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ANNUAL REPORT 2018
Mediation
Mediation is one of alternatives to dispute resolution that suggests the third party’s (i.e. mediator who is neutral, unbiased) involvement in the dispute. The mediator helps the parties reach a certain agreement on the dispute, whereas the parties are fully free to make a decision. Mediation has been known in different parts of the world and its history dates back to ancient times. The mediation in the modern world began to develop in the second half of the twentieth century, mainly in the Anglo-Saxon countries, such as the United States, Australia, and the UK, and then began to spread through Europe. From the outset, mediation was more commonly used to resolve family disputes, and later on it was widely applied in various areas. Table of Contents
2 Board Chairman’s Address
3 Financial System Mediator’s Address
4 Office of Financial System Mediator
8 Events Calendar
16 Programs Carried Out in 2018
22 Programs to be Implemented in 2019
26 Statistics of Claims
50 Financial Statement and Audit Opinion
58 Precedents/Exemplary Cases
130 Clients' Letters of Gratitude to the Office
134 The List of Organizations that have not Signed the Covenant public authorities and non-governmental organi- zations – with the goal of sharing experience and knowledge. For this purpose efforts, activities, events, visits were an indispensable part of the Mediator’s policy during the reporting period.
As we could have expected as a result of all these activities, there has been a considerable increase in the number of complains, calls and visits to the Office.
Summing up this address, I would like to note that the Board of Trustees of the Office will be consist- ent in pursuing its strategic goals by putting forward new ideas and challenges and looking for prospective development programs that will make the activities of the Office more efficient, will ensure an impartial Board Chairman’s and effective investigation of the claims, will raise the Address awareness of the citizens, and will contribute to the successful cooperation with the financial institutions. Dear reader,
The activities carried out and measures taken by the Financial System Mediator in the reporting period of 2018, were aimed at fulfilling the objectives set out in the Strategic Plan approved by the Board of Trustees of the Office.
Attaching importance to increasing the effectiveness of dispute resolution between consumers and financial institutions, the Office has, first of all, taken actual steps to introduce and develop a new electronic system for dispute resolution, which has essentially increased the speed and efficiency of the claim investigation process.
The Office then remained proactive in raising public awareness on the Financial System Mediator, strength- ening confidence in the institution of Mediator, and ensuring that the services provided by the Mediator are available.
The Board of Trustees of the Office of Financial Sys- Arkady Khachatryan tem Mediator has always highlighted the importance of international cooperation of the Office with the Chairman of the Board foreign partners – financial ombudsmen, interested of Trustees
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Board Chairman’s Address As I have mentioned many times, one of the most important tasks of the Office is to help raise con- sumer awareness on financial services and products. Within the frames of “Increasing consumer financial education and awareness” program, our specialists have held seminars in different parts of the Republic of Armenia and the Republic of Artsakh. The pro- gram embraced a number of target groups, senior schoolchildren, students, employees of government agencies and large companies, children of different age groups etc.
Introducing best international practices and shar- ing experience with foreign partners is what we always prioritize. In 2018, the Office hosted foreign visitors from several countries, who had interest in Financial System becoming well-acquainted with core principles and Mediator’s Address procedures of the Mediator’s Office, as well as with the consumer awareness program. In the reporting Dear reader, period we took part in a number of international conferences as a speaker, delivered speeches on our I am pleased to draw your attention to the activities activities, experience and programs. of the Financial System Mediator’s Office which were steered to achieve strategic objectives in the reporting In this report you will find more information about period of 2018. the work we have done. And of course, our profes- sional team will continue investing their dedicated Year 2018 was outstanding as we saw a substantial efforts to achieve the mission defined in our law. increase in the number of citizens who appealed to the Office, with even more claims and complaints.
In 2018, the Office received 6,364 complaints, 5,848 of which were related to the financial system. As compared to the previous year, the claims have in- creased by 76,97% constituting a total of 2,959 claims, which ended up with the financial organizations having paid compensation to the customers a total of around 304 million AMD through facilitation of the Mediator. Such increase in the number of claims owes, first and foremost, to increased and even en- hanced trust in the Office, effective use of the mech- anism of mediation for the resolution of disputes be- Piruz Sargsyan tween the parties, raised consumer awareness and so on. Financial System Mediator
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Financial System Mediator’s Address OFFICE OF FINANCIAL SYSTEM MEDIATOR
Ombudsman
The word ‘ombudsman’ has Swedish origin, and the first Ombudsman’s office was founded in Sweden in 1809. The word is translated as “citizen’s protector” or “citizen’s representative”. Since 1809, Ombudsman’s offices have been set up in many countries around the world in public and private domains, such as financial, labor ombudsman’s offices. The Financial Ombudsman, in its turn, is a structure created to settle down the disputes between individuals and financial organizations. At present, there are about 60 financial ombudsmen’s offices in the world registered in the International Network of Financial Services Ombudsman Schemes (INFO Network). The Office of Financial System Mediator is an institu- • Professionalism and teamwork; tion with an independent management system. The • International cooperation and openness to inno- founder is the Central Bank of Armenia. The Office vative solutions. of FSM is called to settle out any property disputes that arise between consumers as natural person and Governance financial organizations. The services of FSM are free of charge; the process of review of a claim is explicit, According to RA Law on Financial System Mediator, fast and transparent. The Office of FSM was estab- bodies of management of the Office of FSM are: lished pursuant to the Republic of Armenia Law on Financial System Mediator, passed on June 17, 2008. • the Board of Trustees, and The Financial System Mediator started professional • Manager of the Office, i.e. the Mediator. activity on January 24, 2009. According to the Republic of Armenia Law on Finan- cial System Mediator, the Board of Trustees of the Objectives of activity Office of FSM consists of 7 members, and they are appointed as follows: The objectives of Financial System Mediator's activities are as follows: • one member by the Government of Armenia, • one member by the Board of the Central Bank of • Protection of consumer rights and interests in Armenia, the financial market; • one member by organizations that advocate • Fast, effective and free of charge review and protection of consumer rights, and handling of claims of clients; • four members by unions of organizations. • Enhancement of the public trust in the financial system. The Board of Trustees of the Office of FSM is called to approve internal policies and procedures of the Office, examine the Financial System Mediator’s re- Core Values ports, check the status of implementation of the de- cisions The Mediator has made, oversee day-to-day The Office of Financial System Mediator has pledged activities of the Office and its financial and economic to working effectively and increasing the public trust – performance, approve the budget of the Office, any these are the core principles which underlie the activity changes made thereto; oversee the performance of the Office of FSM. The core values which are also against the budget, approve annual financial ac- embedded in the strategy of the Office of FSM are counts and take other functions as required by the as follows: law. According to the law, the Board of Trustees shall not interfere with the professional activities of the • Impartiality in case review; Mediator. • Equality and equal rights for the parties; • Caring attitude towards the customers; According to the Republic of Armenia Law on Fi- • Priority to reconciliation of the parties; nancial System Mediator, the Mediator is required to • Operational effectiveness; have higher education, a high reputation and at least • Transparency and openness; five years’ work experience. The Mediator cannot be • Partnership and confidentiality; a person who has worked in any financial organiza- tion during the last three years. The Mediator shall
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Office of Financial System Mediator not: i) be engaged in entrepreneurial activity, ii) be a member of management at the party, iii) hold a po- sition in central or local governments, commercial undertakings, iv) perform other paid work except for scientific, pedagogical and creative activities; the Me- diator must avoid from any actions that cast doubt on their independence and impartiality.
The Office of FSM has an auditor. The auditor is ap- pointed by the Board and reports to the Board direct. The auditor carries out independent and impartial investigation and evaluation of the operations of the Office of FSM through checkups/examinations.
The Office of FSM has two pillars which make sure the Office operates fluently. These are:
• Support Group which is responsible for the ad- ministrative tasks to make sure day-to-day activ- ities of the Office are uninterrupted; and
• Claim Acceptance and Investigation Group which makes sure the Office performs its professional duties as prescribed by the law. This group, in turn, consists of:
◉ specialists who accept claims, receive the visits of clients and provide them with an upfront con- sulting,
◉ specialists who investigate claims and whose main function is claim investigation, explanation/ clarification, legal attendance of the Office, inter- national cooperation, and
◉ support group for the specialists who investi- gate claims; the group is primarily responsible for helping with claim investigation, making visits to schools and getting involved in activities related to the “Increasing Consumer Financial Education and Awareness” program.
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The Office of Financial System Mediator STRUCTURE
The Board of Auditor trustees
Support The Mediator Assistant to Group Mediator
Head of the case Handling and investigating group
Complaints Case Specialists Handlings Investigators Supporting Case Specialists Investigators
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The Office of Financial System Mediator Events calendar
Mediation in China
China, where the dispute resolution methods have their origins coming from Confucius Principles, has admitted mediation as a primary form of dispute resolution before the Common Era. Since the establishment of the Western Zhou dynasty, the position of mediator has been incorporated in all forms of public administration. In China, there are about 950,000 mediation committees and 6 million mediators. China’s mediators not only resolve the dispute and move forward, but also explain to the parties how to act more effectively in a long-term perspective. January
18 A quiz was conducted on the occasion of the 9th year of activity of the Financial Mediator’s Office.
24 Annual event in celebration of the 9th year of activity of the Financial Mediator’s Office. The winners of the quiz were announced.
25 A seminar was held at high school No. 184 in Yerevan.
February
07 Meeting with the representatives of the Central Bank of Zambia.
13 Financial System Mediator Piruz Sargsyan participated as a speaker in the 4th International Conference on Financial Literacy and Financial Inclusion.
March
13 A seminar-meetup was arranged with the students of YSU Faculty of Economics and Management.
21 A seminar was held with the officials from AFI member institutions. A seminar-meetup was arranged with secondary school children in Tsovagyugh.
26 A seminar-meetup was arranged with the students of French University in Armenia. A meet-up was arranged with the pupils of Sarahart and Gogaran secondary schools.
27 A seminar-meetup was arranged with secondary school children in Artsvanist.
28 A seminar-meetup was arranged with the children of secondary school No. 1 in Maralik.
30 A seminar-meetup was arranged with the children of Yervandashat and Bagaran secondary schools.
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Events calendar April
04 A seminar was held for high school students in Sisian.
05 A seminar was held for the students of high schools No. 2 and 9 in Kapan.
06 A seminar was held for the students of high school No. 1 and 4 in Goris.
10 A meeting in Kiev, for the officials responsible for the implementation of the Ukrainian financial system reforms.
13 A seminar-meetup was arranged for Berqaber and Sarigyugh secondary schools children.
May
15 A seminar-meetup was arranged with Nor Artagers secondary school children.
16 A seminar-meetup was arranged with Teghout secondary school children.
17 A seminar-meetup was arranged with Sarigyugh secondary school children.
22 A seminar-meetup was arranged with Noratus secondary school children.
23 A seminar-meetup was arranged with Solak secondary school children.
June
25 A seminar was held during the “Traveling to Us” camp, organized jointly by “KAZA” Foundation and the United Nations Refugee Agency.
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Events calendar July
12 A seminar was held during the “Traveling to Us” camp, organized jointly by “KAZA” Foundation and the United Nations Refugee Agency.
16 An educational event with a financial focus was organized as part of the “Mediator’s Camp” program in the “Heqiatayin Kirch” summer camp.
18 An educational event with a financial focus was organized as part of the “Mediator’s Camp” program in the “Aragats” summer camp.
19 An educational event with a financial focus was organized as part of the “Mediator’s Camp” program in the “Lusabats” summer camp.
20 An educational event with a financial focus was organized as part of the “Mediator’s Camp” program in the “Hasmik” summer camp.
23 An educational event with a financial focus was organized as part of the “Mediator’s Camp” program in the “Khotor Jur” summer camp.
24 An educational event with a financial focus was organized as part of the “Mediator’s Camp” program in the “LAVA Aghbyur” summer camp.
August
06 A special summer internship program was launched for students.
09 Within the frames of a “Special summer internship” program, a meeting was held at Ingo Armenia ICJSC office.
14 An educational event was organized as part of the “Mediator’s Camp” program in the “Azhdahak” ecological center’s eco-club.
16 Within the frames of a special summer internship program, a meeting was arranged with Financial System Mediator Piruz Sargsyan.
20 The annual report of the Financial System Mediator's Office for 2017 was published.
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Events calendar September
25 Financial System Mediator Piruz Sargsyan participated in the annual conference: International Network of Financial Ombudsmen – Info 2018.
October
02 Financial System Mediator Piruz Sargsyan participated as a speaker in the 3rd international conference on protection of interests of financial service consumers. A meetup was arranged with Arevatsag secondary school children.
03 A meetup was arranged with Janfida secondary school children.
04 A meetup was arranged with children of secondary school No. 1 in Yeranos.
09 A meetup was arranged with children of secondary school No. 2 in Aragatsavan.
10 A meetup was arranged with Lchashen secondary school children.
17 The 8th annual conference “The Financial Sector Going Digital and the Financial System’s Future”, organized by the Office of the Financial System Mediator, commenced.
24 A meetup was arranged with Areni secondary school children.
25 A meetup was arranged with Arevik secondary school children.
29 A seminar was arranged with the students of basic high school after Mkhitar Heratsi.
30 A meetup was arranged with Mets Mantash secondary school children.
31 Participation in events dedicated to the International Savings Day. A meetup was arranged with Zovaber secondary school children.
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Events calendar November
01 A meetup was arranged with Arevashogh secondary school children.
07 Visits to the Financial System Mediator’s Office in the framework of the “My Finance Month2018 ” project
17 A roundtable, a traditional meeting format, involved the participation of specialists of the Financial System Mediator’s Office and the representatives of the insurance market of Armenia.
19 A seminar was held at high school No. 2 in Metsamor.
21 A seminar was held at high school No. 2 in Garni.
23 A seminar was held at high school No. 13 in Hrazdan.
24 A traditional 6th meeting with participation of specialists of the Financial System Mediator’s Office and representatives of the banking sector of Armenia.
26 A seminar was held at high school No. 2 in Vagharshapat.
28 A seminar was held at Sevan High School after Kh. Abovyan.
30 A seminar was held at high school No. 1 in Yeghvard.
December
03 A seminar was held at high school in Gavar.
04 A seminar was held at Hrazdan High School No. 1 after Kh. Abovyan.
05 A seminar was held at high school No. 4 in Abovyan.
10 A seminar was held at high school No. 1 in Abovyan.
11 A seminar was held at high school No. 182 in Yerevan.
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Events calendar 12 In the framework of “Open Days” program, a visit to Gyumri was organized, including arrangement of the reception of customers.
14 A seminar was held at high school No. 190 in Yerevan.
18 A seminar was held for the students of Ejmiatsin State College.
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Events calendar 2 Board Chairman’s Address
3 Financial System Mediator’s Address
4 Office of Financial System Mediator
8 Events Calendar
16 Programs Carried Out in 2018
22 Programs to be Implemented in 2019
26 Statistics of Claims
50 Financial Statement and Audit Opinion
58 Precedents/Exemplary Cases
130 Clients' Letters of Gratitude to the Office
134 The List of Organizations that have not Signed the Covenant Programs carried out in 2018
Arbitration and mediation in Ancient Greece
From the end of the fourth century and even earlier, the Greeks have widely used arbitrage and mediation to resolve disputes between towns and even countries. Usually small towns resorted to larger and more powerful city authorities to deal with disputes between them, which acted as an arbitrator in the dispute. These were mainly territorial disputes and often referred to the belonging of some of the temples. The decisions of such disputes were typically engraved on stone columns or on the pillars of temples. The “Increasing Consumer A visit to the Central Bank Visitor Center, a seminar Financial Education along with refreshments and visits to the History and Awareness” program Museum of Armenia, were organized for the school- children this year, too.
Seminars at schools Visit to the Republic of Artsakh During the period under review, the employees of the Office of FSM arranged seminars for 11th and 12th Within the frames of “Increasing Consumer Financial graders (a total of 1840 schoolchildren from 18 high Education and Awareness” program the Office of schools in Yerevan and different parts of Armenia), FSM organized a series of seminars in the Republic pursuant to a preset timetable. Specifically, seminars of Artsakh with the involvement of different target were held at Yerevan high schools No. 184, 182, 190; groups. In particular, seminars were designed for Kapan high schools No. 2 and 9; Goris high schools representatives of banks and insurance companies, No. 1 and 4; Metsamor high school No. 2, Garni high the Government and National Assembly, as well school No. 2; Hrazdan high schools No. 13 and 1; Ejmi- as for major employers in the Republic of Artsakh. atsin high school No. 2; Abovyan high schools No. 1 During the seminars, the specialists of the Office and 4; high schools in Sisian, Sevan and Gavar. shared their knowledge, presented the Mediator’s activities, the cases and precedents under examina- tion of the Office. Seminars at universities
During the period under review, the Office of FSM Internship hold seminars for more than 200 students from French University in Armenia, YSU Faculty of Eco- In 2018, as part of awareness campaign for young nomics and Management as well as basic high school people and student involvement in the Office ac- after Mkhitar Heratsi and Ejmiatsin State College. tivities, we arranged practical training/internship for 13 students from various universities in Armenia. The interns had an opportunity to obtain theoretical and Hosting schoolchildren at practical knowledge of what the Office of FSM does the Office of FSM within the frames of in practice and the financial sector of Armenia on “20 Days for 20 Schools” program the whole.
