On 16 October 2019, the Ukrainian President signed Draft Law No. 1085-1, which sets out new requirements for the quality and transparency of financial services provided by banks and other financial institutions.
In Ukraine, many consumers of financial services still suffer from false advertising, unlawful personal data disclosure and other illegal practices. The new law addresses these problems by introducing uniform rules to disclose information about financial services, new requirements for advertising, and sanctions for violation of rights of financial services consumers.
The aim of lawmakers appears to have been to create a legal framework in Ukraine based on following EU instruments: Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts; Directive 2006/114/EC of the European Parliament and of the Council of 12 December 2006 concerning misleading and comparative advertising; Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC; and Directive 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes.
New rules for disclosing information
The law requires financial services providers to publish the following information on their websites:
- a list of the financial services provided by them;
- the procedures and conditions for receiving financial services;
- the price, tariffs, interest rate for providing financial services; and
- the mechanisms in place to protect the rights of these consumers.
The new requirements regarding the development of websites and marketing materials are expected to increase the expenses of financial services providers, which could be passed on to consumers.
Making advertising more reliable
According to the new law, financial services providers are prohibited from spreading incomplete, inaccurate or unreliable information about any of their services. The law also recognises that financial service advertising is “unfair” if:
- a financial services provider has no financial institution status or any of the required permits and licenses;
- the financial services offered are prohibited in Ukraine; and
- the ad fails to provide clear information about the financial services offered.
Fines for violations
Financial authorities can impose fines on any financial service provider for violating consumer rights in the following cases:
- failure to provide a consumer with full information about financial services before entering into a contract, with fines from EUR 185 to EUR 370 per violation;
- failure to provide a consumer with a draft financial services agreement, with fines from EUR 185 to EUR 370 per violation; and
- unilateral increase of a fixed interest rate or failure to notify the consumer about changes in the variable interest rate, with fines from EUR 310 to EUR 495 per violation.
The authorities able to issue penalties include the National Bank of Ukraine, the National Commission for State Regulation of Financial Services Markets or the National Securities and Stock Market Commission. (Note that the responsibilities of the National Commission for State Regulation of Financial Services Markets will be assumed by the National Bank of Ukraine and the National Securities and Stock Market Commission on 1 July 2020.)
Consumers can refer potential violations directly to any of these supervising bodies instead of initiating court procedures, which makes the complaint process both time- and cost-effective.
The Law shall be brought into effect on 19 January 2020.
Legislation: Draft Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine to Protect Rights of Consumers of Financial Services” No. 1085-1 dated 6 September 2019.