Articles authored by the members 2023

No matter how much time pressure you are under, you should read the contract documentation before taking out a loan. You must check whether there is any additional service, fee or charge associated with the loan, what conditions are offered, and how you can make sure that the contract terms and conditions remain unchanged in the future. If you act with care at the time of contracting, you can avoid unexpected expenditures or inconvenient situations at a later date.

When taking out a loan, your past experience and current circumstances determine the criteria for selecting the right product for you. The length of the term and the amount of the monthly repayment instalment are key to the decision. It may also be worth your while to consider what life situations may occur later, influencing your ability to pay. Examples include accidents, illness, the loss of a job, or the birth of a child.

The type and the rate of the interest should be just as important. When you are about to enter into a loan contract, you can choose between fixed and variable loan interest rates. Interest is variable if its rate may be changed only as a new period defined in the loan contract (interest period) starts; variable interest is typically calculated as a reference interest rate plus a margin.

With fixed-rate loans, the interest rate can be fixed either for the full term or for a period of at least 1 year within the term. If the interest rate on a loan is fixed until maturity, it must not be changed throughout the term at all; if the interest is fixed for a certain period, then the rate must not be changed within the interest period. Fixed-rate loans are attractive mainly because they offer a security and reliability as customers know that the loan repayment will take out the same amount from the family budget every month. There is no need to worry that it might suddenly rise, causing payment difficulties. But is that in fact the case every time?

Exceptions lead to disputes

In a case brought before the Financial Arbitration Board (FAB) of the Magyar Nemzeti Bank (MNB), a consumer escalated their complaint to the FAB after being rejected by their bank; the consumer complained that instead of the monthly fixed repayment on their zero-interest consumer finance loan, they received (often with a delay) postal order forms for a higher sum. The FAB discovered during the proceeding that the client had requested a hybrid loan, in which a consumer finance loan was combined with a credit card agreement, with 0% APR, plus payment protection insurance.

The consumer finance loan was indeed a zero-interest product, and its repayment instalment amounts were the same every month. But the customer also applied for the payment protection insurance as well, which aligned with the credit limit spent each month; this was the reason for the higher monthly payables. A further item increasing the amount payable was the fact that the consumer had failed to pay one of the instalments, and a late fee was charged as a result. It was as a combined result of all of the above that the postal order forms the customer received were for an amount higher than just the fixed monthly instalment. The customer’s request was therefore unfounded.

Commodity loans may be attractive to consumers because these loans can be applied for at the point of sale and may thus offer immediate assistance to buy a product. Short contract terms and low instalment amounts make the product affordable even if the customer does not have enough cash to cover the full purchase price.

The possibility of fast loan application may be an advantage as well as a disadvantage, because the purchase is not always based on a rational decision but it is rather an impulsive shopping. The ensuing contract can sometimes go beyond the consumer’s original intention. This is especially true if it is combined with additional services. Often, these products are offered only in combination with a credit card, and it is therefore important that consumers make sure they understand whether the product in question is a commodity loan only or a hybrid product.

In the FAB’s proceedings, most consumers declared the insurance cover linked to the consumer finance loan as unnecessary, yet they themselves had requested it at the time of contracting and, by signing the contract, they accepted the contract terms and conditions as binding on themselves. If a consumer is late with the monthly instalment of a consumer finance loan combined with a credit card, the bank will repay the unpaid amount against the credit card limit if this is permitted by the contractual terms and conditions. As a result, the fees and interest applicable to credit card debt must then be paid. Yet the outstanding repayment instalments under the repayment schedule will remain fixed, along with their interest.

A further unexpected expenditure may be the annual card fee; if permitted under the product terms, the financial service provider may make this fee dependent on the utilisation of the credit limit or stipulate as a condition for waiving the fee that the customer should combine it with an application for a consumer finance loan. The payments made and the outstanding debt can be checked in the monthly account statements.

Care should be taken to ensure that the payments arrive to the financial service provider on time, by the deadlines set out in the contract. Postal orders are a preferred form of payment among consumers. If you choose this form of payment, be aware that the lead time will be longer than with other payment methods. The payment date will be the day the payment is received, not the day you send it at the post office. And payment delays mean an increase in the debt. Therefore if you receive the postal order necessary for making the payment or know that you could post it only at a later date, you should opt for a different payment method (such as banking transfer or direct debit).

In exceptional circumstances, interest may change within the interest period as well; for instance, this might happen in the case of changes to the contract terms or in the circumstances of compliance with the agreed conditions. Many financial service providers offer discounts to their customers predicated on compliance with certain terms and conditions. These may include preferential interest rates, a deduction from the interest rate applicable to the relevant product. Besides earning eligibility for the discounts, you should be mindful of the preconditions for retaining that eligibility and understand the consequences of losing it. For instance, the parties may agree that a certain amount would be credited each month or that the customer’s wages would be transferred to their account with the lender bank.

If customers fail to comply with these contractually stipulated conditions, they may lose their eligibility for the preferential rate. The resulting rise in the loan interest rate does not classify as a unilateral contract amendment; after all, the loan agreement states the negative consequences of a failure to comply with the promotional conditions. Depending on the contract terms and conditions, the discount may be lost temporarily or definitively. In certain cases customers may regain their preferential interest rates once they start to comply with the conditions again.

Another factor causing a change in the fixed-rate interest may be a delay or default on instalment payments due to unexpected events (e.g. unexpected spending of a large sum, long-term illness, loss of job, divorce) causing difficulties in making repayments in full and by the deadline. The solutions available in such cases include extending the term or changing the monthly repayment instalment amounts in the contract. By contrast, you may find that you can repay the loan in part or in full before maturity.

Partial prepayments can also reduce the tenor. Final repayment means paying off the total outstanding debt in a lump sum before the end of the term, provided that you make an explicit declaration that final repayment is your intention. Contract amendments, be it the extension or reduction of the term, may require a change to the interest rate and may involve miscellaneous fees and charges.

The limitation of claims under private law does not imply and does not cause the extinguishing of the claim. A time-barred claim lives on as a so-called natural obligation. Payments made on a voluntary basis after the expiry of the limitation period cannot be recovered. However, it may be a lifeline for debtors if it is proven that their debt is time-barred, as the statute of limitations is an enforcement barrier. As a general rule, a time-barred claim cannot be pursued or enforced through the courts. (Act V of 2013 on the Civil Code (new Civil Code) states, however, that the law itself may diverge from that general rule.)

In civil lawsuits, the court does not examine the limitation of a claim ex officio; the debt needs to refer to this fact. If in a lawsuit the intention is to enforce a time-barred claim on the debtor, the latter needs to lodge a statute of limitations objection. Whereas if the issuing of an order for payment is requested against the debtor of time-barred debt, then the latter may raise an objection within the relevant statutory time limit, claiming that the claim is time-barred. If court proceedings have not yet been brought against the debtor of the time-barred debt and the creditor is a bank or a debt manager, the debtor can lodge a complaint with them. If this is rejected, the consumer may take the petition to the Financial Arbitration Board (FAB) attached to the MNB.

Where customers cited the statute of limitations in proceedings before the FAB, the payee financial service providers often admitted the limitation and closed the claims in their systems. At the same time, they declared that they would not impose further claims on the consumers in relation to the particular case. In several cases where claims had reached the collection stage the financial service provider recognised the limitation and took measures to terminate the execution.

What can a debtor do if a claim is placed in the collection process? If a final, enforceable court decision has already been made in the case and collection proceedings have been launched to enforce it, only the collection acts and the modification of the debt amount by mutual agreement may interrupt the limitation period.

If a debtor believes that a claim is time-barred, it is advisable that they invoke the statute of limitations with the bailiff before initiating the action for termination of collection pursuant to Article 41 of Act LIII of 1994 on Judicial Enforcement (Act on Judicial Enforcement). Once this has been done, the bailiff will, citing the evidence, call upon the requestor of collection to declare the existence of the claim and at the same time to pay, from the funds already collected from the debtor, the amounts specified by law to the appropriate account or to the bailiff. If the requestor of collection acknowledges the debtor’s claim that the limitation period has expired and pays the amounts indicated, the collection procedure will be terminated. By contrast, if the requestor of the collection procedure disputes the expiry of the limitation period, then the debtor may bring a lawsuit for the termination of execution.

It is a widely held misconception that all civil law claims have a limitation period of 5 years. This may be true in general, but the law or a written agreement between the parties (e.g. their contract) may set different terms. As a result, the contracting parties define in writing a limitation period that is shorter or longer. Agreements excluding limitation are null and void, however.

Some limitation periods are for less than 5 years. Examples include debt under mobile phone or internet subscriptions, for which the limitation period is 1 year; for electricity bill claims, the limitation period is 3 years. The Civil Code also specifies a number of special limitation periods. With the exception of wilful damage and gross negligence, claims pursuant to forwarding contracts have a limitation period of one year, while the period is 3 years for hazardous plant liability claims. There is no limitation period for property claims. Labour law claims have a 3-year limitation period in general.

In certain cases, the limitation period is suspended; in practice this means that it is extended. This will apply only if the payee (with reasonable excuse) is not in a position to enforce the claim. An example of this may be when the payee is unable to obtain any information on whether the claim has been inherited by anyone after the debtor’s death and who the heirs are.

Another frequent mistake is the assumption that a payment notice cannot suspend the limitation period of a claim at all. First of all it must be clarified whether the transaction (legal relationship, contract) underlying the claim was created before the entry into force of the new Civil Code (15 March 2014). If it was, then it must be judged against the provisions of Act IV of 1959 on the Civil Code (old Civil Code) whether the claim is time barred; if it is not, then the new Civil Code will prevail.

In the old Civil Code, a payment notice was a fact suspending the limitation period. Accordingly, if a debtor receives a payment notice (within the limitation period) under a contract concluded before the above date, the notice will suspend the limitation period, which will thus start again.

Although the new Civil Code declares that a payment notice does not suspend the limitation period (on contracts concluded after the entry into force of the Code), there are other facts that may do so. These include the admission of the debt; the modification of the liability by joint consent; settlement; the enforcement of the claim through the courts, once the court has adopted a final ruling on the merits of the case (a final order for payment has the same effect), and if the claim has been declared in a bankruptcy proceeding.

