if, for example, the insured person has an accident while under the influence of alcohol. So always read carefully also the exclusion and exemption clauses in the policy.

If you are travelling in Europe, take your European Health Insurance Card with you if you have one, as it can provide immediate assistance in case of a medical emergency. However, it also has several limitations: it is only accepted by providers being in contractual relationship with the local social insurance provider, and it does not ensure comprehensive health provision and full exemption from costs. E.g. it does not cover the cost of a possible air ambulance, the cost of medicines or the patient’s transportation to the home country.

In one dispute resolution case before the FAB, a passenger specifically sought insurance for skiing. The product he chose was very promising, with 44 different benefits for a variety of claims. In a lengthy table of covers, the limit was set in the amount of HUF 50 million for “medical assistance in the event of illness or accident during the insured’s trip abroad, including air and road rescue”; further down in the table, HUF 2 million for “rescue from a ski track"; and then in the last row of the table, HUF 1 million for “air rescue, mountain rescue, search”. The passenger failed to read 79-page detailed terms and conditions of the product.

Then a misfortune befell him: the customer suffered an injury on the ski track and he required a helicopter rescue. However, the insurer reimbursed only HUF 1 million of the HUF 2.5 million helicopter rescue costs incurred. This is because the detailed terms of the contract stipulated this limit for the event of helicopter rescue for accidents on the ski track.

It also matters when you take out insurance: make sure you do it before you start your trip! One passenger was already abroad when he asked his relatives in Hungary to take out insurance for him before going for rock climbing. He suffered a serious accident during rock climbing, but the insurance company did not provide any benefit, only reimbursed the insurance premium paid. The insurance company referred to the contractual terms and conditions according to which if the insured was not in Hungary at the time of concluding the contract, the contract is not valid.

Bad luck with the car

If your luggage is stolen from our car, it also makes a difference where it was stored. Insurers only cover the theft of luggage stolen by forcibly breaking into a locked vehicle and placed in the boot protected from view. An additional condition is that you should attach to your claim the report to the local police. In the latter case (despite the language difficulties), make sure that the foreign police document states that the vehicle was broken into, that luggage was stolen from the boot protected from view, all insured persons who suffered luggage damage are named and that you try to quantify the damage.

In the case of theft damage involving theft from the boot, insurers usually exclude cash, jewellery and technical equipment or set a lower limit for those.

A family who suffered damage packed the boot of their rental car on the last day of their holiday and went for a last beach trip before driving to the airport. The rented vehicle was broken into, all their luggage was stolen, and the passengers were left with only their phones and beach gear. They called the insurance company, asking for immediate financial assistance. Their insurer asked them to take photographs of the broken-into vehicle, file a report with the local police and then report the claim attaching the appropriate documents.

In such cases, you should apply for assistance from the nearest Hungarian consulate, as the insurer will not replace your documents and will not provide immediate emergency assistance for your return home unless it is included in the terms and conditions. When the family arrived home, they reported the claim to the insurance company, which only partially reimbursed it. Although it turned a blind eye to the fact that the police document did not state that the stolen personal property was placed in the boot of the vehicle (which was protected from view), it paid only to one of the insured persons because he was the only one named in the document. The insurer reimbursed him only for the personal property listed in the police report, up to the limit specified in the policy.

Before you travel, it is also worth checking the terms and conditions of the insurance included in your bankcard to avoid any unpleasant surprises.

A family travelled by plane with their young child, but on arrival the pram – which had been checked in as luggage and was worth more than HUF 250,000 – arrived broken into pieces. The insurer did not reimburse the baggage damage because the contract did not cover property worth more than HUF 250,000.

“COVID coverage included”. Or not?

A family has applied for reimbursement of their cancellation costs under a trip cancellation insurance policy with COVID cover. One of their children was quarantined by the authorities, and they were unable to make their planned trip. The child did not test positive for COVID and did not receive any medical treatment, but was subjected to official measure due to illnesses in his school class. The insurer refused to pay damages citing that it underwrote the risk specifically for the event of the insured’s COVID illness.

Another insurer also refused to pay when a member of a family of five arriving in Greece was detected by the airport’s thermal imaging camera, after which he was tested for COVID and it was positive. The whole family was placed in quarantine for two weeks as part of an administrative measure, which resulted in extra accommodation costs and other expenses due to changing their flight tickets. However, they had no symptoms, hence they received no medical treatment. Thus, their insurer did not provide the benefit because its contractual terms excluded the settlement of claims related to administrative epidemiological measures.

Let us learn the lessons from the above cases and make sure that you read the detailed terms and conditions of the contract and decide which travel insurance product to choose not only on the basis of on the table containing the insurance benefit amounts or based on the favourable premiums.

If nevertheless you have a dispute with the insurer, you can take the matter to the FAB, attached to the MNB, for free dispute resolution or institute proceedings in the civil court.

"Published in edited form on the Origo.hu on 21 December 2022."