During the period under review, the program select- ed 21 schools from the regions of Armenia were se- Seminar in the framework lected in order to have seminars and meetings at the of a joint consumer protection Office of Financial System Mediator. 920 schoolchil- training program dren in total from secondary schools in Tsovagyu- gh, Sarahart, Gogaran, Artsvanist, Maralik, Berqaber, The Central Bank of Armenia and the Alliance for Fi- Sarigyugh, Nor Artagers, Teghout, Noratus, Solak, nancial Inclusion (AFI) held a joint training program on Arevatsag, Janfida, Yeranos, Aragatsavan, Lchash- consumer protection, on March 19-23, 2018. More than en, Areni, Arevik, Mets Mantash, Zovaber and Are- 40 officials from AFI member organizations which vashogh communities attended the seminars. are in charge of developing consumer protection
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Programs carried out in 2018 and market management guidelines, policy develop- it functions and complies with regulatory frame- ment and implementation, took part in the program. work, get practical and theoretical knowledge about the activities of the Office of Financial System Medi- Within the frames of the Program, the specialists of ator, observe in practice and participate in the pro- the Office of Financial System Mediator conducted a cess of complaints handling and cases investigation, seminar on March 21, during which they presented learn about the alternatives to dispute resolution, the objectives, principles and programs of the Office. including mediation and arbitration, and take part in out-of-city events. At the end of the program, two best students were offered a contracted employ- “Mediator’s Camp” ment at the Mediator’s Office.
In summertime, the employees of the Office organ- ized seminars in summer camps for schoolchildren Participation in the aged 11-13, particularly the camps “Khotor Jur”, “Lusa- events dedicated to the bats”, “Heqiatayin Kirch”, “Aragats”, “Hasmik” in Han- “International Savings Day” qavan and the camp “LAVA Aghbyur” in Tsaghkadzor and Eco camps in Gegharqunik village. On the occasion of the international day of savings, on October 31, 2018 the Saving Banks Foundation for International Cooperation, the Union of Arme- Seminars at the camp nian Banks, the Central Bank of Armenia, the Fi- “Traveling to Us” nancial System Mediator’s Office and the Deposit Guarantee Fund held a dedicated event at Marriott In June and July of 2018, the employees of the Of- Hotel in Yerevan. During the event, Financial Sys- fice held a seminar in the “Traveling to Us” camp tem Mediator Piruz Sargsyan made a speech enti- as part of the program “Increasing Consumer Fi- tled “How You Can Protect Your Rights as a Client”, nancial Education and Awareness”. The program followed by a special Savings Expo (with participa- was jointly organized by “KAZA” Foundation and tion of SBFIC, Central Bank of Armenia, the Finan- the United Nations Refugee Agency. During the cial System Mediator’s Office, and representatives seminar, participants had the opportunity to learn of banks) and interactive activities for children. about the activities of the Mediator’s Office, the A drawing at the end of the event selected partici- organizations operating in the financial market of pants who received prizes from the financial insti- Armenia and the services they offer. Participants tutions and Mediator’s office. of the program also watched infomercials on the financial system, on a bank account, deposit, loan products and insurance activities. Visit to Gyumri
On 12-13 December 2018, the specialists of the Finan- A “Special Summer Internship Program” cial Mediator’s Office visited Shirak Region; in Gyumri they organized a reception of the citizens who had This year the Office of Financial System Mediator financial problems with banks, credit organizations, has carried out a specially designed internship pro- insurance companies or financial institutions or would gram for students for the first time. The program like to get more detailed information about the Of- gave students an opportunity to become familiar fice’s activities. Within the frames of the program the with the structure of the financial system, learn how office specialists have received about 80 customers.
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Programs carried out in 2018 Identifying how often to maintain partnership relations with the financial customers in rural communities organizations, trying to have them settle the dis- appeal to the Mediator pute through conciliation, so that a faster outcome is reached, a mutually acceptable solution to the Following a tender announced by the Office, a firm parties is found and a business relationship between was selected in order to organize and conduct a survey the entity and its customer is sustained. to identify the causes that make impact on applying to the Mediator’s Office by the customers in the rural communities. A meetup/seminar with the representatives of the banking system Media coverage Strengthening the relationship with the banking in- During the period under review, we signed contracts stitutions is very important; during the period under with a number of TV companies to broadcast in- review the Office of FSM organized the 6th meetup formative materials about the Mediator’s Office on which brought together the Office specialists and television. the domestic banking community to share experi- ence and suggest steps to find solution to the exist- ing problems in the banking industry. A total of Dissemination of information 30 participants representing 16 banks attended this via internet and social media regular event. The 2017-2018 precedents, problems identified at the examination of client complaints, as The website of the Office of FSM as well as online well as the draft procedure of acceptance and in- social media and social networking services, such vestigation of claims by the Mediator were the top as Facebook and Twitter, were used by the Office issues of the meeting, followed by team exercises to post its regular news updates and other relevant and discussions. information about various events, day-to-day activi- ties, including reports, statements, claim typologies and customary business practices, and so on. A roundtable with insurance companies
During the period under review, the Office of FSM arranged a roundtable meeting, another annual Cooperation with event, with domestic insurance market participants. the financial institutions The meeting hosted 17 representatives from insur- ance companies, the Armenian Bureau of Motor In- surers and other insurance market agents who are responsible for the relations with the Office of FSM. Following the best international practices and striv- During the meeting, participants talked, inter alia, of ing to be an impartial and trustworthy entity, we the 2017-2018 precedents, problems identified during are investing effective efforts in carrying out our ac- the examination of client complaints/claims, identi- tivities and attempt to raise public trust in financial fied customary business practices, the draft proce- institutions in the Republic of Armenia. In the view dure of acceptance and investigation of claims by of the objectives set for the Office, we do our best the Mediator, and the next year’s events.
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Programs carried out in 2018 Best cooperating partners Meeting with the officials responsible for the At a traditional event, this time organized to cele- implementation of the Ukrainian brate the 9th year of operation of the Office of FSM, financial system reforms the Mediator had the pleasure to announce the win- ners in the nomination “Best Cooperating Company” On 10-11 April, 2017, due to the invitation of the and “Best Cooperating Officer”. As always, best co- Ukraine US Agency for International Development operating partners were chosen taking into account (USAID), Financial System Mediator Piruz Sargsyan such criteria as the extent to which the organization and Head of Claim Acceptance and Review Group had been involved in the case review, the share of Hranush Aghayan left for Ukraine to have a meeting cases ended with reconciliation of the parties in to- with the officials in charge of the financial system tal, and so on. Based on the 2018 results, “VTB Bank reform in Ukraine. Vigorous activities to introduce Armenia” CJSC was announced as the best cooper- mechanisms of consumer protection in the financial ating bank and “Ingo Armenia” ICJSC was announced system of Ukraine are underway, and establishment as the best cooperating insurance company. of the Financial Ombudsman’s office in Ukraine is viewed as a key component of that framework. The Mediator always takes the opportunity to thank The representatives of the Mediator’s Office were the employees of the financial organizations who invited to Kiev to present the experience of Arme- support the Office of FSM in the process of the claim nia. During one of the main meetings, attended by investigation. This year “Best Cooperating Officer” officials from the Ukrainian Parliament, the Govern- certificate was awarded to Ms. Anna Baghdasaryan, ment, the National Bank and the financial system, a chief specialist of General Legal Services of “VTB they spoke of the Armenian experience, which was Bank Armenia CJSC”, and to Ms. Lusine Hakobyan, applauded. Following this, individual meetups were a specialist of Property Insurance Claims Regulation organized with the representatives of the Union of “Rosgosstrakh Armenia” ICJSC. of Insurance Companies, the Association of Banks, the Supervisory Body, the National Bank and firms engaged in microfinance. The goals, principles and activities of the Mediator’s Office were presented at these meetings. International cooperation
Participation in the international conference, The year under review was remarkable as the Office INFO2018 of Mediator had achievements in the internation- al arena. In 2018 the Office organized international The International Network of Financial Ombuds- conferences, arranged meetings with international men, INFO2018, had their regular get-together on organizations to exchange experience, hosted spe- September 24-26, 2018 – this time in Dublin, Ireland. cialists from different countries to share its know- The Financial System Mediator Piruz Sargsyan was how with them. The Mediator received invitations to invited to attend the conference as spokesperson, participate in a number of international conferences where she delivered a speech entitled “Keeping an as a guest speaker. During the conferences the activ- Ombudsman’s System Independent”. ities of the Office, challenges and the ways to tackle difficulties were presented.
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Programs carried out in 2018 Participation in the 3rd international conference “Protection of Rights of Consumers of Financial Services”
The third international conference “Protection of Rights of Consumers of Financial Services” was held in Moscow, Russia on 2-3 October, 2018. Mrs. Piruz Sargsyan, Financial System Mediator, who was invited as spokesperson, delivered a speech about the estab- lishment of financial mediation in Armenia, as well as on the international and Armenian experience.
Organizing an international conference
The Office of FSM organized the th8 annual confe- rence entitled “The Financial Sector Going Digital and the Financial System’s Future”. It was held at Arme- nia Marriott Hotel in Yerevan on 17-18 October, 2018. The conference addressed issues such as the digitiza- tion of the financial system, innovations in banking and insurance, dispute resolution in the Internet era, blockchains and crypto-currencies, payment systems and how they are going to develop. Issues like to- morrow’s labor market structure, competitiveness and developments in financial services were touched upon as well. Guest speakers of the conference in- cluded lead specialists from Great Britain, Canada, Australia, USA and Bulgaria.
Cooperation with the Organization for Economic Cooperation and Development (OECD)
Within the frames of the “Increasing Consumer Fi- nancial Education and Awareness” program, an ini- tial agreement was reached with the OECD to im- plement joint financial education programs. Under the agreement, the OECD will fund the assessment of the Office’s financial education programs and the development and producing of information clips.
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Programs carried out in 2018 Programs to be implemented in 2019
Mediation in the Caucasus
In the Caucasian mountains of Georgia, the Abkhaz people used the mediation for many years as the main means of resolving disputes. Particularly, the disputes arising between the Abkhaz tribes were resolved by elderly people who were universally respected. The elderly acted as mediators and helped the parties come to a compromise and reach mutually beneficial solutions. Mediators were usually chosen from elderly respectable men or sometimes women. Review of the more about the financial services and stir up their 10-year of activities interest in the financial system in an “out-of-class- room” mode through games, contests and interac- January 24th, 2019 marks the 10th year of activities of the tive workshops during the summer holidays. Office of FSM. On this occasion, we are planning to hold a press conference during which a brief account of the handled complaints and claims as well as the “Moot court” other activities by the Office for 2018 and all the previ- ous years will be presented. The names of the winners In 2019 the Office of FSM will organize a moot court in the nomination “The Best Cooperating Companies” on the insurance law; this will pursue a goal of rais- and “The Best Cooperating Officers” for 2018 as well as ing the students’ interest in the insurance law and the ones of “The Best Cooperating Companies” of all let them have an in-depth study of the field. the previous 10 years will be announced.
“Financial camp” Consumer financial education programs Within the frames of the “Increasing Consumer Fi- nancial Education and Awareness” program, a 3-day The Office of FSM aims to push forward the imple- “Financial Camp” event is planned to take place in mentation of the “Increasing Consumer Financial 2019 for high school students in Gyumri, Shirak Re- Education and Awareness” program over 2019, with gion. At the camp, schoolchildren will obtain theo- a focus on expanding the target groups. We intend retical and practical knowledge about finance, sav- to welcome in Yerevan schoolchildren of 20 high ings, insurance, the Armenian financial system and schools from different parts of Armenia; meantime, will increase their awareness through various inter- we will not only continue the seminars for school- active games, while taking part in various contests children and students but are planning educational with a financial aspect. events for doctors.
An “Open days” event Inclusion in the in Armenia’s regions National Strategy for Financial Education In 2019 the office of FSM intends to implement a special program which will involve an “Open Doors Our Office will continue sustainable cooperation Day” event to be organized in the municipal center with the Central Bank of Armenia as part of imple- of each of ten regions of Armenia. mentation of the program on national curriculum for financial education, including the implementa- tion of the “My Finance Month” program. A “Special Summer Internship” program
“Mediator’s Camp” The Office of FSM is planning to carry out a speci- fically designed internship program for students The “Mediator’s Camp” program will go on in 2019 in 2019, too. Within the frames of the program, to encourage children aged from s up to 13 to learn the students will have an opportunity to become
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Programs to be implemented in 2019 familiar with the financial system structure, to Boosting the procedures learn how it functions and what it does for com- and transition to pliance with regulatory framework, to get practical electronic communication and theoretical knowledge about the activities of the Office of Financial System Mediator, to observe Starting from 2019, the Office of FSM will make a full in practice and participate in handling and investi- transition to electronic handling of documents with gation processes of the claims, to learn about the a goal to increase the quality and speed of cus- alternatives to dispute resolution, including media- tomer service. Accepting and reviewing customer tion and arbitration, and join the events to be or- complains/claims electronically is much simpler and ganized outside the city. quicker as the client acknowledging that visiting the Mediator’s Office is not a must.
Media coverage
Our plans for media coverage in the upcoming year will include further efforts to get infomercials, de- signed and prepared by us, broadcasted on televi- sion, using leading Armenian TV channels. Develop- ing of new video clips is anticipated too. In addition, coverage will be provided not only through TV com- panies, but also via social media.
Discussions and seminars
The upcoming year will provide more roundtable events at which domestic financial industry repre- sentatives will be expected to address issues relating to the review of typical examples of client claims, controversies emerging as a result of examination and other matters of relevance.
Preparing for the 10th international conference
Our annual international conference is planned to take place next year as well. The conference will, as always, choose a topic that is most relevant to the current issues and will invite leading industry profes- sionals from all over the world.
24
Programs to be implemented in 2019 2 Board Chairman’s Address
3 Financial System Mediator’s Address
4 Office of Financial System Mediator
8 Events Calendar
16 Programs Carried Out in 2018
22 Programs to be Implemented in 2019
26 Statistics of Claims
50 Financial Statement and Audit Opinion
58 Precedents/Exemplary Cases
130 Clients' Letters of Gratitude to the Office
134 The List of Organizations that have not Signed the Covenant STATISTICS OF CLAIMS
Thirty Years’ War
The Peace of Westphalia was concluded in 1648 and put an end to the Thirty Years’ War, which actually lasted 47 years and proved to be disastrous for the entire Europe. The Peace of Westphalia is a fruit of the first diplomatic congress of the modern world, which had been possible thanks to negotiations and mediation. It laid the foundation for a new order in Europe. The agreement touched upon the Holy Roman Empire, Spain, France, Sweden and the Netherlands. Count Maximilian von Trauttmanstorff, a representative of the Holy Roman Empire, had greatly contributed to achieving the peace, as he made efforts to get the sides reconciled. STATISTICS OF CLAIMS, 2018 This figure does not consider the cases, which were settled out with no money actually reim- • In 2018, the Office of FSM received a total of bursed to the client but rather seeking to satisfy 6,364 1 complaints, 91.89% of which (5,848 2) con- another claim of theirs, for example, by chang- stitute the ones relating to the financial sec- ing the terms in the loan contract or having an tor. Of these 5,848 complaints related to the overdue loan re-classified in favor of the client, financial sector, 4,911 were eligible for review and so on. by the Mediator. A total of 937 complaints filed against financial organizations but not eligible • The largest compensation was AMD 6,611,000 and for the review by the Mediator were associ- the smallest, AMD 59. In 2017, the total amount ated with the events occurred before the Law of compensation was AMD 206,720,967; in 2016, on the Financial System Mediator has entered AMD 188,897, in 2015, AMD 198,369,625; in 2014, into force; some of the claims ended up with AMD 199,147,628; in 2013, AMD 204,578,416; in 2012, a court writ issued or with the case pending AMD 134,087,137; in 2011, AMD 58,137,847; in 2010, in court proceedings; in other cases, the party AMD 29,264,354 and in 2009, AMD 26,062,886. having applied has not been qualified as client. In the remaining cases, the complaints were of • Of 4,911 complaints submitted to the Office of a general nature and did not virtually contain FSM, which were related to financial organiza- property-related claims. tions and were subject to be examined by the Mediator, 2,959 complaints (60.25% of the com- • As much as 2,959 complaints out of 4,911 were plaints eligible for examination) were accepted submitted to the Office of FSM for examination for examination in 2018; 1,672 (54.62%) complaints in 2018, and 65.57% of which were settled out in out of 3,061 in 2017, 1,523 (50.95%) complaints out favor of the client. Note that 35.20% of the claims of 2,989 in 2016; 1,448 (54.27%) complaints out settled out in favor of the client ended up with of 2,668 in 2015; 1,276 (47.84%) complaints out reconciliation of the parties involved. According of 2,667 in 2014; 818 (50.28%) complaints out of to the 2017 results, of the claims settled out in 1,627 in 2013; 392 (41.22%) complaints out of 951 favor of the client, 49.60% were with an outcome in 2012; 144 (26.13%) complaints out of 551 in 2011; of reconciliation; in 2016, 2015, 2014, 2013, 2012, 110 (24.44%) complaints out of 450 in 2010; and 57 2011, 2010 and 2009 these indicators were 55.55%, (29.08%) complaints out of 196 in 2009. 56.32%, 61.30%, 79.70%, 73.36%, 70.50%, 59.10% and 61.00%, respectively. • In the year under review, complaints filed against insurance companies accounted for • In monetary terms, a total AMD 304,233,688 was 54.51% in all complaints submitted, with claims compensated through the mediation of the Of- related to motor third party liability insurance fice of FSM in favor of the clients during 2018. contracts being the largest share, 93.21%, in the complaints filed against insurance companies. Most clients did not agree with the estimated amount of damage, as well as many complaints 1 The indicator has been corrected compared with the one were received in connection with non-compen- published on the 10th anniversary due to the transition to a new database. sation of the damage and subrogation.
2 The indicator has been corrected compared with the one published on the 10th anniversary due to the transition to a new database.
27
Statement of Claims • It is also worth mentioning, that during the peri- od under review, the number of the claims/com- plaints taken into investigation against banks and credit organizations increased, particularly, in 2018 662 claims against banks were taken into investigation, 84.44% out of which was related to credit transactions. In 2018 136 claims against credit organizations were taken into investiga- tion by Mediator. While 270 claims against banks were investigated in 2017 and only 12.96% out of them was related to credit operations. Moreover, only 22 claims against credit organizations were investigated by the Mediator in 2017.
