Access to Justice in financial services in Italy
(By Associazione Consumatori Piemonte )

ACCESS TO THE JUSTICE IN THE FINANCIAL SERVICES

Systems of extra judicial resolution of litigations in the field of financial services
in Italy

In Italy, several are the controversies between the subscribers of financial services and the banks, credit institutions, real estate brokerage companies, and more in general between consumers and the whole group of financial brokerage companies.
A confirmation is provided by the data gathered by consumer associations; they report in the last year an ever-increasing demand of information and protection on behalf of users in this field.
The problem of the rise in this kind of conflicts is rooted mainly in national provisions that allow financial and credit institution to modify the condition of the contract (of the checking account, for instance) in a damaging way for the subscriber without any direct communication (but just by means of concise notice), and also in unfair practices adopted by said institutions, such as lack of transparency in the oral presentation of the services offered to the customers, which turn out to be much more disadvantageous in the actual contract.
Throughout last year, the financial scandals which thousands of investors have been involved into have caused an exponential rise of the claims towards banks.

The Complaint Bureau and the Bank Ombudsman

The “Code of the Complaint Bureau of credit institutions and the Bank Ombudsman” came into force in Italy on April 15, 1993. It is the result of an initiative of the Italian Banking Association, and has been joined by the majority of Italian credit institutes.
The Code, adopted by a circular of ABI (Association of Italian Banks), provides for the institution of purposely-created Complaint Bureaus, which deal with the controversies arisen after January 1, 1993 between private users only (companies and societies are excluded) and banks.
Complaints must be sent to the relevant Office of the customer’s bank by registered letter with receipt notice or registered in protocol at the branch counter, which will take care of forwarding the file. The bank Complaint Office must deal with the received claims as soon as possible; it must give an answer within 60 days from the reception of the documentation, and must communicate the deadline within which the bank will remedy its mistake, if the claim has been accepted.
Said deadline is of 90 days, if the claim is related to an investment service.
If the claim is rejected, the customer can go to the Bank Ombudsman: the Ombudsman in an institution that has been operating for the last two centuries in Northern Europe. In Italy, it is a collective body created to settle, free of charge, the controversies between a bank and its customers. It retains its independence of judgment. People can submit their claims to the Ombudsman by registered letter, to be sent to the address of the institution, in Rome, for the controversies not exceeding ten thousand Euro and not already submitted to court or to an arbitration board, arisen between a private customer and a financial institution which adheres to the Code.
The judgment issued by the Ombudsman (consisting of five members: the president, designated by the Governor of the Bank of Italy, two members designated by the President of the Association of Italian banks, and two members designated by the National Forensic Committee and the National Committee of Professional Accountants) is unappealable by the banks, while the customer, in any case, can turn to the relevant court.
The collective body issues its judgment within 90 days from the receipt of the claim (120 days in some specific cases mentioned by the Ombudsman itself, for instance when part of the necessary documentation is missing) and give written notice both to the claiming customer and to the bank involved.
If the financial institution does not comply with the decision of the Ombudsman, the procedure provides for a proper notice to be published on the press, paid for by the bank.
The Ombudsman reports a growing request of intervention by the customers, in the last years.

More procedures to access the justice for the subscribers of financial services in Italy: Protocols of Understanding and Commissions of Conciliation

Some procedures of access to the justice in the financial services are promoted by the subjects whose institutional role is to play a role in the extra judicial resolution of all the controversies between consumers and service suppliers. Consumers associations are an example of such players. They deal with the bank and the financial brokerage companies on behalf of the customers in all the controversies that may arise (claim about checking accounts, about operations made after the theft or loss of credit cards, elaboration of repayment plans, etc), trying to avoid going to court.
Also the Justice of Peace can take a stand about said themes, when the claiming party file an application of conciliation rather than a judgment, in order to reduce costs and time; the Justice of Peace fixes a conciliation hearing in the attempt to find an agreement between the parties.
The setoff for all these alternative procedures of resolution of the controversies is the non obligatoriness for the counterpart to go to the hearings or to accept the files of complaint; however, when the institution accepts the intermediation of the consumer association or of the Justice of Peace, in most case a mutually satisfactory solution is reached.

As far as financial services which include entering a contract of life insurance, ISVAP (Institute for the supervision of private insurance with collective interest) has the task of receiving the claims submitted by the customers towards the companies subjected to the supervision of the Institute, of facilitating the prompt and fair execution of the contracts, of asking for explanation to the companies, of assisting the solution of the claims submitted.
We would like to stress the fact that in Italy the figure of the so called “Insurance Ombudsman” doe not exist, contrary to what happens in other European countries. However, national legislation has transferred to ISVAP some specific functions regarding the transparency of the relations between companies and their customers, and the information to the consumer. Said functions are performed by ISVAP on all the companies operating on the Italian market, including companies with corporate domicile in other European countries operating in Italy as a branch or as independent service suppliers.

