Disputes in competence of the Financial Arbitrator

Whether the Financial Arbitrator is or is not competent to decide a specific dispute depends on the circumstances of that case. Please be aware that the below mentioned examples shall not constitute an exhaustive or definite list of cases in competence of the Financial Arbitrator, nevertheless it may help you to get a basic understanding of the competence of the Financial Arbitrator.

Disputes arising in connection with payment services and electronic money

The Financial Arbitrator is authorized to decide disputes arising in connection with providing a payment service, or issuing and reverse exchange of the electronic money, even if the dispute does not concern the payment service or electronic money itself.

The Financial Arbitrator is authorized to decide e.g. the following disputes:

• malfunction of the ATM – not issuing the money,
• malfunction of the ATM – money debited from the account twice (or several times),
• money presented to the bank by client via ATM or personally not credited to the account,
• ATM withdrawal made by a third party (misuse of a credit card),
• payment with a credit card - money debited from the account twice (or several times),
• payment with a credit card made by a third party (misuse of a credit card),
• delayed execution of a payment transaction,
• non-execution of a payment transaction initiated by the payee,
• incorrect exchange rate used for a cross-border wire transfer,
• incorrect fee for providing a payment service,
• payment transaction made without a consent of the payment service user.

Disputes arising in connection with money exchanges

The Financial Arbitrator is authorized to decide following disputes arising in connection with money exchanges regarding:

• withdrawal from the money exchange,
• the amount of the fee for the execution of the money exchange,
• validity of the money exchange,
• exchange rate.

Disputes arising in connection with consumer credits

The Financial Arbitrator is authorized to decide disputes arising in connection with offering, providing or mediation of the consumer credit by a creditor or credit intermediary.

The Financial Arbitrator is authorized to decide e.g. the following disputes regarding:

• the right to early repayment of a debt under a credit agreement,
• the amount of the fee for early repayment of a credit,
• the amount of the non-drawdown fee of a credit,
• the validity of withdrawal from a credit agreement or an intermediation agreement,
• creditworthiness assessment,
• requiring payment from the consumer,
• fees from a credit agreement or an intermediation agreement,
• the validity of a credit agreement, contractual penalty or other contractual arrangement or provision;
• the determination of the amount of a debt under a credit agreement,
• the right to interest on a credit in the amount of the discount rate, the repo rate or the usual lending interest rate,
• the calculation of the annual percentage rate of charge (APRC),
• compensation for damage caused by a creditor or an intermediary in connection with a credit or an intermediation agreement,
• the method of repaying a credit affected by the COVID-19 pandemic in accordance with Act No. 177/2020 Coll., on some measures in area of loan repayments related to COVID‑19 pandemic.

Disputes arising in connection with collective investment

The Financial Arbitrator is authorized to decide disputes arising in connection with collective investment, for example disputes between a consumer and a management company or an investment fund regarding:

• the settlement of the buy/sell/exchange of units,
• the value of units,
• the proper execution of the order to buy/sell/exchange units by the management company,
• the proper execution of the order to buy/sell/exchange units by the investment intermediary,
• damages caused by an investment advice provided by a management company or an investment intermediary in connection with collective investment,
• the fee charged for buy/sell/exchange of units,
• damages related to the fulfilling of information duties by a management company or an investment fund.

Disputes arising in connection with investment services

The Financial Arbitrator is authorized to decide disputes arising from providing investment services between a consumer and a person providing investment services, e.g. an investment firm, an investment intermediary, a tied agent or a foreign person authorized by the supervisory authority of another EU member state, for example in the following cases:

• the proper execution of the order to buy/sell a financial instrument,
• damages caused by an investment firm or an investment intermediary in connection with providing investment advice,
• the fee charged for buy/sell of a financial instrument,
• the validity or termination of an investment services agreement.

Disputes arising in connection with life insurance

The Financial Arbitrator is authorized to decide disputes arising in connection with the life insurance. Life insurance is an insurance, by which the insured event is connected with  death, reaching certain age or date of the end of the insurance, or other situation concerning a change of personal status of such individual. The Financial Arbitrator is authorized to decide disputes between a consumer and an insurer or an insurance intermediary.

The Financial Arbitrator is authorized to decide e.g. the following disputes:

• validity/invalidity of the life insurance contract,
• validity/invalidity of the agreement on fees connected with the life insurance,
• damage caused in connection with the life insurance,
• disputes over insurance benefits (an agreed insurance benefit hasn’t been paid out, or there is a dispute about the amount of insurance benefit).

Examples of heard disputes:

ATM withdrawal made with a stolen credit card

While the complainant was shopping in the mall someone stole a wallet including the credit card from her. The complainant notified the bank and the police of the theft immediately. Subsequently, she found out using her internet banking that before the notification took place someone has made an ATM withdrawal of CZK 10.000 using the credit card. The bank refused to reimburse the complainant of the loss.

The Financial Arbitrator found out that the wallet was stolen on 25^th February 2011 approximately at 10:00 in the mall in Prague. At 10:05 the withdrawal was made from the ATM in the same mall using the PIN code correctly entered on a first try. At 10:45 the complainant notified the bank of the theft. Based on the CCTV record made by the ATM, the Financial Arbitrator found out that the withdrawal has been made by a person different from the complainant – probably a thief. As the complainant did not provide her consent with the transaction, an unauthorized payment transaction was concerned in the sense of Sec. 98 of the Payment System Act. The Financial Arbitrator therefore dealt with the question of liability of the bank.