28
Statement of Claims Statistics, general profile
The number of complaints received by the Office during 2018, by quarter: The number of complaints related to financial system
2000
1500
1000
500
1376 1303 1431 1738 0 I quarter II quarter III quarter IV quarter
29
Statement of Claims The number of complaints received by the Office during 2018, by month: The number of complaints related to financial system
750
412 486 478 352 458 493 479 508 444 523 708 507 0
January February March April May June July August September October November December
The number of claims received by the Office during 2018, by quarter: The number of claims
1100
575 497 818 1069 0
I quarter II quarter III quarter IV quarter
30
Statement of Claims The number of claims received by the Office during 2018, by month: The number of claims
0 450
January 162
February 218
March 195
April 151
May 157
June 189
July 230
August 293
September 295
October 351
November 410
December 308
31
Statement of Claims The number of complaints and written form lodged claims received by the Office during 2018, by quarter:
The number of complaints 1800 The number of claims 1600
1400
1200
1000
800
600
400
200 1376 575 1303 497 1431 818 1738 1069 0
I quarter II quarter III quarter IV quarter
Total number of the complaints received during 2018, o/w: 6,364
Number of complaints to financial system 5,848
• Not eligible for the review by Mediator 937
• Eligible for the review by Mediator 4,911
Written-form lodged claims admitted to be reviewed, o/w: 2,959
• Claims satisfied through reconciliation 627
• Claims declined 935
• Claims partially satisfied 1005
• Review of the claims suspended 233
• Claims satisfied 149
• Claims the review of which was declined 10
32
Statement of Claims Results/outcome of review of complaints/claims, by percent:
33.96% 31.60% 21.19% 7.87% 5.04% 0.34%
Claims partially satisfied Review of the claims suspended Claims declined Claims satisfied Claims satisfied through reconciliation Reviews declined
Cases declined and cases settled Claims settled down in favor down in favor of the client, of the client, by percent: presented as a ratio:
65.57% 34.43% 56.43% 35.20% 8.37%
Claims satisfied through reconciliation Claims settled down in favor of the client Claims partially satisfied Claims declined Claims satisfied
33
Statement of Claims Complaints, by type of organizations:
The Number of the complaints related to financial system received 5,848 100% during 2018, which were filed against:
Banks 2,047 35.00%
Insurance companies 3,188 54.51%
Credit Organizations 442 7.56%
Pawnshops 7 0.12%
Armenian Motor Insurers’ Bureau 71 1.21%
Payment and settlement organizations making remittances 16 0.27%
Credit Bureau 18 0.31%
Central Depository of Armenia 1 0.02%
Other financial institutions 58 0.99%
Share of complaints filed against financial organizations in 2018 in the total number of complaints presented to the Office:
54.51% 35.00% 7.56% 1.21% 0.99% 0.31% 0.27% 0.12% 0.02%
Credit Bureau Payment and settlement organizations Insurance companies making remittances Banks Pawnshops Credit Organizations Central Depository Armenian Motor Insurers’ Bureau Other
34
Statement of Claims Claims reviewed, by the type of organizations:
The total number of written-form lodged claims during 2018, 2,959 100% which were filed against
Insurance companies 2,115 71.48%
Banks 662 22.37%
Armenian Motor Insurers’ Bureau 42 1.42%
Credit organizations 136 4.60%
Credit Bureau 3 0.10%
Payment and settlement organizations making remittances 1 0.03%
Share of claims filed against selected financial organizations in total complaints accepted by the Office for review in 2018:
71.48% 22.37% 4.60% 1.42% 0.10% 0.03%
Insurance companies Banks Credit organizations Armenian Motor Insurers’ Bureau Credit Bureau Payment and settlement organizations making remittances
35
Statement of Claims The content of claims filed against banks reviewed in 2018:
Total number of the written-form lodged claims filed against banks 662 100% during 2018 related to:
Credit operations 559 84.44%
Payment and settlement transactions 60 9.06%
Depositary operations 42 6.34%
Other 1 0.15%
Share of banking services in total claims filed against banks for review in 2018:
84.44% 9.06% 6.43% 0.15%
Credit operations Payment and settlement transactions Depositary operations Other
36
Statement of Claims The types of credit operations filed against banks for riview in 2018 compared with the one in 2017
The cliams related to Credit Operations received for review against 2017 2018 Banks by service type
Total number of written-form lodged claims against banks in connection with: 270 662
Credit operation, including 185 559
Violation of the RA Law on Consumer Credits 17 336
Calculation of the interest rate, penalty and fine 81 124
Loan classification 34 42
Pledge-related issues 16 20
Loan service 37 37
The structure of claims filed against banks by service type
350
336 300
250
200 2017 2018 150 124
100 81
50 34 42 37 37 17 16 20 0 Violation of Calculation of Loan Pledge-related Loan service the RA Law on the interest rate, classification issues Consumer Credits penalty and fine
37
Statement of Claims The types of depositary operations filed against banks for riview in 2018 compared with the one in 2017
The claims related to depositary operations received for review against 2017 2018 Banks by service type
Total number of claims in writing filed against banks in connection with: 270 662
Depositary operation, including 35 42
Interest rate calculation 6 12
Violation of the RA Law on Attraction of Bank deposits 23 23
Bank account service 5 3
Deposit service 1 4
The structure of claims related to depositary operations filed against banks
25
23 23 20
15
12 2017 10 2018
6 5 5 4 3 1 0 Interest rate Violation of the RA Bank account Deposit service calculation Law on Attraction service of Bank deposits
38
Statement of Claims The types of credit operations filed against Credit Organizations for riview in 2018 compared with the one in 2017
The claims related to Credit Operations received for review against 2017 2018 Credit Organizations by service type
Total number of written-form lodged claims against credit organizations in 22 136 connection with:
Violation of the RA Law on Consumer Credits 3 66
Loan classification 13 30
Calculation of the interest rate, penalty and fine 4 14
Pledge-related issues 1 24
Loan service 1 2
The structure of claims filed against credit organizations
70
66 60
50
40 2017 30 30 2018 24 20 13 14 10 3 4 1 1 2 0 Violation of Loan Calculation Pledge-related Loan service the RA Law on classification of the interest rate, issues Consumer Credits penalty and fine
39
Statement of Claims The content of claims filed against Insurance companies and Armenian Motor Insurers’ Bureau reviewed in 2018:
Total number of claims during 2018, which were filed against Insurance 2157 100% companies and Armenian Motor Insurers’ Bureau, including
Compulsory motor third party liability insurance/CMTPLI (including Motor 2027 93.97% Insurers’ Bureau)
Vehicle insurance 56 2.60%
Medical insurance 36 1.67%
Travel insurance 14 0.65%
Property insurance 14 0.65%
Accident insurance 5 0.23%
Voluntary motor third party liability insurance/Voluntary MTPLI 5 0.23%
Share of insurance products in total claims filed against Insurance Companies and Motor Insurers' Bureau for review in 2018.
93.97% 2.60% 1.67% 0.65% 0.65% 0.23% 0.23%
Medical insurance Travel insurance Compulsory MTPLI (including Armenia Motor Property insurance Insurers’ Bureau) Accident insurance Vehicle insurance Voluntary MTPLI
40
Statement of Claims Share of CMTPLI in total claims filed against Insurance Companies and Motor Insurers' Bureau for review in 2018 compared with the one in 2017.
The claims related to CMTPLI received for review against Insurance 2017 2018 companies by service type
Total number of written-form lodged claims against Insurance 1373 2157 companies and Armenia Motor Insurers’ Bureau in connection with:
CMTPLI (including Armenia Motor Insurers’ Bureau), from which 1271 2027
Disagreement on the damage size 850 1093
Rejection of the compensation/repayment 315 696
Subrogation 79 214
Repayment/compensation delay 25 12
Bonus-Malus system 2 7
Other 0 5
Structure of claims related to CMTPLI filed against insurance companies and Motor Insurers' Bureau
1200 1093
1000 850 800 696 2017 600 2018
400 315 214 200 79 25 12 2 7 0 5 0 Disagreement Rejection of the Subrogation Delay of the Bonus-Malus Other on the damage size compensation compensation system
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Statement of Claims Reimbursement:
The total value of Client reimbursement 304,233,688 100% during 2018, including:
Reimbursement of the claims against banks 43,948,917 14.446%
Reimbursement of the claims against insurance companies 245,095,704 80.562%
Reimbursement of the claims against credit organizations 13,954,067 4.587%
Reimbursement of the claims against Armenian Motor Insurers’ Bureau 1,230,000 0.404%
Reimbursement of the claims against Payment and settlement 5,000 0.002% organizations making remittances
Share of reimbursements as a result of review of the claims filed against financial institutions in total indemnification provided to the clients in 2018
14.45% Reimbursement of the claims against Banks 80.56% Reimbursement of the claims against 4.59% Insurance companies Reimbursement of the claims against 0.40% Credit companies Reimbursement of the claims against Armenian Motor Insurers’ Bureau
During 2018:
65.57% of the cases reviewed were settled in favor of the clients;
• the largest compensation – AMD 6,611,000;
• the smallest compensation – AMD 59.
42
Statement of Claims Share of claims, which were settled in favor of the client, in total claims, by year (%):
82
80.91% 80
78.71%
78 77.79%
76.91%
76
74
72.14% 72
70.44% 70
68.75%
68 67.69%
66.4%
66 65.57%
64
62
60
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
43
Statement of Claims Share of claims, which were settled in favor of the client, in selected financial institutions claims (%):
80
70
60
50
40
30
20
10
49.91% 72.01% 50.88% 6.25% 66.67% 0
Banks Armenian Motor Insurers Bureau Insurance Companies Payment and settlement Credit Organizations organizations making
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Statement of Claims The dynamic analysis of some indicators The number of complaints received by the Office in 2009-2018, by quarter:
0 1800
67 185 213 249 446 850 819 956 1135 I quarter 1376
80 164 185 345 422 723 771 1054 1046 II quarter 1303
86 128 212 379 445 741 828 1009 967 III quarter 1431
2009 161 2010 165 2011 193 2012 338 2013 690 2014 930 2015 845 2016 1099 2017 1224 2018 IV quarter 1738
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Statement of Claims The number of complaints and written form lodged claims received by the Office in 2009-2018, by year:
6000
5848
5000
4372
4118 4000
3244 3263
3000 2959
2003 2000
1672 1523 1448 1311 1276
1000 803 818 642
378 392
144 57 110 0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
The number of complaints The number of claims
46
Statement of Claims The number of complaints received by the Office in 2009-2018, by type of financial institutions, by year:
0 3500
252 419 434 509 706 1029 1114 1418 1662 Banks 2047
54 63 252 689 1142 2014 1964 2336 2310 Insurance Companies 3188
46 75 60 48 48 71 88 162 176 Credit Institutions 442 26 2009 85 2010 57 2011 65 2012 107 2013 130 2014 97 2015 202 2016 224 2017 Other 171 2018
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Statement of Claims Client reimbursement in 2009-2018: Total amount of compensations (AMD)
350 000 000
304 233 688 300 000 000
250 000 000
204 578 416 206 720 967 199 147 628 200 000 000 198 369 625 188 897 125
150 000 000 134 087 137
100 000 000
58 137 847
50 000 000
29 264 354 26 062 886
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
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Statement of Claims 2 Board Chairman’s Address
3 Financial System Mediator’s Address
4 Office of Financial System Mediator
8 Events Calendar
16 Programs Carried Out in 2018
22 Programs to be Implemented in 2019
26 Statistics of Claims
50 Financial Statement and Audit Opinion
58 Precedents/Exemplary Cases
130 Clients' Letters of Gratitude to the Office
134 The List of Organizations that have not Signed the Covenant FINANCIAL STATEMENT AND AUDIT OPINION
First environmental mediation
The center of the dispute was the construction of a hydroelectric plant on the river of Snoqualmie, Washington state, US. This is considered as the first environmental dispute which has been settled through reconciliation. After the floods in 1959, the US Army Corps of Engineers, as a means of fighting the flood, came up with a project for construction of a dam in the southern part of the river. The opponents of the had a fear feared that the construction would pollute the environment and would bring harm to the farmers’ activities. The Governor of Washington state could not confirm the project as long as the representatives of some the settlements in the surroundings of the river were against it. To resolve the issue, the governor appointed a group of mediators who might have tackled the problem through mediation. A group consisting of 10 members who all were also respected individuals and popular among communities that were involved in the dispute was assigned to start mediation. The representatives of the US Army Corps also participated in the discussions and offered alternative options. As a result of the negotiations, the parties came to an agreement on building a dam – not in the southern part of the river, but to the northward of Snoqualmie. 51
Financial Statement and Audit Opinion 52
Financial Statement and Audit Opinion 53
Financial Statement and Audit Opinion 54
Financial Statement and Audit Opinion 55
Financial Statement and Audit Opinion 56
Financial Statement and Audit Opinion 2 Board Chairman’s Address
3 Financial System Mediator’s Address
4 Office of Financial System Mediator
8 Events Calendar
16 Programs Carried Out in 2018
22 Programs to be Implemented in 2019
26 Statistics of Claims
50 Financial Statement and Audit Opinion
58 Precedents/Exemplary Cases
130 Clients' Letters of Gratitude to the Office
134 The List of Organizations that have not Signed the Covenant Precedents/ Exemplary Cases
Russo-Japanese War
The 1904-1905 Russo-Japanese War officially ended by the Portsmouth Treaty. The negotiations with the mediation of US President Theodore Roosevelt took place in Portsmouth, New Hampshire. The final treaty was signed in September 1905, whereby Russia recognized Japan’s clams to Korea for a sphere of influence, lost its leasehold of Liaodong Peninsula, South Manchuria Railway and Southern Sakhalin to Japan, and signed a fishing convention with Japan. Theodore Roosevelt was awarded the Nobel Peace Prize in 1906 for his efforts to reconcile the Russo-Japanese war. 4. The Bank has made a change in loan terms but has not notified the Client of this.
In an appeal to the Mediator, the Client demand- Case 1 ed that the Bank pay AMD 300,000 (three hundred thousand Armenian drams) for a breach of his/her right as defined by Article 17 (1) of the Law on Con- sumer Credits. Claim investigated Claim against a bank operating in the Republic of Armenia; regarding provisions of the RA Law on Investigation of the claim Consumer Credits A. Mediator’s action
By virtue of Article 11 (1) and (2) of the Republic of Content of the claim Armenia Law on Financial System Mediator, the Mediator asked the Bank to provide, within 14 busi- A loan contract of 08.12.2016 was signed between the ness days as specified by the Law on “Financial Bank and the Client by which the Client was provided System Mediator”, explanations and clarifications with a loan amount of AMD 1,500,000 at a 20% in- and/or objections in writing as well as other sup- terest rate. By reference to Article 17 (1) and (3) of the port documentation and deliverables, such as the RA Law on “Consumer Credits”, the Client stated that loan contract signed between the Client and the he/she did not renounce his/her right to receive in- Bank, with attachments thereto, the loan package formation provided for in Article 17 (1) of the Law on (loan application, decision on approval, etc.), the “Consumer Credits” through a postal service, which Client’s bank account contract, with attachments follows that the Creditor had an obligation to provide thereto, a request for choosing on how the infor- the aforementioned information just in that manner. mation subject to mandatory provision is to be re- ceived (if any), the Bank’s internal rules and policies The Client noted that from the date of signing the on providing the customers with information sub- contract up to the date of filing the claim, the Bank ject to mandatory provision (if any), evidence that did not provide, in a prescribed manner, the follow- the information subject to mandatory provision, as ing information to the Client that: mentioned by the Client, had been made available, evidence of communication with the Client, the 1. On 17.02.2017 the Board of the Central Bank of Ar- Client’s claim and response thereto, as well as any menia enacted Decision No 45-N by which chan- other information or document that might be help- ges and supplements were made to the Central ful for the investigation. Bank Board Decision No 225-N of 28.07.2009;
2. On 02.03.2018 the Board of the Central Bank of B. Bank’s viewpoint Armenia enacted Decision No 21-N by which amendments were made to the Central Bank The Office of Mediator received a letter from the Board Decision No 229-N of 28.07.2009; Bank in which they explained their viewpoint on the Client’s claim. The Bank noted that, during the term 3. On 24.09.2018 the procedure for reviewing cus- of the Client’s loan contract, no changes were made tomer complaints was approved by the Bank; that have affected or could have affected the rights
59
Precedents/Exemplary Cases and obligations the Bank had undertaken under that According to Article 887 (1) of the Republic of Arme- loan contract signed on 08.12.2016. nia Civil Code (hereinafter Civil Code), under a credit contract, a bank or other credit organization (the Thus, the essential facts for the investigation of the creditor) is obligated to provide money funds (credit) claim are as follows: to the borrower in the amount and on the condi- tions provided by the contract, and the borrower is 1. On 08.12.2016 a consumer loan contract (here- obligated to return the monetary amount received inafter the Contract) was concluded between and to pay interest on it. the Bank and the Client by which the Client was provided with a loan amount of AMD Article 2 (1.1) of the RA Law on “Consumer Credits” 1,500,000 (one million five hundred thousand (hereinafter the Law) gives the definition of credit as Armenian drams) at an actual 24.67% interest the right for repayment, in a variable period of time, rate per annum, with a maturity period up un- of liability, loan, borrowing, financial lease, or any til 05.12.2019. other agreement or arrangement, with the view of financing procurement of goods, services or works. 2. On 05.12.2016 the Client applied to the Bank for another consumer loan in the amount of AMD Article 17 (1) of the Law establishes that any communi- 1,500,000 (one million five hundred thousand cation between creditor and consumer, which relates Armenian drams) with a maturity period of 36 to terms of credit agreement, or norms of communi- months, while preferring to receive the infor- cation between the parties, or rights and obligations mation provided by the Bank in person, at the of the parties, or establishment, change, or suspen- Bank’s premises. sion of liability, or relates to laws, statutory norms, or creditor’s internal acts affecting credit agreement, 3. According to the client account statement sub- shall be made in writing, through mail service, except mitted by the Bank, the amount of the loan was in cases indicated under part 3 hereof. Moreover, the provided to the Client. information indicated hereof shall be considered in- formation subject to mandatory provision. 4. In investigating the claim, no evidence that changes to the loan contract were made has According to part 3 of the same article, by filing an been there. application, including through electronic communi- cation, the consumer may renounce his right of re- 5. The Client has filed a claim to the Bank. ceiving information established under parts 1 and 2, hereof, through mail service, requesting information 6. The Client has appealed to the Mediator, request- subject to mandatory provision through electronic ing that Bank pay AMD 300,000 (three hundred or other communication services, or at the premises thousand Armenian drams) for violation of his/ of the bank. Any provision limiting the right of con- her right defined under Article 17 of the RA Law sumer to receiving information subject to mandato- on “Consumer Credits”. ry provision through electronic or other communica- tion services, or at the premises of the bank shall be After a comprehensive review of the documentation invalid. Moreover, the creditor may not compel the and deliverables related to the claim, of the explana- consumer, including by way of creating unfavorable tions and objections of the parties, as well as based situation for the consumer, to renounce his/her right on the requirements of the Law, the Mediator has of receiving the information subject to mandatory concluded as follows: provision through a mail service.