The primary claim may have associated, dependent secondary claims (such as interest or charges). Both the old and the new Civil Code state that these become time-barred along with the main claim. By contrast, the limitation of a secondary claim does not imply the limitation of the primary claim. How does limitation impact the collaterals for a claim? The new Civil Code states that the charge or mortgage will expire if the claim secured by it becomes time barred and adds that claims cannot be enforced through the courts on a guarantor of a time-barred claim.

To summarise the above, debtors should be careful if an old debt is demanded from them:

• They should check how many years the limitation period of claims under such a legal relationship would be;
• They should look up when the contract underlying the debt was concluded. If it was concluded before 15 March 2014, the old Civil Code will govern the limitation period. In such a case, a payment notice sent to the obligor (within the limitation period) will (also) suspend limitation;
• They should check whether there are any circumstances suspending limitation;
• After gathering all the necessary information, they should decide whether the claim is time barred or not;
• They should understand that if they repay an old debt and it later transpires that it had been time barred at the time, they do not have the right to reclaim that amount;
• If they are taken to court to enforce the time-barred claim, they should cite limitation (since this is not something the court will examine ex officio; if a lawsuit is brought, they can do this by filing a statute of limitations objection, and if a proceeding to issue an order for payment is brought, then by citing the limitation period in their opposition);
• If the legal dispute concerns a financial consumer contract and, being the payee of the time-barred claim, the financial service provider has not yet turned to the courts but sends a dunning letter, for example, then the customer should lodge a complaint with the provider. If this is rejected or no clear answer is given regarding the limitation of the claim, the customer should turn to the FAB with a request for recognising the limitation and closing the case.

Online trading platforms have proliferated recently. A large number of Hungarian and foreign service providers promote their platforms to newbies so that they can try their hand at FOREX and crypto trading, for instance. Average consumers investing their hard-earned cash should take the time to find out more about the platforms and opportunities offered.

They can read a lot of good advice and warnings regarding such deals on the website of Magyar Nemzeti Bank. It is important to gather information about the firm behind an investment, the contract terms and conditions and the trading rules in order to avoid surprises later. Consumers should remember that deals offering high returns generally entail higher, often significant risk. It is also worth noting whether the platform is operated by a foreign or a Hungarian company, as in a potential financial consumer legal dispute the Financial Arbitration Board (FAB) of the MNB will have competence to act against a company only if it is within the MNB’s supervisory competence; it may not be able to do so in the case of non-resident firms.

The FAB has the powers to act against non-resident financial service providers with a registered office in a member state of the European Economic Area (EEA) if it declares that it submits to the proceedings and binding resolutions of the Board. If a financial service provider fails to make such a declaration in spite of being invited to do so, or declares that it does not wish to be subject to the proceedings, the FAB will not be able to proceed and must reject the petition. In such cases the customer may turn to the appropriate EEA FIN-NET member body or request the transfer of their case to such body.

FIN-NET is a network of alternative dispute resolution forums within the EEA, to which the FAB also belongs. The members of the network work with each other in the handling of cross-border disputes. If a financial service provider subject to a complaint does not have a registered seat or place of business within the EEA, then the FAB will not have competence to proceed, nor is any other FIN-NET member likely to have those powers, unfortunately.

While many companies providing services on online platforms do so in full compliance with the law, there has been a rapid increase in firms that copy the websites of legally compliant online trading services providers to give the consumer the false impression that they are entering their details on the website of a reputable company and are indeed “trading”. Whereas in actual fact they are doing so on a fraudster’s website. Other online trading platforms do not attempt to copy legal service providers; instead, they create fraudulent platforms that seem genuine.

It is a shared feature of this type of fraud that the platforms are not linked to actual markets, and they display fake, not genuine, products and false information. The consumer assume that their money is actually being invested as they can see diagrams and investment figures in their online account. And initial very “successful investments” encourage customers to invest ever higher amounts. Often, the representatives of these companies contact the unsuspecting investor by phone, e-mail or other online communication channels in order to get them to part with even more of their money. In some cases, consumers have failed to recognise that they had registered and made investments on fraudulent websites.

The victims tend to become suspicious only when they try to take out their money. This at first seems problematic and eventually proves impossible. At this point the customers realise that they have been the victim of fraud. They try to contact the firm operating the online trading platform, which is mostly impossible, either because it is impossible to identify the company behind the platform or it is an offshore firm, not available at all. The victims then normally report the fraudster company to the police.

Since they paid into the online trading platform mostly by funds transfer or by bank card, the only option remaining to them is to turn to their payment service provider. In the petitions submitted to it, the FAB has found that some consumers would seek remedy either from their own bank or the bank receiving the bank transfers or card transactions, i.e. the bank of the transaction payee. These petitioners claim that their own bank or the payee’s bank has a responsibility in the fact that they had fallen victim to fraud. They maintain that the banks should have been aware that the amounts transferred or paid by card landed on the accounts of fraudsters.

In proceedings against the banks of these payees, the FAB regrettably has no competence because the petitioner does not have a financial consumer relationship with the bank of the trading platform. Typically, transactions can land on bank accounts of various companies, or even private individuals, rather than the platform, without the “investor” noticing this.

Substantive remedy from the financial service provider where the customer’s account is held may also be difficult, as the petitioner had submitted, willed and confirmed these transactions in almost all cases. They changed their minds only at a later date, sometimes years after the fact, once they discovered that they had been the victim of fraud. At this point there is little chance for getting their money back. In such cases, just as with any other financial transaction, information and prevention is preferable to after the fact damage control.

What can you do to prevent such situations? Take the time and find out more about the platform service provider before entering into a business relationship. It is important to check whether the service provider has a permit from the MNB, if it is a Hungarian company, or from the relevant regulator, if it is a non-resident. Also, check the websites of the foreign regulators and the MNB to see if they have posted any warnings regarding the company. Remember: if an investment offers great returns, it might also cause you great losses! Always read the contract terms and conditions and the trading rules in advance.

You should also find out where you can bring a complaints procedure and, should that procedure fail, which alternative dispute resolution forum or regulatory body you can turn to. The latter is especially important if the financial service provider is a non-resident. Never give out your card details or download remote access software on your electronic devices. When you make a bank transfer or a card transaction, be mindful of who the payee is. Treat it as suspicious if a partner asks you to pay into the account of an unknown person or company, or if the text message containing the transaction confirmation code includes a payee name or transaction type not appropriate to the transaction on hand.

In addition to the official websites of the regulators, it is a good idea to look up the given service and the service provider on the internet as well. Useful information is available, for instance, on forums and other websites, where individuals share their personal experiences and post reviews. If you insist on using an online trading platform, make sure you find a reliable company. Do not give criminals a chance to gain access to the savings you have worked hard for over many years to ensure yourself a comfortable retirement.

Whenever a new financial product or service emerges, it may be a headache to figure out how to access it, how to interpret the terms, and how the thing actually works. Among the elderly, many may need help to do this. The Magyar Nemzeti Bank has formulated requirements addressed to the financial service providers on how they should provide their financial services to their customers in the older age groups. As a result, some banks now offer account packages specifically tailored to pensioners. As for any legal disputes with their financial service providers, elderly consumers can seek help from the Financial Arbitration Board (FAB) free of charge.

The FAB’s services are used widely by our elderly compatriots, which suggests that they have more financial problems than you would think. And those who are still active among them can dedicate time to finding a solution. For example, elderly debtors who run into payment difficulties may request easier payment terms or equitable treatment from their bank. If their request is rejected, they may petition the FAB.

Besides their loan transactions, the elderly (or their relatives or other authorised representatives) may seek a proceeding by the FAB in legal disputes regarding other banking services or insurance companies. As a precondition, they must first file a complaint with their financial service provider. The law states that the FAB may be brought in to help find a solution only after the complaints procedure has failed. The primary purpose of its proceedings it to achieve settlement in the financial consumer’s legal dispute.

Over the last three years, pensioners’ petitions to the FAB concerned mostly the financial services of granting credit and loans. Within that category, the legal disputes were about personal loans, mortgage loans, motor vehicle loans, housing loans and home equity loans, overdraft facilities and consumer finance loans. In non-life insurance, the legal disputes most frequently concerned fire and other property damage as well as motor third-party liability insurance. In payment services, the problems related mainly to payment accounts, credit cards and debit cards. In life insurance, the issues requiring a solution were concentrated mainly in traditional life insurance, unit-linked life insurance and pension insurance. Few petitions were received from pensioners with investments; these related mainly to investment mandates and investment advice.

The elderly are especially at risk from phishing, as many of them acquired their IT skills and knowledge in a more advanced age. It cannot be stressed often enough (and older family members should always be reminded) that you must never give out your confidential details (login IDs, passwords, PIN codes) to fraudsters who contact you by telephone, e-mail or text and pretend they work for a bank. But how to recognise fraudulent intention when fraudsters often claim they are acting on behalf of your bank’s customer service, mostly suggesting that there is a threat or risk as they try to gain from you your confidential data for their fraudulent purposes? The answer: never approve a transaction you did not initiate yourself. It is a good idea to ask your bank about possible options for reducing risk, the approved communication channels and their features.

The inappropriate, improper use of simple financial products may also cause serious problems. For example, credit cards should not be confused with debit cards, which are linked to payment accounts and can be used for spending against the account balance or the associated overdraft facility, if any. Although a credit card can be used for withdrawing cash from ATMs, the charges for this are very high. As with all financial products, it is extremely important to understand the contractual clauses, read and interpret the contract terms and conditions, and ask for help if necessary. The Network of Financial Navigator Advisory Offices, which is a partner of the Magyar Nemzeti Bank and is available at all county seats, provides advice free of charge on all kinds of financial subjects.

In insurance, there are some problems that concern specifically the elderly. For instance, accident, health and travel insurances stipulate that claims relating to an illness that predates risk inception are to be excluded from the cover. What does this mean in practice? High blood pressure, cardiovascular disease and diabetes are very common among the elderly. If an insured person has been diagnosed with high blood pressure in the past, the insurer is unlikely to pay out in the event of cardiovascular events (stroke, heart attack etc.). The situation is similar in travel insurance: the insurance company will not pay out in the event of cancellation of travel or illness sustained during travel if the underlying disease had been diagnosed before risk inception, if the patient had received treatment.