These are general procedures; they cover all the controversies that may arise between producers and consumers. However, in the last year, we assisted to the creation of some specific procedures of access to the justice purposely designed to favor the subscribers of financial services, as a consequence of the Cirio and Parmalat financial scandals, which have shaken the national opinion.
More in detail, Unicredit group has signed, in December 2003, a Protocol of Understanding with the most representative consumer associations, aimed at creating a Commission, consisting of bank officials, to evaluate the option of reimbursement of the customers that bought Cirio bonds and applied to the bank for access to the procedure within March 2004.
Shortly afterwards, Capitalia group has followed the example, planning the reimbursement of the customers who held in their portfolio Cirio, Parmalat and Giacomelli bonds.
Following these developments, also Banca Intesa group has entered a Protocol of understanding with consumers associations, setting up a Joint Committee, i.e. a Committee which includes a conciliator appointed by the consumers associations, aimed at reimbursing the customers who bought Cirio, Parmalat and Giacomelli bonds. Users could apply to the bank for access to the protocol until June 30, 2004.
Before these acts, Monte dei Paschi di Siena group had created a conciliation procedure for the resolution of the controversies connected to a couple of products sold by the bank, which used to be submitted to the customer as ordinary form of investments and turned out to be loans with rather high interests (“My Way” and “For You” contracts).
The common ratio behind these last procedures is to relieve the Institutes from the responsibility of directing the customer towards investments that were submitted as absolutely risk-free but have turned out to be ruinous.
Once the principle of guiltlessness of the banks has been established, the following step is the procedure of reimbursement through the evaluation of the investor profile: the criteria adopted are often disadvantageous for the customers, because if they are considered risk investors even their portfolio is only slightly differentiated. The proposed compensation for this category of investors is very low (between 10 and 20%); the cases of a repayment on the basis of fair percentages (between 70 and 80%) are limited, and the cases of total repayment are rare, and only for small amounts on just one title.

Systems of extra judicial resolution of the controversies in the field of financial services in Europe

The European Commission created in 2001 a Net for the extra judicial resolution of the controversies in the field of financial services called FIN-NET, specifically aimed at avoiding trials between users and suppliers of services with corporate domicile in a different country.
The Commission created this Net in order to boost buyer’s confidence towards the purchase of products coming from third countries, in the perspective of promoting a single market of the financial services. In case of claims, the user is offered prompt and inexpensive procedures, therefore facilitating transnational operations.

FIN-NET puts together the various systems on the basis of a memorandum of agreement voluntarily joined by financial institutes. It offers consumers a system that allows easy access to procedures of extra judicial resolution, even if the supplier of the financial services does not adhere to the petition system adopted by the country where the consumer is domiciled. In this sort of cases, the claimer may apply to the local national body of Alternative Resolution of Controversies that will connect him with the corresponding system in the country where the service provider has its corporate domicile. This transnational cooperation has another advantage: it offers petition bodies a higher number of information, therefore said bodies can process transnational claims with the highest speed and efficiency.
Further information about FIN-NET and joining bodies can be obtained on the Commission Internet site at the following address:
http://europa.eu.int/comm/internal_market.
In Italy, the bodies which adhered to the memorandum of agreement which is at the basis of FIN-NET are: Bank Ombudsman, and, accepted on condition, Isvap (Institute for the supervision of private insurance) and Ania (the association of private insurance companies; this institute could adhere to the memorandum only in the case a procedure of conciliation got initiated between Ania itself and consumers associations: said procedure is presently in stalemate).

Conclusions and proposals

An issue common to all the above-mentioned systems of extra judicial resolution of the controversies is the fact that, except few instances, they receive few adhesions.
Excluding the most recent Italian Protocols of Understanding between banks and consumers associations, created with the specific aim of tackling the huge financial scandals caused by the default of major companies which involved thousands of investors, few subscribers know about alternative procedures, specially for the controversies of limited economic value, in which cases trials are extremely expensive and time-consuming.

We would like to add that, with the exclusion of the intervention of the Justice of Peace and of consumers associations, the other procedures of alternative resolution of the controversies in the financial field are submitted to bodies directly controlled by the institutes involved: the Bank Complaint Bureau, for instance, which typically supports the bank standings.
Also the supervision bodies, or second degrees bodies, such as Isvap and Ombudsman, have shown in the last years a scarce inclination to settle disputes in favor of the user, maybe for fear of destabilizing the system; this is one of the major reasons why the systems of extra judicial resolution are not widely used.
The European net FIN-NET, in turn, receive very few claims, because the confidence of financial users is already scarce towards suppliers of services in their own countries, and it decreases towards foreign suppliers.

Following are some intervention options:
1) Issuing of a national law more restrictive towards financial brokerage companies, which limit unilateral modifications of the conditions of the contract and which impose sanctions in case of unfair and/or non transparent practices;
2) Issuing of a consumer credit policy, to establish clearly the bound between the contract of purchase and the contract of financing;
3) Designation of the officials of the institutions of control and supervision by consumers associations, or, in anyway, not by financial institutions;
4) Effort of communication towards users about the functioning of such systems of resolution of the controversies.