60
Precedents/Exemplary Cases Article 20 of the Law provides that where creditor In a letter to the Mediator, the Client stated that the violates any of consumer rights established herewith, Bank did not provide him/her with the information consumer is entitled to recourse immediately to court subject to mandatory provision, as envisaged in Arti- or Financial System Mediator or, in cases prescribed cle 17 (1) of the Law. The Customer cited the Central by law, apply to trade arbitrage. Where the fact of Bank Board’s Decision No. 45-N of 17.02.2017 and De- violating the rights of the consumer enjoying cre- cision No. 21-N of 02.03.2018 and the Procedure for ditor’s services has been confirmed, three hundred Reviewing Customer Complaints approved by the thousand drams shall be levied for customer’s be- Bank on 24.09.2018 as a rationale for the information nefit by a court award, or by decision of Financial subject to mandatory provision, making it a point System Mediator. Moreover, the right of a consumer that the Bank ought to provide that information to stipulated by this article may not be viewed as a pro- the client. vision limiting or annulling the right of a consumer to claim compensation for incurred losses. Referring to the Client’s request, the Mediator be- lieves that in order to tackle the investigation of the A complex analysis of the abovementioned norms claim, there is need to find out whether or not the implies that a law or arrangement between the par- statutes cited by the Client are considered as infor- ties may impose a penalty which should be levied on mation subject to mandatory provision, as envisaged the debtor in the event of non-fulfillment or improp- in Article 17 (1) of the Law. er fulfillment of creditor obligations. The penalty is a guarantee of fulfillment of obligations and is aimed Particularly, Article 17 (1) of the Law infers that dur- at securing that the debtor fulfills the obligation, ing the validity of the credit agreement the creditor and if the debtor fails to fulfil or improperly fulfils must provide the consumer with the following infor- the obligation, it has to encumber the debtor with mation subject to mandatory provision: unfavorable property consequences – monetary li- ability. The law endorses a penalty sum which the 1. definition, modification or termination of the consumer has the right to receive from the creditor terms of crediting, in the event the violation of his/her rights under the law has been confirmed. 2. definition, modification or termination of the communication between the parties, In this case, a consumer loan contract (the Contract) has been concluded between the Bank and the Cli- 3. definition, modification or termination of the ent on the basis of which the Client was provided rights, responsibilities or liability of the parties, with a loan amount of AMD 1,500,000 (one million five hundred thousand Armenian drams) at an actual 4. laws, regulations or the creditor’s internal rules 24.67% interest rate per annum, with a maturity pe- and policies anyhow affecting the credit agree- riod up until 05.12.2019. With an application for another ment. consumer loan submitted to the Bank on 05.12.2016, the Client preferred receiving the information in per- It follows from what has been stated above that in son, at the Bank’s premises. With regard to the fact order for the laws, regulations or creditor’s internal mentioned above, as seen by the Mediator, corro- rules and policies to be considered as information borated is the circumstance of the Client refusing to subject to mandatory provision as defined in Article receive the information provided for in Article 17 (1) of 17 (1) of the Law, and in order for such information the Law via a postal service and preferring instead to to arise as the Bank’s liability for being provided to receive it in person at the Bank’s premises. the Client, it needs to affect the credit agreement.
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Precedents/Exemplary Cases When determining how these statutes could affect the obligation to provide that information to the Cli- the agreement, it is necessary to measure the ratio ent, so the Mediator admits that there is no violation of the intended regularization of these acts to the by the Bank for not providing the information as en- relations arising from the credit agreement. visaged in Article 17 (1) of the Law to the Client.
Particularly, pursuant to Article 438 (1) of the Civil In a letter to the Mediator, the Client wrote that Code, a contract must comply with rules obligato- the Bank had made a change to the loan terms and ry for the parties established by a statute and other made no notice of it to the Client. Referring to this legal acts (imperative norms) in effect at the time argument, the Mediator records that a change of of its signing. Under part 2 of the same article, if af- terms constitutes information subject to mandato- ter the signing of the contract a statute is adopted ry provision and the bank must deliver such infor- establishing rules obligatory for the parties other mation to the customer. However, the Mediator than those that were in effect upon signing of the acknowledges that in investigating the claim it did contract, the terms of the concluded contract shall not present a fact of the Bank having unilaterally retain their force except in cases when it was es- changed any terms in the loan contract signed be- tablished in the statute that its effect extends to re- tween the Client and the Bank. Based on the forego- lations arising from previously concluded contracts. ing, the Mediator considers this fact unreliable, so in this aspect too, no violation on the ground of failure It follows from the foregoing that the laws, regula- by the Bank to provide the information exists. tions or creditor’s internal rules and policies affect- ing the credit agreement are the ones which de- Summing up the aforementioned, the Mediator fine mandatory rules other than established by the finds that in the framework of the loan contract parties in the credit agreement concluded between signed between the Client and the Bank, the fact of them and that such rules establish that its effect ex- violation of the Client’s right to receive information tends to relations arising from previously concluded provided for in Article 17 (1) of the Law has not been contracts. That is, the effect on a credit agreement confirmed, and the Client’s claim is groundless and will be in place if the law, regulation or creditor’s must be turned down. internal rule and/or policy provides for stipulation contrary to the one existing in the contract, or it ex- cludes any arrangement prescribed in the contract and its effect extends to the relations arising from previously concluded contracts.
In this case, the Client failed to substantiate how the statutes cited by him/her have affected the con- tract signed between the Client and the Bank, i.e. how these statutes incorporate such mandatory rules which apply to the loan contract between the Client and the Bank and provide for arrangement other than established in that contract. With regard to what was stated above, the Mediator finds that the information cited by the Client does not consti- tute information subject to mandatory provision in a sense of Article 17 (1) of the Law, nor had the Bank
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Precedents/Exemplary Cases Investigation of the claim A. Mediator’s action
By virtue of Article 11 (1) and (2) of the Republic of Case 2 Armenia Law on “Financial System Mediator”, the Mediator asked the Bank to provide, within 14 busi- ness days as indicated in the Law on Financial Sys- tem Mediator, explanations and clarifications and/or Claim investigated objections in a written form as well as other sup- Claim against a bank operating in the Republic of port documentation and deliverables, such as the Armenia; regarding making an early repayment of loan contract signed between the Client and the the loan Bank, with attachments thereto, the bank account contracts signed between the Client and the Bank, statements to bank account of the Client for the en- Content of the claim tire period, the payment order for USD 70 and the clerk’s explanations on the Client’s order, as well as A loan contract has been signed between the Client any other information or document that might be and the Bank, and the Client has made the repay- helpful for the investigation. ments consistently. A lump sum payment of USD 350 on November 29, 2017 benefited the Client a full repayment of the loan. The payment order clearly B. Bank’s Viewpoint indicated a full repayment of the loan. Asking a clerk of the Bank whether he/she has any more to pay, The Office of Mediator has received a letter from the Client was assured that the liabilities were paid the Bank, in which they explained their viewpoint off. It was found out, however, that due to another concerning the Client’s claim. In particular, the Bank problem, the Client had overdue liabilities. It turns noted that they had opened bank accounts in Arme- out that instead of having the sum credited on the nian dram and US dollar for the Client pursuant to loan account as repayment of loan, the clerk of the his request for opening a bank account. According to Bank had it credited on the US dollar account and “Bank Account Opening Contract for Clients as Legal continued charging monthly fees. The Client did Entities and Private Entrepreneurs ” and an accom- not know about it, as the payment order indicated panying agreement for reopening of bank account, early loan repayment. Many employees of the Bank the Bank has reformulated the banking agreement admitted that it was the fault of that clerk, even with the Client. The Client has confirmed that he/ prompted him on how to make an application so she has read and agrees with the general terms and that the solution to the problem could be more ef- conditions of delivery of banking services and ser- fective. In the meantime, the Client has had to pay vice fees and tariffs, which are an integral part of the the overdue amount in order to prevent more days abovementioned bank account opening contract, falling overdue. and unconditionally accepts and undertakes to fol- low them. According to the tariffs of the Bank for In an appeal to the Mediator, the Client insisted that servicing the bank accounts of legal persons and the Bank stop claiming repayment of a sum of USD private entrepreneurs, the annual service fee for the 70 in total, consider the loan paid off and make a re- Bank Account is AMD 5,000. On 30.03.2017 a total of classification of a credit risk. AMD 10,000 was charged as a fee for servicing the bank accounts, on which a receivable in the amount
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Precedents/Exemplary Cases of AMD 8,368.70 has accrued as of 30.03.2017, which granted a loan amount of USD 750 for a period of was repaid on 02.12.2018. On the basis of the above 36 months, with a 20% interest rate per annum. statement, the Bank asks for turning the Client’s claim down. 5. On 29.11.2017 the Client made a transfer of USD 330 onto the bank account with the aim of full Thus, the essential facts for the investigation of the repayment of the loan, and the amount was claim are as follows: sufficient for the full repayment, as the principal amount of the loan that day was USD 324.18 plus 1. The Client and the Bank have concluded a “Bank USD 5.15 as interest. Account Opening Contract for Clients as Legal Entities and Private Entrepreneurs” (hereinafter 6. The loan amount due for repayment on 29.11.2017 the Contract), according to which the Client has was not used to pay off ahead of the schedule opened two accounts – in Armenian dram and but remained in the bank account, and the bal- US dollar – with the Bank. ance was used to make monthly partial repay- ments up until 01.10.2018. 2. The Client confirms that he/she has read and agrees with the general terms and conditions of 7. The balance of USD 5.17 on the Client’s bank ac- delivery of banking services and fees and tariffs, count as of 01.10.2018 was not sufficient to make which are an integral part of the abovemen- a regular repayment of the loan, so the loan was tioned contract, and that he unconditionally ac- fallen overdue. cepts and undertakes to follow them. The Client is aware that the Contract, Terms and Conditions, 8. On 29.10.2018 the Client repaid AMD 25.87 and the Fees and Tariffs, technical specifications (guide- overdue loan amount was considered paid off as lines) for the use of the System (if applicable), any a result. On 01.11.2018 the loan amount fell over- template to the documents signed by the Client due and on 02.11.2018 the Client paid USD 28 and and accepted by the Bank in the framework of AMD 1200 to repay the loan. the Contract together constitute a contract con- cluded between the Bank and the Client. 9. On 20.11.2018 the Bank had the loan rescheduled and considered it to have been repaid in full. The sum 3. The annual fee for servicing a bank account (ex- the Client overpaid that day was USD 57.18, from cept for credit accounts) is AMD 5,000, subject to which USD 20.7 was charged on 31.11.2017 for ser- subpoint 1.1.1.2 “Tariffs for Opening, Servicing and vicing bank accounts (for AMD and USD accounts), Closing Bank Accounts for Legal Entities and Pri- and USD 36.48 transferred onto the bank account. vate Entrepreneurs”, in accordance with Annex 1 to a decision approved by the Executive Board of 10. On 02.12.2018 a sum of USD 20.68 was charged as the Bank. In case of holding more than one dram a service fee, and the remaining amount of USD account or more than one foreign currency ac- 15.8 was given as cash to the Client. count, the service fee is chargeable only for one dram and for one foreign currency account. The 11. From 01.10.2018 to 29.10.2018 and from 01.11.2018 to account service fee is chargeable as a lump sum, 02.11.2018 the Client’s loan was considered as hav- once in every 12 months. ing fallen overdue, but because it has been the Bank’s failure, the Bank sent a note to the Credit 4. On 25.11.2015 a loan contract was signed between Registry for removing overdue days and make the Client and the Bank, by which the Client was a reclassification for that period.
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Precedents/Exemplary Cases 12. On 24.10.2018 the Client filed a claim to the Bank Article 912 (1) of the Code provides that under the and the latter rejected it. contract of bank account, a bank is obligated to credit monetary funds on to the account opened 13. In an appeal to the Mediator, the Client requests with the client (the accountholder), to execute the that the Bank stop claiming a repayment of orders of the client on transfer and issuance of re- a total of USD 70, consider the loan paid off and spective amounts from the account and on the con- make a credit risk reclassification. duct of other operations on the account.
Thus, following a comprehensive review of the doc- According to Article 914 (1) of the Code, upon the mak- umentation and deliverables related to the claim, of ing of a contract of bank account, an account shall be the explanations and objections of the parties, as opened for the client or a person designated by it at well as based on the requirements of the RoA Law, a bank on the conditions agreed upon by the parties. the Mediator has concluded as follows: Article 919 (1) of the Code says that in cases provided by the contract of bank account, the client shall pay According to Article 345 (1) of the Civil Code of the for the services of the bank for performing operations Republic of Armenia (hereinafter referred to as the with monetary funds that are on the account. Code), by force of an obligation one person (the debtor) is obligated to take for the use of another It follows from the combination of the above provi- person a defined action, such as:to pay money, to sions that the bank or any other credit organization transfer property, to perform work, etc., or refrain shall under a credit agreement be required to provide from a defined action, and the creditor has the the borrower with monetary funds in the amount right to demand from the debtor the obligation and on conditions stipulated by the contract, and to perform. In accordance with Article 347 of the the borrower (borrower) is obliged to repay the re- Code, obligations must be performed in a proper ceived monetary funds in an established timeframe manner, in accordance with the terms of the ob- and order and pay interest thereon; moreover, the ligation and the requirements of a statute, other contract must clearly define the size and calculation legal acts, and in the absence of such terms and of interest rate, and the amount of the loan shall be requirements, in accordance with the customary deemed to be returned to the lender or transferred business practices or other requirements usually onto their bank account unless otherwise stipulated offered. in the loan contract. In case of signing a bank ac- count agreement, the bank opens an account in the According to Article 887 (1) of the Code, under name of the customer in accordance with the terms a credit contract, a bank or other credit organiza- of opening a bank account. In addition, the bank has tion (the creditor) is obligated to provide money the right to charge fees for its services, which may be funds (credit) to the borrower in the amount and charged both as per each transaction and as agreed on the conditions provided by the contract, and upon between the parties for a clearly defined sum the borrower is obligated to return the monetary at a clearly defined fee for a certain period of time. amount received and to pay interest on it. The second paragraph of the same article says that The investigation of the claim found out that on the rules provided by Chapter 46 of the Code shall 25.11.2015 the Client and the Bank had entered into be applied to relations under the credit contract, two arrangements – a bank account opening con- unless otherwise established by the rules of the tract and a loan contract. Subject to the “Bank Ac- present Chapter or follows from the nature of the count Opening Contract for Clients as Legal Enti- credit contract. ties and Private Entrepreneurs” signed between the
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Precedents/Exemplary Cases parties, two accounts – in Armenian dram and US the annual fee for the Client’s bank account service; dollar – were opened with the Bank for the Client. moreover, USD 20.7 was used to pay annual service Under the loan contract, the Bank has provided the fee for 2017 and USD 20.68, for that of 2018. According Client with a loan amount of USD 750. Subject to to the Contract, two accounts – in AMD and USD – subpoint 1.1.1.2 “Tariffs for Opening, Servicing and were opened in the name of the Client and an an- Closing Bank Accounts for Legal Entities and Pri- nual bank account service fee of AMD 5,000 was vate Entrepreneurs”, which constitutes an integral charged pursuant to the tariffs, which are an inte- part of the bank account agreement, the annual gral part of the Contract. Note that AMD 5,000 was fee for servicing a bank account is AMD 5,000, and chargeable for each of the two accounts. For USD in case of having more than one dram account or 20.7 and USD 20.68 charged as service fees for each more than one foreign currency account, the ser- of the two accounts, the Bank has used, respectively, vice fee is chargeable, respectively, for one dram and an exchange rate of 484.21 drams and 485.06 drams one foreign currency account only. The account ser- per dollar. The Bank has charged USD 20.68 and 20.7 vice fee is chargeable as a lump sum, once in every as a service fee, which had been envisaged by the 12 months. On 29.11.2017 the Client made a transfer Contract between the parties. of USD 330 onto the bank account with the aim of full repayment of the loan, and the amount was suf- As regards the Client claiming a reclassification of ficient for the full repayment, as the loan principal credit risk, it should be noted that up until 01.10.2018 that day amounted to USD 324.18 plus an interest the Client’s credit risk classification has remained amount of USD 5.15. The loan due for repayment intact as the amount of loan hadn’t been used to on 29.11.2017 has not been used to pay off ahead of pay off on 29.11.2017, since the existing balance of the the schedule but remained in the bank account, and account was used to make regular installments be- the balance was used to make partial repayments fore that time, while the information on credit risk each month up until 01.10.2018. As the Client’s bank reclassification and outstanding credit after 01.10.2018 account balance had been USD 5.17 as of 01.10.2018 has been rectified by the Bank, which means that and was not sufficient to make a regular repay- the Bank has satisfied the Client’s demand in this ment of the loan, the loan was fallen overdue. On sense too. 29.10.2018 the Client repaid AMD 25.87 and the over- due loan amount was considered paid off as a re- Summing up, the Mediator records that the Bank sult. On 01.11.2018 the loan amount fell overdue and has actually fulfilled the Client’s demand by using the on 02.11.2018 the Client paid more USD 28 and AMD payment of 29.11.2017 to pay off the loan, while reme- 1200 to repay the loan. On 20.11.2018 the Bank had dying the credit history; USD 20.7 and USD 20.68 from the loan rescheduled and considered it to have been the amount overpaid were used to charge bank ac- repaid in full. The sum the Client overpaid that day count service fees, subject to the Tariffs which make was USD 57.18 from which USD 20.7 was charged on an integral part of the Contract concluded between 31.11.2017 for servicing bank accounts (for AMD and the parties. The sum of USD 15.8 overpaid as a result USD accounts), and USD 36.48 transferred onto the of recalculation has been refunded to the Client as bank account. On 02.12.2018 a sum of USD 20.68 was cash. In this case, the Client’s claim to the Mediator charged as a service fee, and the remaining amount must be turned down. of USD 15.8 was handed to the Client as cash. That is, the Bank has satisfied the Client’s demand as the loan amount was recalculated and used for repay- ment in full. Part of the sum of USD 57.18 generated as a result of the rescheduled loan was used to pay
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Precedents/Exemplary Cases System Mediator, explanations and clarifications and/or objections in writing as well as other sup- port documentation and deliverables, such as the motor third party liability insurance (MTPLI) policy Case 3 signed with the Client, materials contained in the case related to the accident, including photos of the scene and of the damaged motor vehicles, conclu- sions, decisions issued by the Republic of Armenia Claim investigated Police, and all case-related documents, the results Claim against an insurance company operating in of the expertise, the Company’s decision to reject the Republic of Armenia; regarding the paying the insurance compensation, as well as any other infor- compensation for a burnt motor vehicle mation or document that might be helpful for the investigation.