As for pension insurances, a frequent issue arising upon retirement is that the customer claims to have been given verbal information upon contracting that they would be able to take out the insurance payout in a lump sum after retirement. But prevailing legislation says that if less than 10 years have passed between signing the contract proposal and disbursement by the insurer, then the insurer may pay out only annuity benefits until the end of the 10th year at least. When taking out an insurance contract, it is also important to remember that, often, the contract terms and conditions stipulate an age limit.

Regarding home insurance, pensioners sometimes move to the house of their relatives for longer or shorter periods, for instance to convalesce after hospital treatment or to cut their heating bills in the winter. If their home is not permanently occupied but is insured as such, the insurance company is unlikely to pay out in the event of damage that could have been prevented or reduced by a permanent occupant. It is therefore recommended for them to request modification of their home insurance if they plan to move out for extended periods and to pay higher insurance premiums for the period the home is unoccupied.

A frequent complaint in investment petitions is that, as the elderly customer realises when withdrawing their money from the investment, the contract was somewhat different from what they had originally intended. For instance, the risk assumed was too high and a loss was incurred, or an investment believed to be safe and low-risk later proves to be highly vulnerable to changes in the market in terms of its returns. Gathering information is especially important in the case of investments. In certain scenarios, instead of maximising profits the realistic goal must be limited to minimising losses (an example is the present backdrop of the ongoing war and its impacts, which no one would have predicted just a few years ago). It is important to remain calm in critical situations, to assess the circumstances realistically, and perhaps take professional advice as well; yet even then, the right and the responsibility of the ultimate decision resides with the investor.

The experience of the Financial Arbitration Board (FAB) attached to the MNB suggests that it is worth your while to take such notifications seriously right from the start, to examine the details. Do not set aside the letter that would only make matters worse! A number of debtors who sought out the FAB had received their assignment notices (in which they are informed that their former lender, the financial institution, has transferred their debt to a debt management company) and then a payment notice, but did not do anything about these. Over time, as they did not receive any more letters, they felt reassured, assuming that the debt had been settled, or perhaps there had been a mistake.

Unfortunately, in actual fact their debt was rising all this time, which they had to face up to the next time that the debt management company contacted them. It is important to know that the MNB issued a recommendation to debt management companies in 2019, in which it formulated its expectations (concerning a number of areas). One of this is the requirement introduced as of 2020 that if the debt exceeds the prevailing statutory minimum wage, the debt management company must supply the debtor, at least once a year, with clear, easy-to-understand and comprehensive information, including among others about the amount of the debt.

But what should the debtor do? Whether it is the aforementioned regular annual information, an assignment notification or a payment notice, the first step is that you read the letter carefully and identify which contract it refers to. Find your past documents relating to the matter and think through all the events associated with that contract. For instance, have you received a cancellation notice, or did you think that you had paid off the debt? Do you have any documentation of the latter? Is there anything you have failed to do? Is this perhaps a debt you have forgotten about now resurfacing?

Depending on the answers to these questions, you will have two options. You can either dispute the debt or accept and pay it. If you agree that the debt exists, then consider your finances and income to decide how you will be able to pay it off. Are you able to pay it off in a lump sum or will payment by instalment be your only option? Do you have the opportunity to pay off the full debt or a significant part of it immediately or within the foreseeable future? What is the monthly instalment you can safely commit to, and for how long? What circumstances can you reasonably expect to be taken into account?

If you do not admit the debt, then consider precisely what you will dispute and how you can support your position. You may dispute the claim in terms of its legal basis and/or its amount. Examine therefore the amount notified to you and decide whether you deny that the debt exists at all or only dispute its amount. Often, customers will dispute their debt simply on the grounds that they had not agreed to its assignment to a debt management company. It is an incorrect belief that the assignment of a claim requires consent from the debtor. This is not true; the claim is valid and can be enforced irrespective of such consent.

In parallel with the above, it is recommended that you visit the website of debt management company and read the useful information available there, including their complaints handling regulations and the forms needed for the handling of consumer cases. It may be especially useful to study the FAQ section of the website, if one is provided.

In the second step, make sure you contact (in person, by phone or by letter) the debt management company. When doing so, do not forget to ask about the current status of your case, for instance whether the debt management company has requested the issuing of an order for payment or the launching of a collection procedure. You should also ask about your options, of course: whether the debt management company can grant you any kind of discount, payment by instalment, forgiving of amounts, reduced interest etc. At this point you may also want to present a debt settlement schedule that suits you. It is recommended that you include in this a description of the allowable circumstances (e.g. your income, other debts, number of dependent minors, regular expenditures etc.) you would like to be taken into consideration. You should also ask if you need to provide proof of the above.

If you dispute the debt, explain your reasons. If you dispute the amount, specify precisely which item you do not agree with. Avoid generic formulations such as “I don’t agree with it because it seems too high”, “I have already paid a lot, I’m sure it cannot be this high”, or “I have already repaid three times over what I borrowed originally”. If you do not know how your debt has grown or are uncertain about specific parts of the debt, ask for a statement on the history of the debt.

The MNB’s aforementioned recommendation says that, besides providing regular updates, the debt management companies should also provide, on the debtor’s request, information on the status of the debt management process, doing so within 30 days of receiving the petition or the request from the debtor. The information requested may include especially the possible further steps, the current balance of the claim, and analytical statements of the items underlying the amounts in the information letters. Such information should be sent to customers free of any fees and charges on one occasion. If you do not have the documents of your contract, ask for them to be sent to you.

It is recommended that you consider whether the contract involves any co-debtors, guarantors or mortgagors. If there is a co-debtor, contact them, since any increases or decreases in the debt will be their concern as well. If you are a guarantor or mortgagor, you must always contact the debtor. It makes sense for all these persons to consult with the debt management company together.

Once you have reached an agreement with the debt management company, the third step will be to adhere to the settlement terms and make the agreed payments. You should flag any changes to your circumstances that may be making payments difficult for you. Anyone may be faced with unexpected events (e.g. death, loss of job etc.) that put their livelihood at risk.

Communication is very important in such a case: you should always signal that you remain willing to pay but your circumstances have changed, and work with the debt management company to find a solution to the problem together. You may request the debt management company to grant further forbearance; a temporary cut of instalment amounts may be a solution too; in fact, it is not inconceivable that the parties could agree to an entirely new debt management schedule.

Once you have completed the agreed payments, your fourth step will be to make sure you keep safe the notification of the closing of the transaction, in which you are informed that the debt management company has no further claim on you under this contract. It is good to know that the MNB also expects debt management companies to send debtors a clear, easy-to-understand and comprehensive notification confirming that their total debt has been paid off, and should do so within 30 days. If you do not receive this information, make sure you ask for it in writing.

And if you cannot come to an agreement with the debt management company, because neither party is willing to shift their views on the legitimacy of the claim or the payment of the debt, you can take your case to the FAB. Whereas in the first case you can dispute the debt in a generic proceeding before the FAB (provided that there is no final court ruling or order for payment in the case and it is not subject to an ongoing lawsuit), in the second case the parties must resort to an equity proceeding and may discuss only the settlement of the debt. In the latter case, the conciliation will not be hindered by an order for payment, a lawsuit or a collection proceeding; however, the debt will not be judged on the merits. In these cases, your debt may decrease or even be waived only on equity grounds, subject to the debt management company’s assessment of the criteria. A common feature of both scenarios is that the FAB’s main objective is to help the parties achieve settlement.

From a purchase for a few thousand to a loss of millions

The routines and pressures of our fast-paced world make us all distracted, which is exactly what fraudsters take advantage of. Paying a small amount for delivery or a normal utility bill is done routinely by customers: they enter their card details and the online purchase confirmation code they receive by text message on the relevant platform. Being habituated to this, or perhaps because it is too early or too late in the day, they do not even consider whether they have an order in progress or a utility bill to pay.

There are cases when a purchase fails as the text message received by the customer contains not the card purchase confirmation code but the activation code of a new device. That much data is enough for fraudsters to digitalise the customer’s bank card in a mobile payment service (e.g. Apple Pay or Google Pay) on their phone, and then use it to make purchases at remote locations in the world. This is how a failed bank card payment for HUF 1,499 may cause losses in the magnitude of millions.

Day after day, routine internet banking logins may also be fraught with risks. For example, when they want in to online banking, customers tend to enter their bank’s name in online search engines and then click on one of the links displayed, normally on the first page of the list. Yet there may be a risk when you open a website from an online search engine or a link received by e-mail or other messages. Open your internet banking platform only in the way the bank has asked you to, typing in the address directly.

There have been many cases of customers trying to log in to internet banking in the way described above and then routinely entering the code they received by text message, even though it was a fake website set up by criminals. Rather than an internet banking login code, the message contained a registration code for the bank’s mobile app or a code for QR-based login confirmation, or even the modification of payment limits. After repeated unsuccessful attempts, which meant giving out the codes received one after another, the customers tended to give up on trying to log in. During this time, the fraudsters who acquired their data installed a mobile app on their phone and linked it to the customer’s bank account. They raised the payment limit and executed several payments for large sums.

Fraudsters and illusionists

It is important to understand that, in the online world, customers are identified by their authentication data and the codes they receive from their banks. Multi-factor authentication methods (for example codes received by text message, authentication in a mobile app) were introduced to increase the security of banking transactions. This allows banks to check whether the payment transaction was initiated by the account holder or not. It is very important for customers to act with care when it comes to their data; whenever they give out any piece of their information, they weaken the line of defence protecting them. This is as if a customer first let a fraudster into their home, then showed him the safe, then gave him its code, and finally politely turned away and gave the criminal free rein to carry on with the looting.

The above examples highlight the fact that if a customer does not understand a text message they have received, they should call their bank and discuss what is in the text message and what the customer is doing. It is better to be suspicious than chase your money afterwards!

Besides messaging, fraudsters also use phone calls to obtain your passwords and card details. A typical example is the phishing call, in which fraudsters try to convince you that they are employees of your bank and are calling due to an error or suspected fraud that occurred in a payment transaction.