Pursuant to Sec. 116 of the Payment System Act the payer (i.e. the complainant) shall bear the loss related to an unauthorized payment transaction if he/she incurred it by acting fraudulently, or by failing to fulfil one or more of his/her obligations under Sec. 101 of the same act with intent or gross negligence, e.g. his/her obligation to take all reasonable steps to keep the personalized security features of the payment instrument safe (particularly the PIN code). Although the complainant asserted not to have made any written note of the PIN code, out of the CCTV record and the testimony it followed that the thief used the PIN code which was obviously written on a piece of paper placed in the wallet along with the credit card.

The Financial Arbitrator held that the complainant was liable for the loss related to the unauthorized payment transaction herself as she had not protected the PIN code sufficiently and the withdrawal had been made before she had notified the theft to the bank.

Malfunction of the ATM

The complainant asserted in the complaint that he hadn´t obtained the amount of CZK 5.000 from the ATM as requested.

To prove that the payment transaction had been made correctly the institution submitted the ATM journal, i.e. the record of all the transactions and other operations made on the ATM since it was filled (i.e. supplied with the money) until the day of accounting (i.e. the day when the rest of the remaining money was taken from the ATM and the new money supplied).

Based on the ATM journal, the Financial Arbitrator found out that the ATM made the record of all the steps of the disputed transaction (i.e. insertion of the credit card in the ATM, entering the PIN, amount of money requested, etc.), including the time of the presentation of the money to the complainant.

Furthermore, the Financial Arbitrator requested the records of filling and accounting of the ATM from the institution. Having compared it to the ATM journal, the Financial Arbitrator found out that the amount of money found in the ATM at the day of accounting corresponded to the amount of money inserted in it at the day of filling minus the amount of money withdrawn from the ATM by all the clients during the whole time between the filling and the accounting. Therefore no extra money was found in the ATM that would suggest the complainant did not get the requested amount (or that the ATM did not actually present it to the complainant at the time of the withdrawal).

Based on all the facts of the case the Financial Arbitrator concluded that the institution proved having the payment transaction executed correctly with no evidence suggesting the contrary.

Account blocked due to the enforcement of judgement including the double amount of life minimum

NOTE: if a party who lost court proceedings does not comply with the judgement voluntarily the judgement may be enforced by a court-appointed bailiff who may issue an order to seize money deposited on that party´s bank account up to the due amount. In such case, however, the account holder is entitled to get the double amount of life minimum for an individual (i.e. a certain amount of money prescribed by law).

The bank obtained a seizure order regarding the complainant´s account and blocked the whole account based on that seizure order. The complainant did not specifically request the bank to pay him the double amount of life minimum but he unsuccessfully tried several times to make an ATM withdrawal. As soon as the bank received a notification from the bailiff that the ruling on the enforcement of the judgment came into legal force it sent all the money deposited on the account to the bailiff.

The Financial Arbitrator concluded that the bank shall not block the double amount of life minimum at all and shall not require a specific request of the account holder to unblock it. When the bank is obliged to send the money from the seized account to the bailiff, it shall not transfer it including the double amount of life minimum as that amount shall stay on the account.

Ungrounded penalty for non-compliance with the credit agreement

The complainant asserted that on 3^th April 2012 the creditor had sent him a reminder to pay an instalment of CZK 329 due in March + CZK 100 for sending the reminder, i.e. CZK 429 in total. The complainant paid the instalment on 12^th April 2012. Although the payment has been credited to the creditor´s account on 13^th April 2012, on 16^th April 2012 the creditor sent another reminder to the complainant to pay CZK 984 (instalment of CZK 329 due in March + CZK 100 for sending the second reminder + penalty for non-payment of the instalment due in March of CZK 200 + 8% of the instalment due in March, i.e. CZK 26 + instalment of CZK 329 due in April). In a phone call an employee of the creditor informed the complainant that as the amount of CZK 429 had not been paid without delay the complainant was obliged to pay the difference of CZK 555, which the complainant did, however in the complaint he claimed the reimbursement of CZK 226. The complainant asserted that the creditor was not entitled to get the amount of CZK 226 (i.e. the penalty for non-payment of the instalment due in March of CZK 200 + 8% of the instalment due in March, i.e. CZK 26) as the instalment had been credited to the creditor´s account on 13^th April 2012 (i.e. on time).

On request of the Financial Arbitrator, the creditor explained that as the complainant had not paid the amount of 429 CZK without delay after receiving the reminder, the money had been credited to its bank account on Friday 13^th April 2012. The account in question serves to receive instalments of multiple clients which means that it is credited with tens of thousands instalments every day which are further credited to the credit accounts of the specific clients during the accounting taking place at night based on variant numbers used for paying the instalments. The instalment of the complainant credited to the bank account of the creditor on 13^th April 2012 has been credited to the complainant´s credit account on Monday 16^th April 2012 due to the weekend delay, i.e. after 15^th April 2012 when the April instalment was due. If the preceding instalments are not paid until the due date of the current instalment the IT system of the creditor automatically generates and sends out a reminder, including the penalty. Due to the upcoming weekend the IT system generated the reminder on 13^th April 2012 already.

During the proceedings the creditor admitted that the complainant paid the amount of CZK 429 on time and reimbursed the complainant of the amount of CZK 226. The complainant has withdrawn its complaint and the Financial Arbitrator terminated the proceedings.