Content of the claim B. Company’s viewpoint In September 2018, as a “Mercedes Benz” parked near the Client’s motor vehicle was burning, the The Office of Mediator has received a letter from “Mitsubishi” of the Client was set ablaze. As a result, the Company in which they explained their po- the Client filed a claim to the insurance company sition with regard to the Client’s claim. The Com- (the Company) for compensation. Damage caused pany wrote that on 24.09.2018 a fire broke out in to the motor vehicle amounted to AMD 3,500,000 the underground parking of Building #34 in Hala- (three million five hundred thousand). According to byan Street, Yerevan, which resulted in the burning the expertise examination of the accident, the one of “Mercedes Benz” and “Mitsubishi” motor vehicles. found guilty of the accident was a third party, on The Client has filed a claim to the Company for in- the basis of which the Company decided to reject surance indemnity against damage caused to the the compensation. The Client does not agree with property in connection with the abovementioned the decision, since there is no evidence that any third accident, with the documents attached thereto. An person is guilty of an accident; moreover, the scene expertise of the cause was carried out by a firm in had been observed under a video surveillance. the framework of examination of the accident. The Company noted that it had informed the Client of In an appeal to the Mediator, the Client demanded the results of the examination by written notice, but that the Company provide insurance indemnity for the Client has failed to exercise his rights set out in damage caused to his motor vehicle as a result of the RA Law on “Compulsory Insurance Against Civil the accident, in the amount of AMD 1,800,000. Liability in Respect of the Use of Motor Vehicles” and the Rules of the Armenian Motor Insurers’ Bu- reau to request for a double or additional expert ex- Investigation of the claim amination within the period mentioned above. The A. Mediator’s action Company, referring to RL-001 Rules of the Bureau of Motor Insurers of Armenia point 94 (4), made a de- By virtue of Article 11 (1) and (2) of the Republic of cision to pay (refuse to pay) insurance indemnity Armenia Law on “Financial System Mediator”, the against property damage in the field of MTPLI policy. Mediator asked the Company to provide, within 14 The Client filed a complaint to the Company, to business days as specified by the Law on Financial which the Company responded by a letter delivered
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Precedents/Exemplary Cases by mail. The Company has submitted copies of the for about 18 months, hence the battery was out relevant documents attached to the letter. of order but in a charged condition, we conclude that the burning could have stemmed from Thus, the essential facts for the investigation of the a source of open or low-calorie heat (e.g. a safety claim are as follows: match, lighter ignited, a cigarette butt not extin- guished, etc.), possibly in availability of petroleum 1. The Client and the Company have signed a Mo- products around. To figure out more specifically tor Third Party Liability Insurance Certificate the nature of setting of the fire in the “Mercedes (hereinafter also referred to as Certificate) arising Benz” is not possible due to total burning and from the use of motor vehicles, by which the li- demolition of the motor vehicle. (...)’. ability from the use of “Mitsubishi” motor vehicle has been insured. 6. The Client has filed a claim to the Company to seek insurance indemnity against damage caused 2. According to an act of fire, prepared as of to the property in connection with the accident. 27.09.2018, the Ministry of Emergency Situations of the Republic of Armenia received an alarm of 7. According to the conclusion issued by the exper- fire on 24.09.2018, at 03:15 AM. It was found out tise on loss assessment as prepared by the Com- that a fire broke out in an underground parking pany, the damage caused to “Mitsubishi” motor of Building #34 in Halabyan Street, Yerevan, which vehicle was an estimated AMD 2,400,000 (two resulted in total burning of “Mercedes Benz” and million four hundred thousand Armenian drams) “Mitsubishi” motor vehicles. by residual valuation methodology.
3. To figure out the exact amount of property dam- 8. The conclusion issued by the expertise on the caus- age caused by fire and the source of the fire, es of road accident that has been delegated by the a thorough expertise on commodity and techni- Company and carried out by the expertise firm cal aspects of construction and fire was assigned. read as follows: ‘(...) from the data we had at hand it follows that the fire that broke out in “Mercedes 4. The expert opinion issued by the firm read as fol- Benz” motor vehicle was caused by external inter- lows: ‘the investigation found that, as a result of ference, namely by an impact of a third party. In the the fire, the “Mercedes Benz” motor vehicle was circumstances known to us, any actions by drivers completely burnt, exposed to thermal effects and of “Mercedes Benz” and “Mitsubishi” motor vehicles not fit for restoration. (...) Restoration and repair that could have led to the occurrence of the ac- of the motor vehicle is not viewed to be practical cident because these were technically contrary to and economically justified’. the requirements of Road Traffic Rules or the RA Law on Traffic Safety, are not evident. (...)’. Taking 5. The expert opinion further read as follows: ‘(...), the aforementioned into account, the expertise broke out in the “Mercedes Benz”, the fire evolved noted in a respective section on the guilty that to the “Mitsubishi” that was parked nearby and neither the drivers nor the owner of the damaged heated up the surrounding areas. Given the lack property are to blame, and the third party is found of traces on electrical wires, typical of emergency guilty of the occurrence of a road accident instead. regimes, in the motor vehicles, the data of the act of fire as shown in the materials, and con- 9. The Company, having referred to point 94 (4) of sidering the “Mercedes Benz” driver’s explanation General Terms of MTPLI policy, has made a deci- that the motor vehicle had not been operated sion to pay/refuse insurance compensation.
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Precedents/Exemplary Cases 10. The Client has filed a complaint to the Compa- According to Article 1072 (1) of the Code, legal per- ny, in which he voiced a disagreement with the sons and citizens, whose activity is connected with viewpoint of the Company. increased danger for those around (use of means of transport, mechanisms, high-voltage electrical energy, 11. In an appeal to the Mediator, the Client demand- atomic energy, explosive substances, strongly-acting ed that the Company pay insurance indemni- poisons, etc.; conduct of construction work and other ty for damages caused to his motor vehicle as activity connected with it) shall be obligated to com- a result of a car accident, in the amount of AMD pensate for harm caused by the source of increased 1,800,000. danger unless they show that the harm arose as a re- sult of force majeure or the intent of the victim. (...). The Thus, following a comprehensive review of the doc- liability of compensation for harm shall be placed upon umentation related to the claim, of the explanations the legal person or citizen who possesses the source of and objections of the parties, as well as based on increased danger by the right of ownership or on other the requirements of the RA law, the Mediator has legal basis (on the right of lease, under an authoriza- concluded as follows: tion for the right to drive means of transport, etc.). Un- der part 2 of the same article, the possessor of a source According to Article 996 (1) of the Civil Code of the of increased danger shall not be liable for harm caused Republic of Armenia (hereinafter the Code), a par- by this source if it shows that the source left its control ty to the insurance contract (the Insurer) shall un- as a result of the illegal actions of other persons. dertake, against a certain charge, whether non-re- current or regular (Insurance premium), to pay or Article 1058 (1) of the Code establishes that harm make available to the other party to the insurance caused to the person or property of a citizen and contract, i.e. the policyholder or a party designated also harm caused to the property of a legal person by it (the Beneficiary), an insurance cover as and shall be subject to compensation in full by the per- when an insurance event occurs, in order to indem- son who has caused the harm. According to para- nify damage caused as a result of occurrence of any graphs 2 and 3 of the same article, the person who event(s), provided that such event(s) is/are acciden- has caused the harm shall be exempt from compen- tal and/or not dependent on the will of the parties sation for the harm if he/she proves that the harm or insured person or beneficiary, except when, in was caused not by his/her fault. The law may provide case of life assurance, occurrence of any certain or for the compensation of damages in the absence of anticipated event is indemnified. Part 1 of Article a guilty party. Damage caused by lawful acts shall be 10211 of the Code says that the policyholder can en- compensated in the cases prescribed by law. ter into an insurance contract whereby the risk of liability against the third party damage is insured. In other words, as the statement mentioned above In accordance with part 4 of the same article, the infers, the law separates the damage caused to their insurance contract on risk of liability against the possessors as a result of interaction of sources of third party damage shall be deemed concluded in increased danger from the damage caused as a re- favor of the parties which can incur loss (in favor sult of increased danger, establishing that in the first of the Beneficiaries), even if the contract has been case the damage is compensated on general princi- concluded in favor of the policyholder or another ples set out in Article 1058 of the Code (fault liability) party which is responsible for the damage caused, and, in the second case, the damage is compensated or the contract does not specify whose favor it has in the manner prescribed in Article 1072 of the Code been concluded for. (liability, regardless of the fault of the person who caused the damage).
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Precedents/Exemplary Cases This means that the law makes a distinction be- d) it is not proved judicially that gross negligence tween: of the sufferer has contributed to the generation or increment of the harm in which case would 1. The damage caused to the possessors as a re- the court be able to reduce the amount of com- sult of interaction of sources of increased dan- pensation, depending on the degree of the fault ger (in this particular case: transport means), in of the sufferer and of the person having caused which case the general principles of liability for the harm; where the fault of the person having the causing of harm as established in Article 1058 caused the harm lacks while gross negligence of of the Civil Code shall apply (the above referred the sufferer is proved, the court would be able stipulation derives from the Republic of Armenia to reduce the compensation against harm, unless Court of Cassation decision, No. 1097/02/10, dated the statute provides otherwise. March 23, 2012, and No. 0959/02/09, dated July 1, 2011). In that respect, the Republic of Armenia Thus, Article 1058 of the Code has established gene- Court of Cassation has ascertained in a num- ral provisions of liability for compensation against ber of decisions that the cause and effect in the harm whereas general provisions of liability for com- debtor’s unlawful behavior, damage and unlawful pensation against harm and ability for exemption action and the guilt of the debtor existing simul- therefrom, depending on the way, method, form taneously is a prerequisite for indemnification of and etc., have been established in articles 1060-1073 the damage. Moreover, in the case under review, of the Code. the law admits the presumption of guilt of the person who has caused the damage, since the As it was mentioned earlier, paragraph 1 of Article person who has caused the alleged damage will 1072 infers that the only fact of proof within a claim, incur the obligation to prove his lack of guilt, the hence the ground for liability, is causing personal in- proof of which is what will exempt that person jury to the Client as a result of the use of the source from indemnity. of increased danger for those around, whereas the person having caused the harm can be exempt from 2. The increased danger for those around, the li- the duty to pay compensation against harm only abilities of the person causing the harm (more when the grounds as referred to above are in place specifically, the owner and/or possessor of the to get the person having caused the harm to be increased source of danger) of which is available exempt from liability. in the following circumstances: Article 1058 of the Code, which was referred to in a) the fact of the harm caused as a result of the Article 1072 (3) in connection with compensation of use of the source of increased danger has been the damage caused as a result of interaction of the proven, sources of increased danger, mentions that a statue may provide for compensation of the damage by the b) the person having caused the harm fails to prove lack of fault of the person who caused the damage, that the harm has arisen as a result of force ma- and that the damage caused under such circum- jeure or a deliberate action taken by the sufferer, stances shall be compensated as and when required by the law. Article 1072 of the Code sets forth general c) the person having caused the harm fails to prove clauses on responsibility for indemnification of loss that the source left its control as a result of the and grounds for, and exemption from, the liability for unlawful actions of other persons, the loss caused as a consequence of the use of the source of increased danger, and thus provides that
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Precedents/Exemplary Cases the loss caused as a consequence of the use of the insurance cover, except for costs caused by damage source of increased danger shall be indemnified irre- as defined in part 1 of Article 25 hereof. Such costs spective of the fault of the person having caused that shall be compensated to an aggrieved person (his loss and whether or not that loss has been caused representative or heir) by payment of the respective through a lawful or unlawful action. The same arti- amount or liquidation of damage, as the aggrieved cle, however establishes that the court may reduce person (his representative or heir) would prefer. the payment of compensation, in proportion to the If expertise proves that liquidation of damage is im- degree of the fault of the sufferer and the person possible, or not feasible, costs shall be compensated having caused that loss, provided that gross negli- solely by payment of the respective amount. gence of the sufferer has been proven. According to Article 16 (2) of the Law, motor vehicle According to Article 5 (1) of the RA Law on “Com- is deemed destroyed where the repair is techni- pulsory Insurance Against Civil Liability in Respect of cally impossible or economically not feasible (re- the Use of Motor Vehicles” (hereinafter also referred pair costs will by 80% exceed the price of the vehicle to as the Law), the MTPLI policy shall insure against before accident). In case of destruction of the motor liability of insured persons for the damage resulting vehicle, the difference between its assessed price be- from the use of motor vehicles. According to Article fore the accident and the residual price calculated in 3 (1) 17 of the Law, damage resulting from the use of manner established by the Board of the Armenian motor vehicle means any damage resulted by direct Motor Insurers’ Bureau. or indirect operation of the motor vehicle whether or not the engine was running (including as a result According to Article 3 (1) 15 of the Law, insurance in- of explosion or arson of a motor vehicle). The logi- demnity is the sum which the insurance company cal analysis of the above norms suggests that, under pays under law and/or in cases provided for by the this Law, not only the damage caused by explosion MTPLI policy to the sufferer, his representatives or of the motor vehicle should be indemnified, but heirs when an insurance event occurs. Paragraph 5 also the damage caused as a result of arson. True, of the same article says that sufferer means any per- the Law does not reveal the essence of arson, son entitled to indemnification under this law and but from a legislative arrangement point of view other relevant regulations in respect of personal or it becomes clear that it involves the incidents of property damage/loss, as provided for under this setting fire to the motor vehicle by other people law, resulting from accidents which are caused by as well, as a result of which the damage reaches the use of motor vehicles. the policyholder. At the same time, it is notewor- thy that here one may deal with the principle of Article 21 (1) of the Law has the following regulari- liability without fault liability for damage caused zation: where civil, criminal or court litigation pro- by burning of the motor vehicle, since there is no ceedings were instituted, the size of damage caused interaction of motor vehicles in this case. to property shall be assessed and the degree of guilt of a person decided through the valid and effective According to Article 15 (1) of the Law, damage caused decision of the court involved in the proceedings, to the property of the injured party shall include: whereas in case if such action was not brought to 1) damage, destruction or loss of the motor vehicle court, or the court involved in the proceedings did of the injured party (...). The second part of the arti- not issue a decision, the size of personal damage cle provides that in case of damage caused to prop- shall be assessed by the qualified experts of the erty of a person, costs defined by Articles 16-19 of Armenian Motor Insurers’ Bureau, except for cases this Law shall be compensated within the amount of stipulated by part 4, Article 19 of this Law, for which,
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Precedents/Exemplary Cases according to the Bureau rules, a simplified process to refuse the payment of insurance indemnity by the for determining the degree of guilt and (or) the size Company could not have relied upon whether or not of loss by insurance company may be established. the owner of the motor vehicle that has caused the damage was guilty, since the “Mercedes Benz” has Pursuant to point 94 (4) of the operational rules RL been damaged as a result of the arson of that motor 1-001 adopted by the Armenian Motor Insurers’ Bu- vehicle. The requirement that the Policyholder’s guilt reau (hereinafter referred to as the Rules), as they of the damage needs to be corroborated uncondi- are rendered effective at the time of the Client filing tionally, which the insurance company refers to as a claim to the Insurer, the Insurer having received the being a necessary condition for a liability to arise for claim shall reject insurance indemnity or, in the cases compensation, seems not lawful as the liability of provided for by this chapter, reduce the amount of the motor vehicle that caused the damage arises in insurance compensation, if: (...) 4) the suffered per- the absence of guilt, to the effect of possessing the son is the owner or another legally authorized own- source of increased danger. er of the motor vehicle involved in the accident, and the fault of the owner(s) of that/those motor vehi- The Mediator considers the liability of the Company cle(s) is lacking in that accident in accordance with to pay insurance indemnity confirmed, as the fact of a court ruling or the results of expertise. (...). the damage caused to the Client as a result of pos- sessing the source of increased danger is proven, the In investigation of the claim it became clear that by person who has caused the damage fails to prove referring to point 94 (4) of the Rules, the Company that the damage has occurred as a result of force came up with an observation that there’s been a de- majeure or deliberate action of the sufferer, fails to liberate or negligently committed action of an un- prove that the source of increased danger has left known third party, in which case the Company does his control as a result of the illegal actions of others not bear an obligation to pay compensation to the and there is no proof judicially that gross negligence suffered parties. of the sufferer has contributed to the generation or increment of the harm. The Mediator considers it necessary to clarify that the definition of arson as an insurance accident un- Thus, the Mediator believes that the Company bears der the Law implies per se that the liability to in- the responsibility to indemnify the owner of “Mit- demnify the damage to the Policyholder by setting subishi” motor vehicle against the damage caused as fire to the motor vehicle thus demonstrating any a result an occurred insurance event: burning. form of guilt by the third party lies with the Com- pany that has signed the Motor Third Party Liability Subject to point 50 of the Rules, as the insurance Insurance policy. cover per motor vehicle under the MTPLI policy on the damages caused to each individual per insur- In this circumstance, the conclusions of two exper- ance event amounts to (...) 2) AMD 1,800,000 for the tise firms confirm that thefire broke out as a re- damage caused to the property, (...), the Mediator sult of external interference, developed into the believes that the Client’s request must be satisfied. “Mercedes Benz” and moved to the “Mitsubishi” parked nearby. That is, these conclusions substan- tiate that the “Mercedes Benz” was burnt down as result of the actions of a third party, with a conse- quential damage caused to the Client’s motor vehicle which was parked nearby. In this case, the decision