Another dangerous trap is when they recommend installing remote access software on the device used for online banking by the customer (the fraudsters tend to claim this is antivirus software) or cite banking security as a reason for asking for bank card data and internet banking logins. It should be suspicious if they ask you to raise your limit, to give out any code with the purpose of cancelling a payment transaction or to make a transfer to a “safe account”. It is important to know that even when banks detect fraud and contact their customers by phone, they will never ask for such data.

If a customer reports and confirms fraud, their bank will limit access to the account and block the card, mobile app or internet banking account subject to the fraud event. There is no safe account, there is no need to delete any payment transactions to prevent fraud.

Be careful with your personal data!

Another fraudulent method is for the customer’s purported investment manager to ask for authorisation to access the customer’s internet banking account via a remote access application (e.g. AnyDesk, TeamViewer etc.). In the FAB’s experience, customers often make their internet banking accounts available to third parties without any control.

There have been multiple cases when they watched without any misgivings as a third person started a payment transaction remotely in their internet banking account. There were also cases when customers did not see their internet banking platform for quite some time as the fraudsters concealed it from them, claiming that they were using a small-sum transaction to test the connection between the internet banking account and the investment management system.

Many clients did not ask the reasonable question: why is it not enough to give out their bank account number for the investment to be paid to them? And why did they need to transfer the invested amount to a completely unknown private individual? The customers concerned said that they had done so because this is what the “banking advisors” told them. And anyway, the payment amount and thus the risk was low, and of course every payment transaction would have to be confirmed via strong customer authentication. Yet there are exceptions, in which strong customer authentication is not used. One such scenario is when you make a new payment to a saved partner (a trusted beneficiary), once you had made a payment to them with strong customer authentication. The first payment, confirmed by the customer, may have been for as little as 1 forint, but the next one will land millions on the criminals’ account, and yet there will be no need for authentication. Every request to access your internet banking or mobile banking should therefore be suspicious.

Besides learning the basic skills, it is a good idea to constantly update your knowledge. Helpful resources include the fraud warnings and information sent out by the banks or shared on their websites, and the fraud safety advice of the Magyar Nemzeti Bank (MNB) and many other official bodies and organisations.

In order to prevent cybersecurity risks, the MNB, the Hungarian Banking Association, the financial market operators and a number of other official bodies recently launched their joint educational campaign CyberShield to support customers who use electronic financial services. This also involved revising the digital security chapter on the MNB’s Financial Navigator page, offering further useful information on the subject.

Just how wise is it to keep reassuring yourself that your debt on a loan you took out many years before will be forgotten and just disappear? Should you expect legal steps if you refuse to acknowledge that, in the meantime, your former lender, a financial institution, has transferred your debt to a debt management company? Could it have negative consequences if, even when you feel ready to do something, you turn to social media users for help and then believe their apparently reassuring messages on the limitation period of claims? If you ignore your debt for years, should you expect it to grow further with interest plus legal and collection costs?

These questions tend to remain unanswered until events take a sudden turn. Finding a solution becomes urgent once a court foreclosure proceeding is started and your account servicing bank notifies you of the transfer of funds by court order (this is better known by the name of collection order), or if your pension, your only source of income, is reduced by deductions. Not to mention receiving an auction notice on your family home.

In such a difficult situation many will immediately contact the bailiff or the debt management company and propose a plan for settling the debt. They hope that their debt will be waived in part or in full, or that they will be granted at least payment by instalment terms. They list their allowable circumstances, describing in detail their income standing, their regular expenditures (utilities, medicine etc.), the negative changes to their living conditions and health, and request equitable treatment with reference to these.

If they are lucky, an agreement is reached and the debtors can rest assured that the direct threat has been averted and one day they may be rid of their debt. But what options do those have whose equity request is rejected by a debt management company?

Solutions still remain. If your request is rejected, you can lodge an equity petition with the Financial Arbitration Board (FAB) attached to the MNB. You can also turn to the MNB’s Customer Service, the staff of the Network of Financial Navigator Advisory Offices available at county seats, or the “Kormányablak” government offices. You can also submit your petition electronically, using the FAB Online Dispute Resolution application, identifying yourself in KAÜ (the Central Identification Agent platform).

In equity cases, petitioners can cite personal or financial circumstances to request the reduction or forgiving of payment obligations, the amendment or closing of contracts and derogation from the payment terms in the contract (e.g. rescheduling of repayments). Equity petitions may be lodged even when an order for payment has been issued for the claim or when the case is already in the execution or court proceeding stages. However, in equity proceedings, the legal basis for or the amount of the claim may not be disputed.

The FAB does not have the power to order debt management companies to exercise equity nor to waive even part of the debt. The decision on whether to ease the payment terms and what conditions to offer in order to help settle the debt lies entirely with the debt management company. The hearings of the FAB allow the parties to negotiate in person, which helps achieve an agreement. In the cases where the petitioner is able to attend the hearing, solutions are found much faster, even in apparently hopeless situations. If the parties can agree on the conditions of settling the debt, the FAB will issue a resolution confirming the settlement. If the debt management company fails to comply within the deadline, the petitioner may request the court to append an enforcement clause to the FAB’s resolution.

In equity cases brought before financial arbitrators, debtors typically cite their difficult life situations to request the full or partial forgiving of their debt, the suspension of a collection proceeding or the deduction of income, or to reduce the amount of such deductions.

In the equity cases concerning mortgage loans, settlement became urgent for the petitioners once the court foreclosure proceeding to collect their debt had commenced and the bailiff had put up their family home for auction.

In mortgage loan cases the petitioners relied on help from their families in making commitments even beyond their capacity just to reach settlement and protect the real estate that served as their home.

The settlements approved by the FAB mostly involved the waiver of large amounts of debt by the lenders or debt management companies. The petitioners then needed to pay a one-off larger sum and pay the rest of the debt over multiple years, interest-free. The debt management companies tended to demand a clause that if the debtor should be late with or fail to pay a repayment instalment, the settlement shall become null and void and the entire debt would fall due in a lump sum. Yet they also offered to end income deductions in the event of the payment of part of the debt.

A frequent settlement condition was that the petitioner should also pay the costs of the bailiff acting in the collection proceeding. In several of these cases, the debt management companies undertook to suspend the collection proceedings by the bailiff for the period while instalment payments were being made and to terminate that proceeding if the debt was repaid in full and the collection costs were also paid.

No settlement was reached when the petitioner’s offer for a lump-sum debt settlement payment was a mere fraction of the value of the collateral property or if the amount offered as monthly repayment instalment was so low that it fell short of the returns expected by the debt management company.

A second large group of equity cases brought before the FAB is constituted by debt on personal loans. Even today, some of these claims are denominated in foreign currency, and the interest rates tend to be higher than 20 percent.

The FAB was able to approve the settlement for example in a case involving a currency-denominated personal loan, where a reassuring solution was finally found for the petitioner’s 12-year-old debt. The debt management company informed the petitioner of the amount of the debt on several occasions during the 10 years after the debt was transferred to it. The dispute was about the amount throughout, and the petitioner made no payment at all.

The currency-denominated personal loan agreement was not subject to the Act on Forint Conversion, therefore it remained on the books in foreign currency, throughout the period both before and after its assignment to debt management. The petitioner was liable therefore not only for the 24.5 percent late interest but the amount of the exchange difference as well, which constantly increased and ultimately doubled the debt. Admitting the reasons provided by the petitioner, in the settlement agreement approved by the FAB the financial service provider waived half of the debt and allowed the debtor to pay the remaining amount in forints, in interest-free instalments.

Besides personal loans, the debt on motor vehicle loans is often denominated in foreign currency, because debtors did not wish to take advantage of the forint conversion option in statutory settlement. As a result, the debt has increased due not only to interest but the changes in the exchange rate as well.

In one of the cases brought before the FAB, the petitioner had taken out a CHF-denominated loan in 2008. Even though the petitioner paid the monthly instalments every month for 10 years, at the end of the term they still owed HUF 3.5 million. In the equity proceedings before the FAB, the petitioner understood that the contract prescribed an exchange rate adjustment due at the end of the term and the repayment thereof after maturity, and later, they did not request the forint conversion. Recognising the petitioner’s difficult circumstances the financial service provider agreed to forgive HUF 1.5 million of the debt and accept repayment of the remaining amount in interest-free instalments.

Often, petitioners were able to specify only at the hearing called by the financial arbitrators what easing of payment terms would suit them. This is why it is also important for them to attend the hearing. It was only at this point that many of them understood that solutions other than the forgiving of the full debt were also possible and may serve as a way out of the hopeless situation and make their life easier.

Following such discussions, the settlements approved by the FAB included different equitable measures chosen by the debt management companies in question. These included reducing the income amounts deducted; cutting the rate of interest and granting payment by instalment; granting zero-interest payment by instalment; agreeing to a reduced income deduction amount; waiving the interest provided that the outstanding principal was repaid; agreeing to zero-interest monthly instalments following the payment of a one-off larger amount; defined fixed HUF amounts for the repayment of debt previously denominated in foreign currency; agreeing to supplement the monthly repayment from income deductions and also waiving some of the interest debt, or consenting to the sale of the collateral property.

These examples also show that it is a good idea to take advantage of the opportunities provided by the FAB when you cannot reach an agreement with the debt management company. Debtors have an obligation to pay off their loan debt. It is important to contact your lender as soon as you encounter payment difficulties, or later to the debt management company, in an effort to find a solution acceptable to all the parties. Remember that commitments made in contracts and agreements must be adhered to. If you still believe there is a risk that the loan will not be settled, do not hesitate to look for a solution. Contact the debt management company right away, because putting the problem off will generate additional financial burden.

The prenatal baby support loan has special features: its amount is capped at HUF 10 million, it is interest-free for the entire term for the first child, the suspension of repayments can be requested, and some or all of the outstanding debt will be waived when the second or third child is born.

As a main rule, the metropolitan and county government offices have jurisdiction in prenatal baby support cases, and thus applications for legal remedy and equity petitions should be submitted to them. Yet many recipients turned to the Financial Arbitration Board (FAB) attached to the MNB for help, especially where they were convinced that negligence or error on the part of the bank had caused them harm.