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Precedents/Exemplary Cases Mediator asked the Company to provide, within 14 business days as specified by the Law on Financial System Mediator, explanations and clarifications and/or objections in writing as well as other support Case 4 documentation and deliverables, such as the motor third party liability insurance (hereinafter MTPLI) policy signed between the Client and the Company, materials contained in the case related to the acci- Claim investigated dent, including photos of the scene and of the dama- Claim against an insurance company operating in ged motor vehicle, conclusions, decisions issued by the Republic of Armenia; regarding turning down the Republic of Armenia Police, and all case-related the insurance compensation documents, the results of the expertise, the package of documents the Client submitted to the Compa- ny to seek insurance indemnity, the copies of corre- Content of the claim spondence in writing with the Client, as well as any other document or information which may assist A car accident happened on 03.03.2018 caused dama- the investigation of the claim. ge to the Client’s “Toyota” motor vehicle. As a suffered party to the accident, the Client has filed a claim to the insurance company (the Company). The Company has B. Company’s viewpoint responded to the Client by issuing a loss report and decision on a waiver of refund. The report estimat- The Office of Mediator has received a letter from the ed the damage to the motor vehicle in the amount Company in which they explained their viewpoint of AMD 1,695,025 which, however, was not subject to with regard to the Client’s claim, with claim-relat- reimbursement because the Client had voiced at the ed documents attached to the letter. By reference court that he had nothing against the viewpoint who to Article 2 of the RA Law on “Compulsory Insurance has done the harm. Disagreed with the position of the Against Civil Liability in Respect of the Use of Mo- Company, the Client stated that what he had said at tor Vehicles” (hereinafter also referred to as the Law) the court was only to prevent the offender from being and points 7 and 25 of the Rules of the Armenian exposed to criminal case; as to inflicted property dam- Motor Insurers' Bureau (hereinafter also referred to age, the Client noted that although the damage to the as the Bureau), the Company wrote that, following car is subject to mandatory compensation, he did not the Client’s application for insurance indemnity, they receive any compensation. assigned and carried out on 10.10.2018 an expertise assessment of the damage caused to the Client’s The Client demanded that the Company pay for the “Toyota” motor vehicle as a result of car accident oc- damage to the motor vehicle, which makes up AMD curred on 03.03.1998. The damage has been estimat- 1,695,025. ed to amount to AMD 1,695,025. Citing the decision to abate the criminal proceedings and terminate crim- inal prosecution as well as referring to paragraph Investigation of the claim 100 of the Rules, the Company noted that they have A. Mediator’s action made a decision to refuse insurance compensation. The Company has requested to decline the Client’s By virtue of Article 11 (1) and (2) of the Republic of appeal. Armenia Law on “Financial System Mediator”, the
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Precedents/Exemplary Cases In view of the need to further learn the aspects of emergency situations and prevent the occurrence the claim and to negotiate with the parties, the Me- of the accident, the driver of “Mercedes” would, diator has extended the investigation for another 14 technically, have to maintain a safe distance be- working days. tween his own car and the “VAZ-2106” at the moment running apace to the right side of him. Thus, the essential facts for the investigation of the As to the action of the driver of the “Mercedes” claim are as follows: in a sense that he may have driven under the condition of usage of alcohol, it does not require 1. A Motor Third Party Liability Insurance policy as a special auto-technical expertise to evaluate of 20.01.2018 has been signed between the Client the causative link between that action and the and the Company, by which the risk of liability occurrence of the accident. These are subject to arising out of the use of “Toyota” motor vehicle a legal assessment based on the requirements of has been insured. The period of insurance is for Article 24 (7) of the Law on “Maintaining Road 20.01.2018 – 20.05.2018. Traffic Safety”.In proposed circumstances, the driver of “Toyota” did not have the techni- 2. According to the Republic of Armenia Investiga- cal opportunity to prevent a collision with tive Committee’s 03.03.2018 Protocol on examina- “Mercedes”, and any actions taken by that driv- tion of the scene of traffic accident, on March 3, er which might have technically contradicted 2018, at about 15.55, a “Mercedes” driven by a cit- the Road Traffic Rules requirements and which izen of the Republic of Armenia hit on the 5th might have led to the occurrence of collision km of the Yerevan-Sevan highway a left rear side with the “Mercedes” are not observable. In pro- of a “VAZ-2106”, and after losing control of the posed circumstances, any actions taken by the car, came out on the opposite carriageway and driver of “VAZ-2106” which might have technically collided with a “Toyota”, as a result of which the contradicted the Road Traffic Rules requirements Client and the passengers of his car were taken and which might have led to the accident, as well to a medical center, with bodily injuries. as any technical opportunities to prevent the ac- cident are not observable. 3. According to the expertise conclusion of the ex- amination by the Regional Department of the 4. The decision of the Court of First Instance on Investigative Committee, in proposed circum- abatement of criminal proceedings and termi- stances, the driver of the “Mercedes” failed to nation of criminal prosecution read as follows: keep a safe distance from the “VAZ-2106” at the ‘On 06.03.2019, in the course of the accident, moment running at his right side, and, as a re- a number of sufferers submitted appeals in sult, hit the left rear side of the “VAZ-2106” after writing to the court, by which they stated that which he came out on the opposite carriageway they have reached reconciliation with the de- and collided with the “Toyota”; from a technical fendant, forgiven him, do not complain, have point of view, the driver has created an emergen- not filed a claim for material and property cy situation by letting action contrary to the re- damage and asked to abate the criminal pro- quirements of Article 62 of Road Traffic Rules and ceedings against him and discontinue criminal Article 23 (3) of the RA Law on “Maintaining Road prosecution in that aspect’. Traffic Safety” thus leading to the occurrence of the accident and depriving himself of the techni- 5. The Client has filed a claim to the Company to cal opportunity to prevent it. In proposed circum- seek indemnity against the damage to the motor stances, in order to ensure traffic safety, avoid vehicle.
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Precedents/Exemplary Cases 6. The damage caused to the “Toyota” motor vehi- favor of the parties which can incur loss (in favor of cle has been an estimated AMD 1,695,025, accord- the Beneficiaries), even if the contract has been con- ing to an expertise assessment assigned by the cluded in favor of the policyholder or another party Company. which is responsible for the damage caused. Accord- ing to part 4 of the same article, the insurance con- 7. By reference to point 94 of the Bureau’s rules, the tract on risk of liability against the third party dam- Company has declined the Client’s claim. age shall be deemed concluded in favor of the parties which can incur loss (in favor of the Beneficiaries), 8. Disagreed with the viewpoint of the Company, even if the contract has been concluded in favor of the the Client has filed a complaint to the Company, policyholder or another party which is responsible for which the latter responded to. the damage caused, or the contract does not specify whose favor it has been concluded for. 9. In an appeal to the Mediator, the Client demand- ed that the Company recompense him the full According to Article 3 (1) 15 of the RA Law on “Com- amount of the damage, which makes up AMD pulsory Insurance Against Civil Liability in Respect of 1,695,025. the Use of Motor Vehicles”, insurance indemnity is the sum which the insurance company pays under Thus, after a comprehensive review of the claim-re- law and/or in cases provided for by the MTPLI poli- lated documentation, of the explanations and objec- cy to the sufferer, his representatives or heirs when tions of the parties, as well as based on the require- an insurance event occurs. Paragraph 5 of the same ments of the RA Law, the Mediator has concluded article says that sufferer means any person entitled the following: to indemnification under this law and other rele- vant regulations in respect of personal or property According to Article 996 (1) of the Civil Code of the damage/loss, as provided for under this law, result- Republic of Armenia (hereinafter the Code), a party to ing from accidents which are caused by the use of the insurance contract (the Insurer) shall undertake, motor vehicles. Paragraph 17 of the same article says against a certain charge, whether non-recurrent or that damage resulting from the use of motor vehi- regular (Insurance premium), to pay or make available cle means any damage resulted by direct or indirect to the other party to the insurance contract, i.e. the operation of the motor vehicle whether or not the policyholder or a party designated by it (the Benefi- engine was running (including as a result of explo- ciary), an insurance cover as and when an insurance sion or arson of a motor vehicle). event occurs, in order to indemnify damage caused as a result of occurrence of any event(s), provided that It follows from the combination of the above pro- such event(s) is/are accidental and/or not dependent visions that the Company is obliged to indemnify on the will of the parties or insured person or benefi- the suffered party and/or compensate the damage ciary, except when, in case of life assurance, occurrence to their property in case an accident had occurred of any certain or anticipated event is indemnified. under the MTPLI contract. Moreover, the compen- sation provided by the Company must be sufficient Part 1 of Article 10211 of the Code indicates that the pol- for the damaged property to be recovered into what icyholder can enter into an insurance contract where- it has actually been before the accident. by the risk of liability against the third party damage is insured. In accordance with part 4 of the same ar- Article 21 (1) of the Law has the following regulari- ticle, the insurance contract on risk of liability against zation: where civil, criminal or court litigation pro- the third party damage shall be deemed concluded in ceedings were instituted, the size of damage caused
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Precedents/Exemplary Cases to property shall be assessed and the degree of guilt The review of the aforementioned norms may infer of a person decided through the valid and effective that the insurance company has the right to decline decision of the court involved in the proceedings, the suffered party’s claim for indemnity if there is ev- whereas in case if such action was not brought to idence that the latter has already been indemnified court, or the court involved in the proceedings did against the entire damage or part thereof. Moreover, not issue a decision, the size of personal damage if the suffered party has been indemnified against shall be assessed by the qualified experts of the Bu- part of the damage, the Company has the right to reau of Motor Insurers of Armenia, except for cases reduce the indemnity to an appropriate extent. stipulated by part 4, Article 19 of this Law, for which, according to the Bureau rules, a simplified process The investigation of this case found out that on for determining the degree of guilt and (or) the size March 3, 2018, a “Mercedes” driven by a citizen of the of loss by insurance company may be established. Republic of Armenia hit on the 5th km of the Yere- van-Sevan highway a left rear side of a “VAZ-2106”, According to Article 24 (1) of the Law, the insurance and after losing control of the car, came out on the company refuses the application for insurance in- opposite carriageway and collided with a “Toyota”, as demnity in the cases stipulated by the law or by the a result of which the Client and the passengers of Bureau’s rules. Part 3 of the same Article says that the cars were taken to a medical center, with bodily the decision to reject a claim for insurance indemnity injuries. Regional Investigative Department of Inves- must be substantiated (reasoned). tigative Committee has examined the cause of the accident, and the Client was found innocent, as a re- According to point 94 (1) of RL 1-001 Rules adopted by sult. As a suffered party to the accident, the Client the Board of the Armenian Motor Insurers' Bureau, filed a request to the Company for indemnity against the Insurer that has received the Request shall decline damage caused to the motor vehicle. The damage the insurance indemnity or shall reduce the amount caused to the “Toyota” motor vehicle has been an es- of insurance compensation to an extent as provided timated AMD 1,695,025, according to an expertise as- for in this chapter, if the suffered party has already sessment assigned by the Company, yet the Compa- received compensation for that damage under an- ny, referring to the Bureau Rules 94 (1), has declined other MTPLI policy or sought one from the Bureau the Client’s request for insurance indemnity. (regardless of the paid amount of compensation) or from the person who has caused the damage and (or) In order to determine how legitimate the Company’s from other person responsible for the damage, or on decision to turn down an insurance compensation their behalf, except when there is an effective agree- is it is essential to ask whether the party who has ment or statement in writing between the parties caused the damage indemnified the Client against whereby the suffered party takes a commitment, un- the damage caused at the car accident or not has related to the existing relations between the parties, and should the plea to the Court of the First In- to return the sums of money made available to him stance in Armavir Region, with which the Client previously and (or) paid for his behalf previously to the voiced that he neither makes a complaint nor person who has caused the damage and (or) to the lodges material and property claim against the other person responsible for the damage. In the cases defendant, be viewed as a fact proving that the provided for in this subparagraph, the sums of money compensation was received. (compensation) received by the suffered party in the manner described in this subparagraph shall be de- Article 33 of the Criminal Procedure Code of the Re- ducted from the sums of money subject to indemnity public of Armenia provides that prosecution in crim- by the Insurer that has received the Request. inal proceedings is carried out publicly and privately,
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Precedents/Exemplary Cases depending on the gravity and nature of the offense. to resort instead to civil and judicial procedures to Article 183 of the Criminal Procedure Code defines the seek compensation for damage caused by crime. The exhaustive list of criminal cases which are instituted sufferer may waive at all the right to compensation pursuant to private prosecution, i.e. based on the suf- for damage caused by crime. Bearing the latter in ferer’s complaint; the list contains part 1 of Article 242 mind, the Legislator has inserted the wording ‘may’ of the Criminal Code of the Republic of Armenia. in Article 4 (2) of the Law, by virtue of the sufferer’s discretion. The Constitutional Court also noted that The review of the aforementioned provisions may regardless of the fact that the sufferer exercises his/ prompt the Mediator to come to the conclusion her right to compensation for crime-inflicted dam- that as regards corpus delicti on negligently inflicting age under criminal or civil procedures, the rules of grave or medium-gravity injury to human health be- civil procedure will apply. cause the driver of a car or other motorized vehicle has violated traffic rules or road safety requirements Having reviewed the regularizations above and by or safety transport operation rules, the law has pro- virtue of the decision of the RA Constitutional Court, vided for instituting a criminal case on the sufferer’s the Mediator comes to the following conclusion: the complaint only. In other words, the criminal prosecu- fact that choosing not to file a complaint on private tion of these cases is carried out in a private manner. allegation implies that the sufferer does not want the offender to be subject to criminal liability for According to the decision of the Court of First In- committing something not allowed by criminal code stance on abatement of criminal proceedings and and it can in no way be deemed a circumstance as termination of criminal prosecution by certain ep- if the compensation for damage has been received isodes: ‘On 06.03.2019, in the course of the acci- or the person who suffered material damage re- dent, a number of sufferers (the Client inclusive) futes his/her claim for compensation to the per- submitted appeals in writing to the court, by son who has caused the damage. which they stated that they have reached recon- ciliation with the defendant, forgiven him, do not For these conclusions, the Mediator also takes into complain, have not filed a material and property account the precedence law of the European Court damage claim and asked to abate the criminal of Human Rights. Particularly, as the European Court proceedings against him and discontinue crimi- notes, although the circumstances inducing a civil nal prosecution in that aspect’. As it appears from liability may, in some cases, coincide with the cir- the content of the court’s ruling, the Client has not cumstances that provide for arising a criminal liabil- made any statement regarding the settlement of ity, the civil lawsuit must nevertheless be settled on damage, but simply stated that he does not make the basis of the principles of civil liability law. The a property claim. During the investigation of the outcome of the criminal proceedings is not decisive claim, no proofs of the Client having received com- with regard to the case of compensation for dam- pensation were presented. age. The sufferer has the right to claim compensa- tion for damage irrespective of whether the defend- According to the Republic of Armenia Constitutional ant has been convicted or acquitted, and the issue of Court Resolution CCR-1447 of 26.02.2019, the suffer- compensation has to be a subject for an independ- er also has a wide range of discretionary rights to ent legal assessment, in which case the standards compensation for damage. In particular, the suffer- of evidence are substantially different from those er may choose to avail himself/herself of the oppor- of criminal liability. In the court’s opinion, that the tunity to protecting his/her rights under criminal and same act may result in a civil liability for compen- judicial procedures but may choose not as well, and sation of damage resulting from identical (general)
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Precedents/Exemplary Cases circumstances (facts) with the criminal case does not create sufficient grounds for viewing the civil liability imposed on a person as a ‘criminal penalty’ (see, for example, Ringvold v. Norway case of the European Court’s judgment of 11 February 2003, para. 38). Case 5
Based on what has been said above, we can state that the Client’s plea to the court that he has no complaint against the defendant nor makes a prop- Claim investigated erty claim will only mean that a person who has Claim against an insurance company operating in committed action under Article 242 of the Republic the Republic of Armenia; regarding non-compli- of Armenia Criminal Code should not incur criminal ance with business conduct rules prosecution; the Client did not wish to exercise his right to compensation for damage, but it could not anyhow be viewed as a proof of the fact that the Content of the claim Client had already received compensation for mate- rial damage or had waived of such right. According to the claim, on May 21, 2018, the Client filed a complaint to the insurance company (the Summing up the foregoing, the Mediator finds that Company) about the size of amount of compen- the Company’s decision to refuse to pay insurance sation which the Company paid as a coverage indemnity is groundless and the Client has the right for medical insurance. The Client notes that the to receive insurance indemnity at the amount of Company did not comply with the requirements AMD 1,695,025 (one million six hundred and ninety- set out in Article 6 (2) of the RA Law on “Financial five thousand twenty-five Armenian drams). System Mediator”, namely the Organization under- takes to provide the client with a final response in writing within ten working days after receipt of the complaint as referred to in part 1 of that ar- ticle. Specifically, the Company responded to the complaint by sending a letter dated 20.06.2018, which entered “HayPost” CJSC on 24.06.2018 and was shipped to the Client on 28.06.2018. This fact has been confirmed by one of the decisions of the Financial System Mediator. Pursuant to subpara- graph 3.2 (2) and subparagraph 3.1 (dealing with requirements to business conduct rules) of Arti- cle 81 of the RA Law on “Insurance and Insurance Activities”, once the fact of violation of the rules by an insurance company is corroborated by the court or Financial System Mediator, that insurance company must pay the client three hundred thou- sand Armenian drams. The Client has filed a com- plaint to the Company and received a response, not a satisfactory one.
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Precedents/Exemplary Cases In an appeal to the Mediator, the Client demanded violation of the business conduct rules. Given that that the Company pay a fine of AMD 300,000 (three there is no decision of the court or of the Finan- hundred thousand Armenian drams) for a failure to cial System Mediator on the ground of violation of comply with the rules of business conduct. the provisions of Article 81 (paragraphs 3.1 and 3.2) of the RA Law on “Insurance and Insurance Activities”, the Client’s claim is not subject to satisfaction. As to Investigation of the claim providing evidence of the dates on which the com- A. Mediator’s action plaint had entered the Company and the response had been sent to the Client, the Company said they By virtue of Article 11 (1) and (2) of the Republic of did not keep the receipts, but note that there is no Armenia Law on “Financial System Mediator”, the need to present the evidence as the Company does Mediator asked the Company to provide, within 14 not dispute the timing of entry and exit of the writ- business days as specified by the Law on Financial ten communication. The fact of late posting of the System Mediator, explanations and clarifications reply does not deprive the Client of the opportunity and/or objections in writing as well as other doc- to defend his/her rights. uments and deliverables, such as the Client’s health insurance certificate, materials contained in the case Thus, the essential facts for the investigation of the concerned, an indication of the day on which the claim are as follows: complaint entered the Company, the Company’s rules of business conduct, a proper indication of the 1. A health insurance contract was concluded be- day, duly issued by the postal service, on which the tween the Client’s employer and the Company response to the complaint was sent to the Client, on 10.01.2018, under which the Client is an insured the conclusions issued by the Police of the Republic person. of Armenia, the decisions and other information or document that could be helpful for the investigation 2. On 21.05.2018, the Client filled out a claim at the of the claim. Company, with a demand that the Company pay a sum of AMD 50,000 that had fallen unpaid ar- bitrarily as the insurance event occurred. B. Company’s viewpoint 3. On 20.06.2018, the Company wrote a reply that The Office of Mediator has received a letter from the claim filed by the Client on 21.05.2018 is sub- the Company in which they explained their view- ject to rejection. point with regard to the Client’s claim. The Client, the Company wrote, had applied to the Company 4. The Company’s letter of 20.06.2018 to the Client demanding to pay a fine of AMD 300,000 (three complaint entered “HayPost” CJSC on 24.06.2018. hundred thousand Armenian drams), making a point that the Financial Mediator’s decision had 5. A proof of the fact that the letter had been sent confirmed the violation by the Company of the at the Client address was not provided by the rules of business conduct, which implies paying of Company during investigation of the claim. the fine. The Company noted that the decision by the Financial Mediator is pertinent to the Client’s 6. Subject to paragraph 2.6 of the Company’s pro- complaint against the Company, namely the size cedure of examination of complaints/claims of of compensation paid by the Company as a cover- customers, the Company shall review custom- age for medical insurance, rather than the fact of er complaints/claims and shall, at least 10 (ten)
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Precedents/Exemplary Cases working days after receipt thereof, provide a fi- The abovementioned provisions infer that the law or nal response as to decline or satisfy, partially or the agreement of the parties may impose a penalty wholly, such complaints/claims. which must be levied in favor of the debtor in the event the creditor fails to fulfil or improperly fulfils 7. The Client has filed a claim to the Company de- its obligations. The penalty is a guarantee of fulfill- manding a fine of AMD 300,000 (three hundred ment of obligations and is aimed at securing that thousand Armenian drams) for non-compliance the debtor fulfills the obligation, and if the debtor with the Company’s business conduct rules. fails to fulfil or improperly fulfils the obligation, it has to encumber the debtor with unfavorable property 8. The Company has rejected the Client’s claim. consequences – monetary liability.
9. In an appeal to Mediator, the Client demanded According to Article 6 (1) of the RA Law on “Financial from the Company to pay a fine of AMD 300,000 System Mediator”, the Client shall make a complaint (three hundred thousand Armenian drams) for to the organization before submitting an appeal to not following the requirements to the rules of the Financial System Mediator. The second part of business conduct. the same article says that the organization shall un- dertake to provide a final response in writing to the Thus, after a comprehensive review of the claim-re- client within ten business days upon receipt of the lated documentation, of the explanations and objec- complaint/request as referred to in paragraph 1 of tions of the parties, as well as based on the require- the article. ments of the RA Law, the Mediator has concluded as follows: As paragraph 16.1 of Regulation 8/04 ”Minimum Conditions and Principles for Internal Rules, Reg- According to Article 369 (1) of the Civil Code of the ulating the Procedure of Examination of Com- Republic of Armenia (hereinafter the Code), a pen- plaints/Claims of Customers” as approved by the alty (forfeiture, fine) is a monetary sum determined Board of the Central Bank of Armenia Resolution by a statute or contract that a debtor must pay to 225-N of 28.07.2009 (hereinafter also the Regula- the creditor in case of non-performance or improp- tion) establishes, where a letter submitted by the er performance of an obligation, in particular in case customer meets the requirements set out in Arti- of a delayed performance. In demanding payment cle 3 (2) of this regulation, the financial organiza- of a penalty, the creditor is not obligated to prove tion shall consider it a complaint irrespective of the that damage was caused to it. According to Arti- designation of the letter (request, claim, complaint, cle 371 (1) of the Code, The creditor has the right to etc.) or the lack of designation and form thereof demand payment of a penalty defined by a statute and shall provide a final response in the manner (a statutory penalty) regardless of whether or not prescribed by the Law of the Republic of Armenia the obligation to pay it is provided by an agreement “On Financial System Mediator”. of the parties. According to Article 81 (3.1) of the RA Law on “Insur- Pursuant to Article 408 of the Code, a breach of ance and Insurance Activities” (hereinafter the Law), obligation means nonperformance or performance insurance companies must have rules of business of it in an improper manner (untimely, with defects conduct in place. These rules of business conduct of goods, work, and services or with violations of shall at least regularize (...) 3) prior to, upon and af- other conditions determined by the content of the ter concluding of the contract, the list of information obligation). made available to customers and in which manner
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Precedents/Exemplary Cases such information is to be made available, as well as a commercial arbitrage, in order to claim legitimate a procedure for communicating with customers; penalty once the fact of breach of business conduct (...) 6) a procedure for dealing with customers; (...) 8) rules by the Company has been confirmed. other aspects pertaining to protection of customer rights. The Law or the Central Bank regulations may In this sense, subject to Article 81 of the Law, Arti- establish detailed requirements to the content of the cle 6 of the Law on “Financial System Mediator”, and rules of business conduct or part thereof for insur- provisions laid down in Regulation 8/04, the Compa- ance companies. In the event of breach of business ny has in place a rule of business conduct for review conduct rules, the responsibility shall be determined of customer complaint, which is known as “Regulat- by this Law, the Civil Code, the Labor Code and oth- ing the Procedure of Examination of Complaints/ er relevant laws of the Republic of Armenia. Claims of Customers”, with paragraph 2.6 saying that ‘the Company shall review customer com- According to Article 81 (3.2) of the Law, insurance plaints/claims and shall, at least 10 (ten) working companies must comply with the rules of business days after receipt thereof, provide a final response conduct provided for in part 3.1 of the article. Once as to decline or satisfy, partially or wholly, such com- the court or the Financial System Mediator corrob- plaints/claims’. orates the fact of violation by an insurance compa- ny of the rules of business conduct as referred to in The Mediator needs to emphasize that in view of part 3.1 of the article, the insurance company shall providing insurance companies for a responsibility be required to pay to the customer three hundred to have business conduct rules in place, the legis- thousand Armenian drams. The second paragraph lature has sought to regularize how business will of that clause cannot be construed as something be communicating with the customer in providing that limits or excludes the customer’s right to claim services and (or) products to consumers whatsoever. indemnification for damage. In the event an insur- The concept “Rule of Business Conduct” in the Law ance company violates any of consumer rights as covers not only the same-title-bearing documents, provided for under the Law, the consumer shall be but also all policies and procedures of the company entitled to resort to the court or Financial System to provide for communication between the com- Mediator direct, and in the case provided for by law, pany and its customers, the rules of conduct with to commercial arbitrage. customers, and other matters relating to protection of consumer rights, which also includes the way of The above regularizations suggest that companies how to respond to the client complaints. should have business conduct rules in place and the Central Bank may establish mandatory requirements In the context of the logic mentioned above, the to procedures and policies on implementing rules of Mediator finds that the procedure of examination business conduct. Under the law, the Company’s of complaints/Claims of customers is a rule of busi- rules and policies of business conduct should, among ness conduct, regardless of its name, since it regu- others, have in place a procedure for communicat- lates how the Company deals with its customers ing with customers, a procedure for dealing with and communicates with them, in particular the pro- customers, other matters relating to protection of cess and procedure for examining, reviewing and customer rights. At the same time though, the RA responding to complaints/claims of customers (see Law “On Insurance and Insurance Activities” estab- paragraph 1.2 of the Procedure). lishes a legitimate penalty. The client/consumer has the right to apply to the court or the Financial Sys- In this case, on 10.01.2018 a health insurance contract tem Mediator, and in the case provided for by law, to has been concluded between the Client’s employer
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Precedents/Exemplary Cases and the Company, by which the Client is an insured person. On 21.05.2018 the Client filed a complaint to the Company and demanded that the Compa- ny pay an amount of AMD 50,000, unjustifiably re- mained unpaid under the insurance event occurred. Case 6 In response to Client’s complaint, the Company sent a reply letter on 20.06.2018 which entered “HayPost” CJSC on 24.06.2018 in order to be delivered to the Cli- ent. Claim investigated Claim against a credit organization operating in Thus, after putting all the above norms and facts the Republic of Armenia; regarding the penalties together, the Mediator finds it crucial to accen- imposed by the organization tuate that, subject to the rule of business conduct contained in the Company’s internal procedure that governs examination of customer complaints, the Content of the Claim Company ought to respond to the Client’s complaint by 04.06.2018 inclusive as the Client had filled out A loan contract has been signed between the Client a claim at the Company on 21.05.2018 (21.05.2018 - and credit organization (the Organization) in 2017. 04.06.2018 makes 10 working days), whereas the Faced with health problems some time later, which Company prepared a reply letter to the complaint resulted in financial difficulties, in March of 2018 on 22.06.2018, which already is breach to the require- the Client asked the Organization to give him time ment to provide a written response to the Client up until June of 2018 so that he is able to start pay- within 10 business days. This allows to conclude that ing the installments. The Client spoke about this although the Company had a business conduct rule with an employee of the Organization and received (examination of a complaint/claim) in place, it had a rejection. After that, he made lots of requests, in been violated by the Company itself. writing and verbally, to the Organization to consid- er his request for allotting some time, but he was In view of the foregoing, the Mediator recognizes brutally denied by the staff, including the executive the fact that the Company has violated the require- director who had acted disrespectful. Then the Cli- ment of the rule of business conduct, namely provid- ent learned that the credit risk had been classified. ing a final response to a customer complaint at least As the loan contract remained in effect, fines and 10 business days after receiving it, as set out in part penalties accrued to about AMD 400,000, and al- 2.6 of the Company’s internal procedure that gov- though the Client did not agree with that, all the erns the review of customer complaints and claims. penalties were paid. Because the loan is classified, the Client cannot have access to new loans and this Based on the statement above and given that the frustrates him. penalty as specified in Article 81 (3.2) of the Law shall set in after the fact of violation of the rules of busi- In an appeal to the Mediator, the Client demand- ness conduct by Company has been corroborated, ed that the Organization refund him the sums of the Mediator needs to emphasize that the Company penalty he has paid, which amounts to nearly AMD is obliged to pay to the Client AMD 300,000 (three 400,000. hundred thousand Armenian drams) as a sum of penalty provided for in Article 81 (3.2) of the RA Law on “Insurance and Insurance Activities”.
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Precedents/Exemplary Cases Investigation of the claim ing in the Republic of Armenia, that is of Credit A. Mediator’s action Registry, and Procedure for Participation in Cred- it Registry” (approved by the Board of the Central By virtue of Article 11 (1) and (2) of the Republic of Bank of Armenia Resolution 157-N of 11.07.2017), the Armenia Law on “Financial System Mediator”, the creditor shall supply information to the Credit Regis- Mediator asked the Organization to provide, with- try within three working days following the date on in 14 business days as specified by the Law on “Fi- which the loan contract was signed. In case of any nancial System Mediator”, explanations and clarifi- change in the loan data the Credit Registry already cations and/or objections in writing, as well as the has, the creditor shall be required to submit the in- following documents and information: the loan formation of the change to the Credit Registry with- contract signed between the Organization and the in three working days following the date on which Client, with attachments thereto, the statement to the change was made. Further, according to para- the loan for the entire period of the loan, informa- graph 6 of Special Conditions to the contract of the tion on credit history, information on paid penalties, line of credit provided to the borrower on 16.12.2017, any other information that might be helpful for the the borrower confirms that, as they receive the loan, investigation. they give their consent to the creditor for measur- ing their creditworthiness and entitling the creditor to share their credit information, credit reports and B. Credit organization’s viewpoint other such details of the borrower with the Credit Bureau, Credit Registry, data processors and other The Office of Mediator has received a letter from the such parties the creditor cooperates with in order Organization, in which they submitted objections to make decisions under and in the entire validity while providing grounds in connection with the re- period of the loan contract. Based on the foregoing, view of the claim. The letter explained, specifically, the Organization noted that any infringement of the that the Organization and the Client had agreed on payment date had to be recorded with the Credit a 5-year line of credit, so a respective contract was Registry and the ACRA Credit Bureau and was not duly signed in a written form on 17.04.2017. Under the subject to removal. contract, the borrower has received and repaid the following sums of money: AMD 50,000 received on In view of the need to negotiating with the parties, 17.04.2017 and repaid on 17.05.2017; AMD 70,000 re- obtaining additional evidence and further studying ceived on 20.05.2017 and repaid on 19.06.2017; AMD the aspects of the claim, the Mediator has extended 90,000 received on 24.06.2017 and repaid on 30.08.2017; the investigation for another 14 working days. AMD 90,000 received on 01.08.2017 and repaid on 31.08.2017; AMD 90.000 received on 07.09.2017 and re- Thus, the essential facts for the investigation of the paid on 16.11.2017; AMD 180,000 received on 16.11.2017 claim are as follows: and repaid on 06.09.2018. The borrower’s credit risk category was classified standard at the time, which 1. There has been a document entitled “Credit Line was pointed to in the relevant ACRA credit report. Agreement” signed between the Client and the As to the credit risk category which the credit report Organization on 17.04.2017, attesting the following had classified without notification, the Organization legal relationships between the parties: a loan wrote that pursuant to clause 5 of Chapter 2 of the amount of AMD 50,000; a potential line of cred- “Procedure for Creation of Information System of it limit of AMD 350,000; actual interest rate of Creditworthiness of Clients of Banks, Credit Or- 0%; date of loan repayment: 18.05.2017; days for ganizations, Branches of Foreign Banks operat- repayment of the loan: 30.