The FAB has found that disputes between clients and banks due to a failure to suspend repayments has remained a hot topic. Requests for suspension must be submitted to banks, who then have the right to verify whether the preconditions have been met; there have been several cases in which the problem centred on negligence by an employee of the credit institution (resulting in the customer submitting incomplete documentation) or incorrect information (as a result of which the customer did not even submit a request). Months may pass by the time the error comes to light.

In an extreme case seen this year, it was indicated in the document submittal form that the documents had been received (the form was signed off by the bank’s employee) yet it was impossible to find the documents in the bank branch later. As a result, the repayments were not suspended. In such and similar cases the bank’s inspections tend to find that, given the time that had passed, it had become impossible to reconstruct the circumstances of the application and what was said orally; as a result, these cases were investigated solely on the basis of the available information and documents. Since the customer normally does not have relevant documentation at their disposal, banks tend to reject these requests. It is a good idea therefore to be on your guard and, whenever you submit a document to a bank employee, request from them a copy of the document marked as received. This allows customers to evidence their claim in an eventual dispute.

In the majority of cases, the problem arose from the fact that the preferential terms (suspension of repayments, reduced principal) are granted only if the couple notifies, by the legally stipulated deadline, the birth (adoption) of the (first or subsequent) child. By the time these cases are seen by the FAB, the relevant deadline will have passed without a result.

In the past, this deadline was maximum 60 days from the birth of the child. The legislator amended this provision so that requests to suspend repayments may now be submitted up to 180 days after the birth of a child. In fact, as a transitional rule, the law also stipulates that applicants who had passed the formerly applicable deadline at the time of the entry into force of this amendment or had less than 60 days remaining until such deadline should also have the right to submit their requests by a deadline of 180 days from the entry into force of the Decree.

What does this mean exactly? It means that recipients in whose case the original 60-day deadline stipulated in the Decree on the prenatal baby support had expired by 28 April 2023 or had less than 60 days outstanding will have time to submit their request for the suspension of repayments or the disbursement of child support until 25 October 2023. The extended deadline provided a solution in several cases appearing before the FAB, as a result of which it became possible to ensure that the support would be provided even in the case of the purported but unprovable negligence by the banks.

In the period since the introduction of the prenatal baby support product some couples (who had initially taken out the subsidised loan with great enthusiasm and plans for the future) have unfortunately reached a point where their marriage has been dissolved or declared invalid. Support recipients must notify this fact to their bank within 30 days of receiving the final court ruling. If this is the case, the interest subsidy will be discontinued, and if no child was born in the marriage, then any interest subsidy enjoyed previously must be repaid in a lump sum within 120 days.

While only a few such cases were heard by the FAB last year, there has been a significant increase in their number this year. In a particular case, the client told the credit institution about their divorce, moreover, also notified them of the identity of their new spouse and their joint commitment to have a child, yet the bank failed to inform the client about the amount to be repaid and the modified repayment instalment amount. The client also complained that, in spite of their request, the bank did not set the repayments to suspended status and, for two years now, it has failed to release his former wife from the contract and add his new wife to it as debtor. And even though their child is now almost 6 months old, the financial service provider is unwilling to suspend the repayments.

Discussions between the parties in the conciliation proceeding were successful. The bank calculated the repayable interest subsidy amount, deducting from it repayment instalments paid by the client since the first request for suspension. It also declared that the debtor had regained eligibility for the interest subsidy and specified their future payment obligation. In the proceeding the credit institution also made a commitment to respect the legal requirements and the bank’s own requirements when subsidised persons submit to it a request for replacing debtors in the future.

If customers remarry and make a new commitment to have children, they may be faced with problems when it comes to removing their former and adding the new spouse in the contract. Firstly, banks follow diverging practices and, secondly, it is important to remember that credit institutions are under no obligations in this respect, even if the parties agree in their divorce lawsuit that one of them will assume full liability for repaying the joint prenatal baby support loan.

In one such case the FAB heard a former spouse who was to have no debt relating to the prenatal baby support loan in accordance with their divorce settlement. Yet their bank refused to stop considering this person as a debtor, irrespective of what the divorce settlement said. The bank argued that it makes decisions based on risk criteria and assesses the creditworthiness of customers based on objective criteria. In such cases, therefore, the credit institution has the discretion to decide whether to even judge a request for replacement of debtors on the merits and, when it does so, it will conduct its credit approval solely in line with its internal regulations.

In cases like this, debtors may request a proceeding from the FAB if their complaint to the bank has been unsuccessful. The cases listed in this article demonstrate that the parties to these disputes have been able to negotiate before the FAB successfully; almost all proceedings returned a positive result.

The prenatal baby support loan has special features: its amount is capped at HUF 10 million, it is interest-free for the entire term for the first child, the suspension of repayments can be requested, and some or all of the outstanding debt will be waived when the second or third child is born.

As a main rule, the metropolitan and county government offices have jurisdiction in prenatal baby support cases, and thus applications for legal remedy and equity petitions should be submitted to them. Yet many recipients turned to the Financial Arbitration Board (FAB) attached to the MNB for help, especially where they were convinced that negligence or error on the part of the bank had caused them harm.

The FAB has found that disputes between clients and banks due to a failure to suspend repayments has remained a hot topic. Requests for suspension must be submitted to banks, who then have the right to verify whether the preconditions have been met; there have been several cases in which the problem centred on negligence by an employee of the credit institution (resulting in the customer submitting incomplete documentation) or incorrect information (as a result of which the customer did not even submit a request). Months may pass by the time the error comes to light.

In an extreme case seen this year, it was indicated in the document submittal form that the documents had been received (the form was signed off by the bank’s employee) yet it was impossible to find the documents in the bank branch later. As a result, the repayments were not suspended. In such and similar cases the bank’s inspections tend to find that, given the time that had passed, it had become impossible to reconstruct the circumstances of the application and what was said orally; as a result, these cases were investigated solely on the basis of the available information and documents. Since the customer normally does not have relevant documentation at their disposal, banks tend to reject these requests. It is a good idea therefore to be on your guard and, whenever you submit a document to a bank employee, request from them a copy of the document marked as received. This allows customers to evidence their claim in an eventual dispute.

In the majority of cases, the problem arose from the fact that the preferential terms (suspension of repayments, reduced principal) are granted only if the couple notifies, by the legally stipulated deadline, the birth (adoption) of the (first or subsequent) child. By the time these cases are seen by the FAB, the relevant deadline will have passed without a result.

In the past, this deadline was maximum 60 days from the birth of the child. The legislator amended this provision so that requests to suspend repayments may now be submitted up to 180 days after the birth of a child. In fact, as a transitional rule, the law also stipulates that applicants who had passed the formerly applicable deadline at the time of the entry into force of this amendment or had less than 60 days remaining until such deadline should also have the right to submit their requests by a deadline of 180 days from the entry into force of the Decree.

What does this mean exactly? It means that recipients in whose case the original 60-day deadline stipulated in the Decree on the prenatal baby support had expired by 28 April 2023 or had less than 60 days outstanding will have time to submit their request for the suspension of repayments or the disbursement of child support until 25 October 2023. The extended deadline provided a solution in several cases appearing before the FAB, as a result of which it became possible to ensure that the support would be provided even in the case of the purported but unprovable negligence by the banks.

In the period since the introduction of the prenatal baby support product some couples (who had initially taken out the subsidised loan with great enthusiasm and plans for the future) have unfortunately reached a point where their marriage has been dissolved or declared invalid. Support recipients must notify this fact to their bank within 30 days of receiving the final court ruling. If this is the case, the interest subsidy will be discontinued, and if no child was born in the marriage, then any interest subsidy enjoyed previously must be repaid in a lump sum within 120 days.

While only a few such cases were heard by the FAB last year, there has been a significant increase in their number this year. In a particular case, the client told the credit institution about their divorce, moreover, also notified them of the identity of their new spouse and their joint commitment to have a child, yet the bank failed to inform the client about the amount to be repaid and the modified repayment instalment amount. The client also complained that, in spite of their request, the bank did not set the repayments to suspended status and, for two years now, it has failed to release his former wife from the contract and add his new wife to it as debtor. And even though their child is now almost 6 months old, the financial service provider is unwilling to suspend the repayments.

Discussions between the parties in the conciliation proceeding were successful. The bank calculated the repayable interest subsidy amount, deducting from it repayment instalments paid by the client since the first request for suspension. It also declared that the debtor had regained eligibility for the interest subsidy and specified their future payment obligation. In the proceeding the credit institution also made a commitment to respect the legal requirements and the bank’s own requirements when subsidised persons submit to it a request for replacing debtors in the future.

If customers remarry and make a new commitment to have children, they may be faced with problems when it comes to removing their former and adding the new spouse in the contract. Firstly, banks follow diverging practices and, secondly, it is important to remember that credit institutions are under no obligations in this respect, even if the parties agree in their divorce lawsuit that one of them will assume full liability for repaying the joint prenatal baby support loan.

In one such case the FAB heard a former spouse who was to have no debt relating to the prenatal baby support loan in accordance with their divorce settlement. Yet their bank refused to stop considering this person as a debtor, irrespective of what the divorce settlement said. The bank argued that it makes decisions based on risk criteria and assesses the creditworthiness of customers based on objective criteria. In such cases, therefore, the credit institution has the discretion to decide whether to even judge a request for replacement of debtors on the merits and, when it does so, it will conduct its credit approval solely in line with its internal regulations.

In cases like this, debtors may request a proceeding from the FAB if their complaint to the bank has been unsuccessful. The cases listed in this article demonstrate that the parties to these disputes have been able to negotiate before the FAB successfully; almost all proceedings returned a positive result.

Equity cases are a special field for the Financial Arbitration Board, which deals with financial consumer legal disputes in the manner and within the framework defined by the MNB Act.

Legal disputes between customers and financial institutions may reach a point where the former can no longer question or at least no longer dispute the legality of the contract they had concluded. Examples include the cases when a court ruling has been adopted or a collection proceeding is in progress. There may be scenarios when the consumer had already brought the contract to the Board, but the FAB closed the case with a resolution rejecting the case on its merits. But customers still have the opportunity to lodge an equity petition. This is a “magic spell” of a sort; if it is used correctly, it will open otherwise closed doors.

Equity petitions include all those scenarios where the requests lodged with entities, typically banks and debt management companies, have been rejected and the debtor does not/cannot dispute the legality of the claim. Instead, they cite their living conditions, their financial hardships in order to receive personalised discounts in settling their debt and closing the contract within the foreseeable future at terms they can afford. The representatives of banks and debt management companies are typically authorised to agree to bigger or smaller discounts in the conciliation hearings, but they are not required by the law to do so.

At first sight, this may appear mission impossible; after all, why would a financial institution waive some of their rightful claims when they could demand the full amount? In practice, there are examples of surprisingly positive turnarounds. Experience from thousands of hearings shows that where customers take advantage of the right to lodge an equity petition with the Board and are able to see the proceedings to their conclusion, some positive outcome will be reached in a significant proportion of cases.

There are some characteristic obstacles in terms of approach that could stop customers from wishing to request an equity proceeding. One is the attitude of “but I am in the right”, which tends to be associated with a passionate intensity and thus makes it impossible to get out of a dead end. This is true even if the customer is indeed in the right in a general moral etc. sense, yet is not in the right in a way that could be evidenced vis-a-vis the financial institution on the opposite side of the dispute, and concluded from the contract. Or a case may be at a stage (e.g.: collection) where past events can no longer be disputed (at least not before the Board, in an equity case).

An equity case is not the time and place for “arguing the technical details objectively”, and even if you were to arrive at the hearing with the most qualified lawyer, your insistent or even “pushy” arguing would just make matters worse. First and foremost, it is important to understand and accept the situation in which you as a debtor have fallen, often unknowingly and against your will. There are life situations when managing your finances may not be at the top of your priorities out of necessity, for longer or shorter periods. An example would be a health challenge, which makes families fight for the life of their beloved member often beyond their financial means. Such situations also include those caused by the loss of the job, resulting in immense pressure on the family when it comes to trying to “shuffle” the bills coming in every month.

These are typically the allowable and allowed circumstances that the holders of claims are open to considering in most cases. It is precisely the degree and the value of that openness that may be discovered at a personal hearing, but only if the customer is willing and able to attend. There have been instances when the parties said at the end of the proceedings that they were glad of the opportunity to finally meet in person and explain their complaint and grievance to the other party, that they appreciated having someone to listen and even understand them. Often, by the end of such hearings they had let go of their anger and went home with an understanding and acceptance of their situation.

In a significant proportion of cases this attitude serves as a basis for openness and points to a path for jointly considering the options. Once the parties are able to focus on trying to find a solution, they will have won an important battle even though their “war” is not yet over: they have shifted their focus in the right direction. This is the most important thing, and many will reach this point at a hearing before the Board.

The next step is unconditional honesty. The debt management company must be given an explanation of the petitioner’s situation. On paper, the petitioner may own a collateral property for instance, but its location or condition might make its sale or auction almost impossible. Or they may have no assets at all or have such low income that the financial institution should not expect significant returns in any case. It is very helpful if debtors consider the debt management company (and especially its representative) not as an enemy but as the bringer of much needed help.

To live and let live: this is in the interest of both parties! It is a precondition for any outcome in equity cases. And settlements satisfying both parties are often reached in the hearings of the Board. This is evidenced by the thank-you letters regularly received by the members of the Board, not to mention the warm words often expressed at the end of the hearings. When settlement is reached in an apparently hopeless case, this is confirmation that you should never give up, that it is possible to snatch victory from the jaws of defeat!

The legal capacity of a customer may be restricted only by law or a court ruling; reasons are typically to do with age or health condition. In terms of age, young people below the age of 18 belong to this category; according to the Civil Code, a child has no legal capacity until age 14 and limited capacity thereafter until age 18. Declarations by minors with no legal capacity are null and void; their legal representatives, their parents or a guardian assigned by the guardianship authority can act on their behalf. Minors with limited legal capacity may make legal statements but these will be valid only with the consent of their legal representative.

Persons who fall under this category due to a health condition include persons under guardianship whose legal capacity was excluded or restricted by a court ruling. Persons are placed under guardianship if they have a permanent, total lack of discernment or a permanent or recurrent severe impairment of the capacity to manage their affairs due to a mental disorder.

In the former case, they will be placed under guardianship with incapacity, in the latter case under guardianship with limited capacity. This is decided by the court, taking into account the individual circumstances and family and social relationships of the person; the guardianship authority then appoints a guardian to act as legal representative. In the case of a guardianship order restricting legal capacity, the court will specify the matters in which the guardian’s consent will be required for the validity of statements by the person under guardianship. The National Office for the Judiciary maintains a register of persons under guardianship; information may be requested from this register, typically for a fee and subject to proof of the relevant legal interest.

A significant difference between guardianship for persons with incapacity and guardianship for persons with limited capacity is that legal statements made by persons of legal age with incapacity are null and void, their guardian will act on their behalf; by contrast, persons with limited capacity can make valid legal statements in all matters in which their legal capacity has not been restricted by the courts.

In the cases provided for by the law, consent from the guardianship authority may be a precondition for the validity of legal statements. Examples include if the legal statement of a minor or a person under guardianship concerns the acquisition of real estate not free from encumbrances, or the acceptance of encumbrances on real estate they own, or relates to disposals over their assets handed over to the guardianship authority; or in the resolution assigning the guardian or in the case of minors, where the sum exceeds the amount limit specified in the Civil Code (equal to forty-five times the social projection basis figure, which is currently HUF 28,500).

There are legal statements that will not be valid even with consent from the guardianship authority. In order to protect the interests of persons with limited legal capacity or with incapacity, legal statements by legal representatives will be null and void if, against the assets of the person, they make a gift, undertake a commitment without appropriate consideration, or waive rights without consideration.

What banking transactions may involve minors or persons under guardianship with incapacity or limited capacity? Examples include opening a bank account, which offers an excellent opportunity for the minor to learn about managing finances responsibly. There is no rule regarding the youngest age at which bank accounts may be opened. There are account packages available right after the birth of a child, although most offers are focused on the 14-to-18 age group.

Before a minor reaches age 14, their legal representative may open a bank account for them; between ages 14 and 18, the minor and the representative may act jointly. Different sets of services are offered with these bank accounts, but cash withdrawal, bank cards, internet banking and mobile apps tend to be available; the latter are normally limited until the minor’s 14th birthday, available for balance and transaction inquiries only. It is worth comparing the offers of different banks in terms of not only their costs but also the services available in the account package.

For example, bank accounts for limited purposes are available to open for persons under guardianship who can receive their pensions and pay their utility bills there. A special type of account, which requires a resolution by the guardianship authority to be opened, is called the guardianship authority account for minors or persons under guardianship; this account may be combined with savings passbooks.

They may be opened by the legal representative specified in the resolution of the guardianship authority and, in accordance with that resolution, only the representative will have disposal rights over the account. In certain circumstances the guardianship authority may order balances to be placed in a guardianship authority reserve deposit, withdrawals from which are possible only by the resolution of the guardianship authority.

Minors and persons under guardianship may also have a housing savings contract. If the holder of a housing savings contract or its beneficiary does not have legal capacity at the time of disbursement (is a minor or a person under guardianship with limited legal capacity or with incapacity), then their legal representative may, subject to consent from the guardianship authority, dispose over these savings if their balance is higher than the aforementioned amount limit provided for in the Civil Code.

The basic conditions for loan application also include legal capacity and an age of above 18 years. Only in exceptional cases can minors and persons under guardianship become parties to a loan agreement. They cannot validly enter into loan agreements without the consent of their legal representative and the approval of the guardianship authority. Approval from the guardianship authority is always required for the acquisition by a minor or a person under guardianship of real estate that is not unencumbered (e.g. for buying property on a mortgage) or for admitting any encumbrance on the real estate of a minor.

Can the debtor’s account servicing bank examine the substance of a collection order? What happens if the balance on the bank account is lower than the amount in the collection order?

As a general rule, banks servicing a debtor’s bank account must accept from bailiffs and authorities their instructions for the transfer of funds by court order and execute these. If executing the mandate would contravene Section 79/D of the Judicial Enforcement Act, the bank must immediately notify this to the bailiff. For example, cash balances on a Széchenyi Leisure Card account cannot be included in an execution proceeding. Account servicing banks are not required and are not able to examine the legal grounds for credits received to debtors’ bank accounts. If a collection order is received on the bank account and there is sufficient uncommitted balance sheet on the debtor’s bank account, then, subject to the exemption rules in the Judicial Enforcement Act, they must transfer the funds to the entity submitting the mandate and do not have right to discretionary assessment.

If the bank does not accept that it is managing amounts payable to the debtor or if it fails to comply with the instruction of the official body carrying out the collection process, the requestor of collection may bring a lawsuit against it for the collection of the claim. The bank will execute the collection order against the balance on the bank account specified in the collection order submitted by the bailiff. If that balance does not cover all the claims in the collection order, the bank must extend the collection order to include other payment accounts of the debtor serviced by it.

The credit institution will follow the law in determining the sequence order of such extension of scope, taking into consideration, first, the debtor’s other bank accounts serviced by it, second, the debtor’s deposit contracts and, third, their savings deposit contracts. If the balance on a debtor’s bank account is not enough to cover a collection order and extension to other accounts is impossible as well, the bank will declare that there is a lack of funds on the account.

In the case of a lack of funds, mandates for the transfer of funds by court order are queued for 35 days in accordance with Act LXXXV of 2009 on Payment Services (Payment Services Act). During this time, the transfer of funds by court order amount is blocked, showing it on the account as a negative balance. Whenever money is received to the bank account during the queuing period, the bank must make the required payments against such sums as well, as is provided for in the Judicial Enforcement Act. Banks must send a letter to the debtor’s correspondence address to inform them of the receipt and queuing of the collection order.

What happens if the debtor has an overdraft facility on the bank account and the balance on the account does not cover the amount in the collection order?

Unless otherwise agreed by the bank and the account holder debtor, the collection order must also be paid against the debtor’s credit lines, if any, on the payment account specified in the collection order. In that context, the Magyar Nemzeti Bank (MNB) issued a management circular this year in which it called on banks to provide consumers information prior to taking out an overdraft facility contract that, unless otherwise agreed, the bank will make payments against not only their bank account but also the overdraft facility if a transfer of funds by court order were to be received.

The MNB expects the banks to draw up, in clear language, an information notice on the above for consumers and draw the attention of consumers to the explanations in that information notice prior to entering into an overdraft facility agreement, adding that they should publish the notice on their websites as well. An interesting related legal dispute was brought before the Board:at the end of last November, a transfer of funds by court order for the sum of HUF 6 million was received on the bank account of a debtor. As there were insufficient funds on the account, the financial service provider queued the collection order for 35 days. Before turning to the FAB, the debtor complained to the bank that it had made payments against both the total available balance on the bank account and the overdraft facility. The debtor also claimed that the bank had failed to comply with the provisions in the Judicial Enforcement Act regarding exemption when executing the collection order.

The bank rejected these complaints on the grounds that available balances on bank accounts and overdraft facilities are both to be used for paying out under a transfer of funds by court order and that it had calculated the amount payable with reference to the exemption rules in the Judicial Enforcement Act. When calculating the partial payments, it was required to take into consideration the overdraft facility as well, because payments based on collection orders (including payments against the overdraft facilities on the payment accounts) take precedence over other payment transactions. The customer rejected the bank’s answer and lodged a petition with the FAB and, maintaining the position as presented in the complaints procedure, requested an examination of the case, the reconstitution of the overdraft facility and compensation for the loss incurred.

The FAB terminated the proceeding as it found the petition unfounded. The evidence submitted and statements by the parties showed that the parties had not signed an agreement prior to the conclusion of the overdraft facility agreement in which they would have deviated from the relevant provisions of the Payment Services Act. As a result, the bank was under obligation to take into consideration the overdraft facility as well when calculating the amount payable pursuant to the collection order. Besides, the bank had acted lawfully and in accordance with the exemption rules (in force at the time of receiving the collection order) when calculating the amount payable.

Is there any chance to be exempted from the obligation to pay the amount stated in the collection order?

As a general rule, all the money a debtor holds with a bank may be subjected to collection proceedings, regardless of the legal titles for the credits made to the account (e.g. pension benefit). Nevertheless, the law guarantees a certain amount for natural person customers that must be exempted from execution proceedings, and funded from the balance on plus the credits to the account. Exemption rules changed when the Judicial Enforcement Act was amended as of 1 January 2023; the banks have had to apply these new rules for transfers of funds by court order issued after that date.

Under current rules, above a balance of HUF 200,000, there is no limit on the amount that may be included in the execution proceeding, whereas below that level 50 per cent of balances between HUF 60,000 and 200,000 may be included. By default, if the balance is less than HUF 60,000, none may be included. However, if the execution proceeding concerns alimony or costs associated with childbirth, then 50 percent of even that balance may be included in the execution procedure.

When calculating the amount not eligible for inclusion in the procedure, the balances on the bank account as of receiving the mandate for the transfer of funds by court order must be considered together with the funds received during the 35-day queuing of the payment order. During that time, debtors may withdraw the exempted amount on one occasion only; moreover, the various bank charges may reduce that amount.

If a bank is servicing several accounts of a debtor, then the exemption rules should be applied to all the accounts together, not individually for each account. (If the collection order was issued before 1 January 2023, then the earlier exemption rules of the Judicial Enforcement Act should be applied.) According to current practice, the courts and the FAB consistently agree that, when complying with mandates for the transfer of funds by court order, banks servicing the debtors’ accounts may apply only the exemption rules in Chapter V of the Judicial Enforcement Act and, with reference to the relevant mandatory, non-modifiable provisions of the Judicial Enforcement Act, they must not examine the sources of the balances on the bank account.

When complying with a transfer of funds by court order, does the account servicing bank have to take into consideration if the bailiff has already imposed a deduction from the debtor’s income?

Many legal disputes are focused on the fact that a debtor from whose income deductions have already been made finds afterwards that a mandate for the transfer of funds by court order has been issued against their bank account. In such cases debtors often complain about the bank complying with that transfer of funds by court order even though the debtor’s income received on the bank account was already subject to deduction by the bailiffs.

Well, banks are not in the position to take into consideration the income deduction by the bailiffs, for the following reasons: the collection order and the bailiff’s deduction are two different collection acts, the rules applicable to them are found in different places in the Judicial Enforcement Act. Different chapters set out the rules that debtors’ account servicing banks must follow versus the rules on income deduction by the bailiffs and the detailed obligations of employers and the entities disbursing retirement benefits.

Deduction from retirement benefits is the responsibility of the Pensions Directorate, while from wages it is the role of the employer (e.g. the debtor may receive only the pension less the amount deducted). However, once the debtor has received their pension minus the deducted amount, the rules on income deductions no longer apply to it. When complying with a collection order, the debtor’s account servicing bank is not obligated to check whether the amount credited to the debtor’s bank account is the net amount after income deduction.

What happens if the collection order is issued against a bank account with multiple holders?

Balances on a bank account with multiple account holders may be subject to collection orders irrespective of which account holder the claim arises against. The bailiff will inform the account holder who is not the debtor of the fact of debiting the account. In such a case, this account holder has the right to replevin action within 8 days of the amount being blocked, for the reimbursement of the amount debited to the account but rightfully due to the account holder.

The FAB has written in a number of earlier articles of how consumers can also request the Board to proceed if they object to their debt originating from financial consumer contracts, provided that the case meets the relevant legislative conditions. Nevertheless, the current legislative environment does not offer consumers the chance to dispute debt subject to collection proceedings before the FAB (they can dispute them before the courts, in line with the prevailing Judicial Enforcement Act and the Code of Civil Procedure).

But these debtors do have the opportunity to lodge an equity petition and negotiate a settlement with the claimant in the ensuing proceedings. If this happens directly before the collection procedure is started, there is a chance for the parties to negotiate a settlement out-of-court, allowing the debtor to avoid one of the worst acts in a collection process, namely the collection order.

When may it be needed?

In the event of unexpected damage, such as burglary, storm damage, fire, water damage, could happen any time and may damage or destroy your objects. Having to replace domestic appliances, furniture and electronic devices all at the same time may be very expensive and buying or having them repaired may take a while.

Contents insurance tends to be included in property insurance but, in certain scenarios, it is possible to take out contents insurance separately. Examples include cases when condominium insurance does not cover contents and the person does not own the property in which they live. In other situations, a tenant may rent an apartment unfurnished and needs insurance for their personal objects and valuables. Contents insurance is also a good option for those who own valuable collections, antique furniture, jewellery, special glass objects or garden furniture.

Normally, the insurer will be on risk regarding household movables owned, rented, leased or received for safekeeping by the insured person. Insurance payments will be paid for objects owned by third parties, such as for instance the valuables of guests or objects received from the employer for work purposes, if this is explicitly stipulated in the definition of the insurer’s risk.

With insurance claims, it is the responsibility of the insured to provide evidence; the consumer must prove that the insurance event has taken place and evidence the resulting damage. To this end, it is a good idea to keep a record at all times as to what movables and real estate you have.

Should anything go wrong in your home, you must immediately report to the insurer the event as well as any repairs and recovery. Documentation should be as detailed as possible, including photos and videos, because evidence becomes more difficult as time passes after the occurrence of the claim event. In a fire, both the object and the evidence of its purchase may be destroyed. In such a case, past photos and videos stored on a mobile phone or an online storage drive may prove possession of the object prior to the insurance event, and its estimated value.

If an insurer wants to refuse payment, it must prove the facts and circumstances necessary for its exemption. Arguments include cases when a consumer does not take proper action to prevent or mitigate the damage or is late in reporting the insurance event.

When taking out a property insurance contract, it is important to consider which property category the various movable items belong to. The sums insured of the property categories of valuables, special movable properties and generic household contents cannot be merged.

What is the definition of movables?

Any fixtures and fittings found in the house or garden, which are easily removable, portable and not part of the building.

1. Household movables

These are property items in customary quantities that are necessary for everyday personal usage in an average household and are not excluded from the risk cover. They include all furniture that is not built in (e.g. tables, chairs, shelves, beds, sofas), household appliances (e.g. toasters, kettles, irons, washing machines), electronic equipment (e.g. TV, computer), kitchen equipment (e.g. crockery and cutlery, pots and pans), lighting equipment, toys, clothes, shoes, bags, tools, household textiles (curtains, carpets, cushions) and any other household furnishings and objects (e.g. mirrors, pictures). Garden furniture is also movable property, but it is important to remember that insuring these is only done through supplementary cover.

2. Valuables, high-value movables

Valuables and high-value movables constitute a special category of property items; these must always be valued on an individual basis. They include jewellery, precious stones, paintings, antiques, hand-woven carpets, real furs, works of art, technical equipment of high value or items in a prized collection.

An important rule is that contents insurance may be taken out for these items only if they are located in a permanently occupied property or if the property or the storage of the assets meets certain security and protection standards. Holiday homes and weekend houses are not considered to be a permanently occupied building; the situation is similar with properties with no permanent occupiers if it can be proven that the insured person was not present in the property at the time of the insurance event.

Valuables and special movable property are not covered if they are damaged in an outbuilding, in a room not used for dwelling purposes or outdoors. Not all jewellery in the everyday sense of the word is considered as a valuable, only the ones satisfying the conditions in the insurance terms. Other jewellery can be covered in the category of general household contents.

Since repurchase value does not apply to most valuables, insurers will use actual value as the starting point in their case. The insured is responsible for ascertaining the value of these items of property and it is important to make sure when agreeing the sum insured that their value should not be included under household contents.

What are supplementary insurance covers?

You can combine your property insurance with supplementary covers, subject to extra premiums, which will provide insurance protection suited to your needs. Examples include insuring garden furniture, a bicycle or special glass.

When it comes to judging legal disputes, it is an important question whether the insurance event is covered by the insurer’s risk assumption, and whether the on-site damage picture confirms the reporting of the insurance event, and also whether there are any exclusion criteria preventing a payout.

A good example of the latter is storm damage to property items stored outside in a garden. If you use in your garden furniture manufactured for indoor rather than outdoor use and fail to store or fix these properly, then the insurance company will not be in a position to make a payment under your insurance.

Condominium insurance policies in general do not cover all types of insurance events. For example, the insurance cover taken out for glass in the building does not extend to breakage and fissures in the glass of terraces, balconies and side walls. If, to supplement the condominium insurance policy, the homeowners take out an insurance contract for their household movables only, then they will find that, in the above example, breakage of the terrace glass will not be covered by either insurance.

The same may apply if the glass of an electric hob, shower or aquarium becomes broken or cracked. It is recommended to take out supplementary insurance to cover such special glass types. When carrying out restoration work after an insurance event, it is worth bearing in mind that the insurer will only reimburse glass of the same size and quality as the damaged special glass, not costlier, higher-quality glass produced using more advanced technology.

And finally: what does not classify as movables?

Any fixtures and fittings that are directly attached to the walls of the house and can only be moved by demolition or by damage, and as such, constitute an integral part of the property. Among other things, built-in furniture, alarms, air conditioning and built-in ovens are not movables. These must be protected with the home insurance, not the contents insurance.

Insuring our movables and other assets with due care is particularly important to avoid having to be faced with exclusion clauses, the “small print”, only when the damage has already been done.

Dr. Erika Kovács, Chair of the Financial Conciliation Board (FAB), attached to the Magyar Nemzeti Bank considers the Board’s work of nearly 12 years successful, as is evidenced by the numbers. Each year, the FAB produces an annual report that, among other things, analyses the petitions received and the cases resolved, as well as the recurring or significant problems generating frequent disputes between consumers and financial service providers. Last year, 2493 domestic conciliation, 573 equity and 56 cross-border petitions were lodged by customers, and 3 petitions were filed via the online dispute resolution platform (ODR). The Board approved 742 settlement agreements, issued 5 binding resolutions and made 3 recommendations. The proportion of settlement agreements approved was the highest in equity cases. Hearings were held on 2,308 occasions, and the average time needed for closing or ending a case was 62 days, the Chair enumerates.

(Napi.hu then goes on to describe the most important information and data from the year 2022. https://www.napi.hu/magyar-gazdasag/penzugy-bekelteto-testulet-fogyasztovedelem.768452.html).

As a result of the IT development implemented in 2022, since 2 January last year the Board has also been able to receive electronic consumer petitions submitted through its website. Due to this, the number of customer petitions received in electronic form has doubled, involving 997 petitions, while the number of petitions submitted to the Board on paper by post or through the Central Customer Service Desk of the Magyar Nemzeti Bank declined, the FAB’s annual report says. Moreover, the “FAB Online Dispute Resolution Platform” can be used for filling documents and declarations related to pending cases in addition to submitting new petitions.

Just as important as the developing electronic communication facilities and fast procedures is the fact that the Board provides a forum for petitioners to meet their service providers in person. In the world of finances, it is often difficult for customers to get in touch with their service providers, and they can only meet in person at the Board’s hearings. Here, the parties can respond immediately to any suggestions raised, which makes settlements and clarifications of the facts easier, the Chair of the FAB explained.

As regards the handling of complaints by financial institutions prior to the FAB’s proceedings, there may be cases when telephone customer services are unavailable for long periods, online customer service is impersonal and even written or oral complaints may not be answered by the legally stipulated deadline. The FAB Chair underlined that a Decree of the Central Bank makes it mandatory to respond by the deadline; a fine may be imposed if it is missed.

The Network of Financial Navigator Advisory Offices and the MNB Customer Service

Many customer problems could be prevented if consumers sought personalised help from the 18 advisor members of the Financial Navigator network attached to the MNB right from the start, before signing a contract. (There are offices at all county seats; a finder is available here: www.mnb.hu/fogyasztovedelem/tanacsado-irodak.) The MNB has created this network to give a chance for in-person consultation on financial matters to those living outside the capital.

During the free advice sessions, experts provide consumers with detailed information on the features, benefits and risks of different financial services such as borrowing, personal loans, home insurance, life insurance, car insurance or travel insurance. The advisors provide information on the financial products, review contracts and help write and submit official documents and submissions (e.g. equity petitions or consumer complaint).

The advisors direct consumers with financial complaints to the responsible forums: the service provider, the Magyar Nemzeti Bank (MNB), or the FAB. For those living in Budapest, this service is provided by the MNB’s Customer Service at the address Krisztina krt. 6. (contact information: www.mnb.hu/fogyasztovedelem/elerhetosegek/keressen-fel-minket-budapesten). It is important to remember that consumers can turn to the MNB or the FAB only when they have tried but failed to settle their dispute with their financial institution and believe that their complaint was not remedied nor even answered.

Hearings in a customer-friendly way

The FAB’s in-person hearings are held in 13 meeting rooms located on the ground floor of the Capital Square Office Building at Budapest, 13th District, Váci út 76. Chair Erika Kovács points out that this service is of course free of charge, unlike litigation, which is a formalised, time consuming process with rather substantial legal representation costs. It is not necessary to have a lawyer in an arbitration proceeding (although of course it is possible); customers can represent themselves.

In the customer service area in front of the FAB’s meeting rooms, customers can comfortably wait for hearings, while watching short informative films about financial products, potential risks and hazards, and also receive information on the latest news.

Important experience from the conciliation proceedings

Dr. Erika Kovács says that, prior to a conciliation proceeding, it is first examined whether an attempt has been made for conciliation with the service provider, and whether a complaints procedure has been carried out. Customers can turn to the Board (by filling out the appropriate form) only if their complaint has been rejected.

As far as financial service providers are concerned, it appears that they often do not pay enough attention to customers, perhaps due to a lack of money, time or energy. Few employees are able to spend substantive amounts of time on individual problems. Incidentally, this varies across the credit institutions; some banks are mentioned in surprisingly few complaints relative to their size and weight.

As for the text of contracts, the FAB is convinced that they should be made even simpler and clearer.

And as for customers, in spite of growing financial awareness in this country, many would do well to listen to the advice that they should be more careful with their finances. There are still many financial conciliation proceedings in which it becomes clear that the petitioner had not read at all their contract with the bank or insurance company and is therefore not familiar with its terms. Just one example: several customers who took out personal loans, which are now available online too, had no understanding of the terms of the borrowing when they signed the contract.

The Chair of the Board recommends learning as much in-depth detail about the product as possible in advance. Just as in the case of food shopping, for example, it is important to find out which supermarkets offer the best prices and quality before you buy, so too it is important to do this kind of preliminary assessment.

The Financial Law Academy

For four years now, the Central Bank has been offering lawyers and law students, young finance, economics and legal professionals and anyone else interested in finance the opportunity to acquire knowledge through a series of programmes organised with contributions by the Budapest Institute of Banking.

Participants in this training can learn special legal knowledge concerning the financial and capital markets, understand financial market and capital market services, and regulations and practices in the insurance sector. They find out about how these financial services, which they themselves may be users of, work in practice, gain an understanding of financial processes and a comprehensive view of financial sector players and the MNB’s operations.

Applications for the 2023/2024 academic year are already open, here: www.bib-edu.hu/kurzusok/1575?categoryId=o-1

While petitions complaining about cross-border financial services are still insignificant in number compared to the overall total, there has been a salient increase in their quantity before the Financial Arbitration Board (FAB) attached to the MNB, Erika Kovács, Chair of the Board has told Index. Whereas in 2021 only 1 percent of cases heard by the Board concerned cross-border services, the rate increased to two percent in 2022. Moreover, the Chair says that the number of cases concerning cross-border services reached a total in the first ten months of the year that was almost fifty percent higher than in 2022 as a whole; in all, 82 cases were brought to the FAB.

Cyber fraud takes the lead

The cross-border cases received this year will not achieve marked growth due to the significant increase in cyber fraud cases this year; there have been more than a thousand so far this year. This suggests that:

THE NUMBER OF COMPLAINTS RECEIVED BY THE FAB THIS YEAR WILL INCREASE BY AT LEAST 30 PERCENT OVER THE CASE COUNT OF 3,125 MEASURED IN 2022.

As for legal disputes on cross-border services, Revolut is the financial institution single-handedly responsible for the largest subset of these. Nearly one fifth of all such cases are now complaints by customers about Revolut; the increase is striking.

The complaints mostly concerned the bank’s failure to credit amounts paid into Revolut accounts or payments from those accounts into Hungarian bank accounts, where it is unclear what happened to the amounts paid out of the sender accounts, they never arrived on the payee accounts. It is typical in these cases that Revolut has frozen the customer’s account for some reason and the petitioner is unable to access the amount on the account and the company is not providing sufficient help. This correlates with the fact that Revolut still refuses to operate a Hungarian-language customer centre (it is not required by the law to have one), even though similar service providers in other industries (for instance Booking.com) make this available for their Hungarian customers.

She attributes the relatively low number of cases concerning cross-border services to the fact that victims do not assume that they could act against a non-resident service provider within Hungary and, as we shall see, there is some truth to that.

The Chair of the FAB explains that, under EU law, the arbitration body or other alternative dispute resolution forum of a member state may examine a consumer petition against a service provider domiciled in a different member state only if the service provider in question has consented to having the dispute resolution proceeding in that member state, that is to say it accepts the relevant body as acting forum. It must declare this in writing. If it does not do so, then the forum in question is limited to informing the consumer which forum to turn to in the country of registration of the service provider now that legal remedy is not possible locally.

Procedures are standardised in cross-border service cases, as they are regulated by a pan-European agreement of the member states of the European Economic Area (EEA), referred to as the procedures of the Financial Network (FIN-NET), of which the Financial Arbitration Board has been a member since 2012.

Revolut will not give in

Erika Kovács says that, regrettably, Revolut has not given consent even once to a Hungarian consumer to take the legal dispute with it to the Hungarian Financial Arbitration Board.

Since both of Revolut’s companies are registered in Lithuania, Hungarian consumers will have the definite opportunity to enforce their claim and negotiate a settlement only if they lodge their petition with the alternative conciliation forum with the relevant competence, operating in Lithuania. Similarly to the arrangement in Hungarian, this is a financial arbitration body attached to the National Bank of Lithuania. There contract information is now available in Hungarian on the FIN-NET website Members of FIN-NET by country - European Commission (europa.eu) website.