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Precedents/Exemplary Cases 2. Pursuant to paragraph 5 of the Credit Line contract, 6. The “Special Conditions” for the line of credit Section 2: General Terms and Conditions makes contract have been drawn up by the Organiza- an integral part of the contract. According to the tion, but neither the Organization nor the Client contract, the Borrower is informed of the “Special have signed them up. Conditions” and “General Terms and Conditions”, fully agrees to them and admits his/her liability. 7. Pursuant to the document entitled “Special Con- ditions”, the loan provided to the Client makes 3. Subject to paragraph 25 of General Terms and up AMD 180,000; the potential credit line limit, Conditions, which is an integral part of the Line AMD 350,000; the actual interest rate, 60.83%; of Credit contract, the present line of credit con- the date of issue of the loan, 15.01.2018; the num- tract shall be concluded for a period of 5 (five) ber of days for repayment of the loan, 30; loan is- years. Unless the one party notifies the other sue fee, AMD 5,400; the amount of interest, AMD party about termination of the Contract before 3,600; cash withdrawal fee, AMD 9,000; immedi- the expiration thereof, the Contract shall be ate withdrawal fee, AMD 9,000. deemed renewed on the same terms and condi- tions each time. Subject to clause 26 of General 8. The document entitled “Special Conditions” con- Terms and Conditions, the creditor shall provide tains a stipulation for a deferral fee: AMD 11,340 loan(s) to the borrower within the limits of the for a 7-day deferment, AMD 17,010 for a 14-day line of credit, pursuant to the request(s) of the deferment, AMD 28,350 for a 30-day deferment. borrower and in case such request is satisfied, and the borrower shall undertake to return the 9. According to the receipt signed by the Client, actual loan (the amount of the loan made) and the Client has received AMD 180,000, paid AMD pay interest on it, as well as make other pay- 9,000 for cash withdrawal and AMD 9,000 for ments under the contract. Once the contract is immediate withdrawal. signed by both sides, the loan shall be made in the manner and amount as indicated in Section 1 10. Pursuant to a credit statement, effective from of the Contract, without a need to file extra ap- 16.12.2017, the Client has paid to the Organiza- plication and await satisfaction thereof. tion the following sums: AMD 18,000 (as cash withdrawal and immediate withdrawal fees) on 4. On 17.04.2017 the Client received AMD 50,000; 16.12.2017; AMD 13,230 on 16.01.2018; AMD 18,900 on 17.05.2017 the Client repaid the loan of AMD on 24.01.2018; AMD 40,000 on 09.04.2018; AMD 50,000. 180,000 on 04.09.2018; AMD 9,000 on 06.09.2018. In total, the Client has paid to the Organization 5. On 16.12.2017 the Client received and signed up AMD 279,130 (two hundred and seventy-nine an individual ticket, containing essential terms thousand one hundred thirty Armenian drams). and conditions for the line of credit (overdraft) and specifying that the Client was provided with 11. The loan amount of AMD 180,000 provided to the a consumer loan of AMD 180,000 for a 30-day Client has been classified as “bad” as of 30.03.2018 period at an annual interest rate of 60.83%, with but has been reclassified as “standard” as of a total repayment fee of AMD 189,000. As the 29.09.2018. ticket stipulated, it won’t replace loan and guar- antee contracts, and in the event of any issues 12. With a complaint filed to the Organization on related to the provisions of the contract, the Cli- 31.08.2018, the Client asked the Organization to ent would have to follow the Contract. not start imposing penalties on the loan of AMD
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Precedents/Exemplary Cases 180,000 made to him in 2017 while offering them and the thorough meaning of the contract. Under to do a loan reclassification. The Client did not part 2 of the same article, where the rules contained receive a response from the Organization within in paragraph 1 of this Article do not allow for the the timing specified by Article 6 of the RA Law on determination of the content of the contract, the “Financial System Mediator”, which prompted the true common will of the parties shall be determined, Client to appeal to the Mediator. Nonetheless, taking into account the purpose of the contract. the Organization has presented a letter of rejec- More to the point, all relevant circumstances, includ- tion to the Client’s complaint, with an indication ing pre-contract negotiations and correspondence, of two dates - 11.09.2018 and 16.10.2018 and two established practices in the mutual relations of the dates of document outgo, respectively, on it. parties, customary business practices, further behav- ior of the parties shall be taken into account. 13. In an appeal to the Mediator, the Client demand- ed that the Organization carry out a reclassi- The Republic of Armenia Court of Cassation has re- fication of the loan as well as refund him the ferred in its decisions to the issue of interpretation of sums of penalty he has paid, which reaches AMD the contract, admitting that the above article spec- 400,000. ifies three rules for interpretation of the contract: a) interpretation ensues from literal meaning of the To investigate the claim and seek its resolution, the words and phrases of the contract; b) interpreta- Mediator needed to figure out the following: tion ensues from combination with other terms and a thorough meaning of the contract; c) interpreta- 1. What kind of legal relationships existed between tion ensues from identification with the true com- the Client and the Organization? mon will of the parties. What is more, these rules are applied in succession (see “Karat” LLC vs. “Egna 2. Could a loan contract be considered concluded Shin” LLC judgment of 27.05.2011 of the Republic of without it being formulated in writing, with reli- Armenia Court of Cassation for a civil procedure No. ance upon other evidence? SC1/0303/02/10).
Thus, after a comprehensive analysis of the com- According to Article 443 (1) of the Civil Code of the plaint-related documents as well as based on the Republic of Armenia, the contract may stipulate requirements of the RA law, the Mediator has come that its individual terms shall be determined on the to the following conclusion: basis of exemplary terms developed for the respec- tive type of contracts and published in the media. I. When determining the nature of the legal relation- Pursuant to the second part of the same article, in ship between the Client and the Organization, there cases where there is no reference to the exempla- is need to consider how the terms of the contract ry terms in the contract, such exemplary terms will are interpreted. apply to the relations of the parties as customary business practices, provided they meet the require- Particularly, according to Article 447 (1) of the Civil ments set out in Article 7 and Article 437, paragraph Code of the Republic of Armenia, when interpreting 6, of the Code. the terms of the contract, the court shall take into account the literal meaning of the words and phras- As found out by the Mediator when investigating es contained therein. In case the literal meaning of this case, there has been a document (titled “Cred- the term of the contract is not clear, it shall be de- it Line Agreement”) signed between the Client and fined by comparing the other terms of the contract the Organization on 17.04.2017, according to which
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Precedents/Exemplary Cases the following legal relationship exists between the According to Article 887 (1) of the Civil Code of the parties: the amount of loan, AMD 50,000; a poten- Republic of Armenia, the bank or another credit or- tial line of credit limit, AMD 350,000; the loan re- ganization (creditor) is obliged to provide the bor- payment date, 17.05.2017; the number of repayment rower with sums of money (loan) in the amount and days, 30. At the same time, according to the doc- terms stipulated by the contract, and the borrow- ument titled “Credit Line Agreement”, the General er is obliged to repay the received sums of money Terms and Conditions make an integral part of the and pay interest on them. The second paragraph of Contract. Interestingly, these General Terms and the same article says that the rules provided for by Conditions do not come customized and the cir- Chapter 46 of the present Code shall apply to rela- cumstance whether these Terms and Conditions tions arising out of the loan contract, unless other- have made available to the Client is unclear either. wise established by the rules of the present Chapter If we take into account the General Terms and or the loan contract. According to Article 877 (1) of Conditions posted on the Company’s website for the Civil Code of the Republic of Armenia, under the that period, then, pursuant to paragraph 25 of the loan contract, one party (the lender) transfers to the General Terms and Conditions, the contract for line ownership of the other party (the borrower) sums of credit is concluded for a period of 5 (five) years. of money or other property determined by generic Pursuant of paragraph 26 of the General Terms and characteristics, and the borrower is obliged to re- Conditions, the creditor shall provide loan(s) to the turn to the lender the same amount of money (the borrower within the limits of the line of credit, pur- amount of the loan) or an equal quantity of other suant to the request(s) of the borrower and in case property received by it of the same type and quality. such request is satisfied, and the borrower shall un- Article 437 (1) of the Civil Code of the Republic of Ar- dertake to return the actual loan (the amount of the menia says that citizens and legal entities are free to loan made) and pay interest on it, as well as make conclude a contract. Pursuant to the second part of other payments under the contract. According the same article, parties may conclude a contract ei- to paragraph 27 of the General Terms and Condi- ther provided for or not provided for by law or other tions: (...), the Organization shall unilaterally decide statute. Part 3 of the same article provides that par- whether or not the request is satisfied, taking into ties may conclude a contract that contains elements account the assessment of creditworthiness (sol- of various contracts provided for by a statute or oth- vency) of its borrower. According to paragraph 30 er legal acts (a mixed contract). The rules on con- of the General Terms and Conditions (...), once the tracts whose elements are contained in the mixed request is satisfied, the borrower will receive on its contract shall be applied to the relations of parties e-mail the modification effected in Section 1 as a re- under the mixed contract unless otherwise follows sult of provision of the loan, which will come into from an agreement of the parties or the nature of force on the date the loan will actually be made. the mixed contract. The borrower acknowledges that such modification will take place as a result of the request he has filed As the regularization mentioned above suggests, the and agrees to it in the manner prescribed by this parties are free to conclude a contract, it is up to paragraph, without any prior consent in writing or them to decide to conclude a contract which is ei- signing up of any documents. Paragraph 5 of the ther provided for or not provided for by law. In addi- General Terms and Conditions defines that, subject tion, the parties may conclude a contract containing to the Contract, request is an application for a loan elements of different contracts (mixed contract). For that is available within the limits of the line of cred- a contract to qualify as a loan contract, a bank or it, which the borrower makes in the manner pre- other credit organization shall be required to pro- scribed by the Contract. vide the borrower with sums of money as a loan
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Precedents/Exemplary Cases for a certain amount and subject to certain terms agreement by which the creditor extends to the con- and conditions, and the borrower shall be required sumer on permanent terms a renewable or non-re- to return the loan amount and pay interest for the newable line of credit at a pre-agreed amount, irre- amount provided. Credit is a matter of reciprocation, spective of availability of banking, deposit, or other so in all cases when the bank or credit organization account, in order to cover the consumer’s purchas- is not reciprocated, we are dealing not with a loan es, other payments and demand for cash by the use but borrowing. of a credit card. The edited version of Regulation 8/05 on the “Procedure, Terms, Forms and the Min- In this case, what the Organization and the Client imum Requirements for https://www.cba.am/EN/ entered into on 17.04.2017 was a money borrowing laregulations/Regulation%208_05_eng.pdf Commu- agreement by which the Organization has provided nication between Bank and Depositor, Creditor and the Client with AMD 50,000 for a period of 30 days Consumer”, as approved under the Board of the Cen- up until 17.05.2017. Because the Organization will re- tral Bank of Armenia Resolution No. 229-N, dated ceive no reimbursement for that amount as the actu- July 28, 2009 (hereinafter also referred to as Regula- al annual interest rate is 0%, the deal under this case tion 8/05), effective as of the disputed legal relation- is not reimbursable to qualify as a loan. As regards ship, that is 16.12.2017 – the date on which the individ- the “General Terms and Conditions”, which makes ual ticket was issued, has an Annex 4 which points an integral part of the contract between the parties, to the specificity of filing out that ticket compared to it should be noted that, subject to these terms, the those of issued in connection with other consumer parties to the contract may cooperate for a period loans under a line of credit. In this particular type of of 5 years, which can be extended. In the framework line of credit, for example, the line ‘grace period’ or of cooperation, the Client may apply to the Organi- the line ‘interest rate accrued on an unused portion zation which unilaterally decides whether or not to of the loan’ should be filled out. Examining the above- provide the Client with a new borrowing or loan. mentioned norms and law enforcement practices In other words, the “General Terms and Conditions” (decisions adopted in respect of cases CC/4150/05/09 only establish the parties’ relationship for a possible of the RA Court of Cassation, CCY/1010/02/12, lending in the future, as the direct loan relationship CCY/0426/02/13, CCY/1446/02/13) makes it clear that (size of amount, date of maturity, redemption, etc.) is the line of credit is a loan contract, that is the legal regulated by the document known as a Contract for relationship is pertinent to the sum of money already the Line of Credit. As to the Organization opposing lent or the money the borrower has access to. The that, in this case, the line of credit is issued for a pe- line of credit is peculiar in the way it is issued, which riod of five years so the contract is not needed to may or may not involve a credit card, in the way it renew each time but rather there is only a change in is used and, most importantly, in the way the bor- the “Special Conditions” under the contact by setting rower can determine when to use the money made a new limit for money, a new repayment date and available to him, with an interest rate not accruing interest rate, the following will be said: the line of on an unused part of the loan. On 17.04.2017, as it was credit is a loan contract in itself, and the rules gov- found out while examining this case, the Client has erning the relations under a loan contract shall ap- borrowed funds in the amount of AMD 50,000, with ply. Having examined how the concept of a “line of no interest rate, a 30-day maturity period, and the credit” posits in the Republic of Armenia legislative contract signed between the Organization and the and departmental acts as well as in the law enforce- Client so as to entitle the Client to apply for a new ment practice, there is the Article 2 (1) 9 of the RA loan any time in a 5-year course cannot be construed Law on “Consumer Credits” which specifies that the as a loan agreement, even if concluded in the form contract for making credit by a credit card is a credit of a credit line.
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Precedents/Exemplary Cases We need to comment, as summary, that what the parties may be concluded verbally. Pursuant to the parties entered into on 17.04.2017 was a relation- second part of the same article, all transactions that ship for lending AMD 50,000, which was repaid on are being executed at the moment of concluding the 17.05.2017 thereby making that obligation to cease, yet transaction may be concluded verbally, except trans- the obligations of the parties continue with regard actions for which a notarized form is established to their 5-year term commitment under a mixed and transactions for which nonobservance of simple contract whereby the Client applies for a loan and, written form entails their invalidity, unless otherwise once approved, the Organization provides the one. specified by the parties.
II. On 16.12.2017 the Client applied to the Organiza- According to Article 296 (1) of the RA Civil Code, tion for a new loan, with the application, however, a written transaction must be executed by way of not filed in writing, subject to the “General Terms and preparing a document that expresses the content of Conditions”. After the application was satisfied, the the transaction and is signed by the person or per- Client was provided on 16.12.2017 with AMD 180,000 sons involved in the transaction or by persons duly for a period of 30 days at an annual interest rate of authorized by them. Bilateral (multilateral) transac- 60.83%. The Client was provided with an individual tions may be concluded in the manner provided for ticket containing essential terms and conditions for in Article 450 (3) and (4) of the Code. the line of credit/overdraft (hereinafter also individu- al ticket), which he has duly signed up; as specified According to Article 450 (3) of the RA Civil Code, by the individual ticket, the Client was informed of a contract in written form may be concluded by way the Organization’s approval of the loan application on of preparing one document signed by the parties as 16.12.2017 for a loan of AMD 180,000 for a 30-day pe- well as by way of exchanging of the documents via riod at an annual interest rate of 60.83%, with a total mail, telegraph, teletype, telephone, electronic or repayment fee of AMD 189,000. As the ticket stipulat- other communications which make it possible to ed, it does not replace the loan contract. Also, the Cli- determine reliably and ascertain that the document ent signed up a receipt for AMD 180,000 from the Or- proceeds from a party to the contract. When signing ganization. Here, it is essential to determine whether a contract via an electronic means of communica- a loan contract concluded without it being formulat- tion, unless otherwise provided by law for such con- ed in writing can be substituted by other evidence. tractual form, an electronic document not secured by an e-signature will have the same legal effect as According to Article 888 of the RA Civil Code, the a document signed by a person physically. Pursuant loan contract is concluded in writing. Non-com- to part 4 of the same article, the written form of pliance with the concluding in writing results in a contract shall be considered observed if an offer in invalidity of the loan contract. Such a contract is writing to conclude a contract has been accepted by null and void. the procedure prescribed by paragraph 3 of Article 454 of the Code. According to Article 289 of the RA Civil Code, trans- actions are the actions of citizens and legal entities Article 454 (3) of the RA Civil Code provides that tak- aimed at establishing, modifying or terminating civil ing actions (loading goods, doing works, rendering rights and obligations. services, paying fees, etc.) in fulfillment of the terms of the contract within the timeframe established for According to Article 295 (1) of the RA Civil Code, the the acceptance of the offer by the person receiving transaction for which a written (simple or notary) it is considered as acceptance, unless otherwise pro- form is not defined by law or agreement of the vided for by law, other legal acts or the offer.
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Precedents/Exemplary Cases According to Article 298 (1) of the RA Civil Code, failure and others vs. “Hamkhach” LLC judgment of 17.07.2015 to comply with the simple written form of the trans- of the Republic of Armenia Court of Cassation for action shall deprive the parties of the right, in case of a civil procedure No. CCY/1013/02/13). a dispute, to rely for confirmation of the transaction and its terms upon the testimony of witnesses, but Referring to the laws and normative acts mentioned shall not deprive them of the right to adduce written above implies that the contract, as a transaction, can and other evidence. According to the second part of be concluded either verbally or in writing. The pur- the same Article, the failure to comply with the sim- pose of legislation regularizing the form of contract ple written form of the transaction in the cases di- is to make the contractual relationship more precise rectly referred to in the law or in the agreement of and the customary civic practices more sustainable, the parties shall entail the invalidity thereof. in a sense that a contract designed in whatever form would be able to prevent potential disputes before Article 303 (1) of the RA Civil Code says that a trans- they come along. Specifically, customary civic prac- action is invalid as and when recognized so by the tices will go unencumbered if the contract is conclud- court on the grounds provided for under law (con- ed in a verbal form (for example, deals executed at troversial transaction) or irrespective of such court the time of signing, for which special regularization recognition (null and void transaction). is not envisaged, may be concluded verbally). As to the transactions concluded in a written form, there According to Article 304 (1) of the RA Civil Code, an in- are some among them for which the legislature has valid transaction does not result in legal consequenc- unambiguously stipulated that they meet certain es, except for the consequences related to the inva- requirements before being considered as concluded lidity of the transaction. Such a transaction is invalid (RA Civil Code: Article 296 (1), Article 450 (3) and (4)). from the moment of signing. The second part of the Furthermore, establishing a written form for con- same article says that in the event of an invalid trans- cluding a transaction, the legislature has envisaged action, the parties to the contract shall be obliged to two possible consequences of failure to comply with return to each other all what they have received un- that form: der the transaction, and where returning what has been received in kind (including when what was re- 1) failure to comply with the simple written form ceived consisted of the use of property, work done, or of the transaction shall deprive the parties of the services provided) is not possible, to compensate for right, in case of a dispute, to rely for confirmation its value in money, unless other consequences of the of the transaction and its terms upon the testi- invalidity of the transaction are provided by law. mony of witnesses, but shall not deprive them of the right to adduce written and other evidence, The Mediator records that every transaction (con- tract) is a voluntary act in the first place, which is 2) failure to comply with the simple written form of aimed at bringing in certain legal consequences. the transaction in the cases directly referred to in Concepts of ‘will’ and ‘expression of will’ are of pri- the law or in the agreement of the parties leads mary importance for signing the deal. The ‘will’ is the to its invalidity. individual’s inner wish, demand, aspiring, intending, deliberation, and consent; the ‘expression of will’ is So, where the legislature has established a written the outward form, way and method of expressing form for a particular type of contract without men- the will. In other words, the transaction is a combi- tioning the consequences of not observing to the nation of the inner will and the outer expression form (for example, a commitment contract, an as- of will of those who signed it (see Nelli Hakobyan signment contract, a commission contract, etc.), rule 1
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Precedents/Exemplary Cases mentioned above applies. Note that the above legal terms of the contract within the timeframe estab- consequence (rule 1) applies solely in the event of lished for the acceptance of the offer in writing by a dispute. That is, when the fact that the transaction the person who has received it, unless otherwise has been concluded is not argued by the parties, the provided for by law, other legal acts or the offer. circumstance that a simple written form of the trans- action has not been complied with does not entail any In this case, no document in a written form was pre- legal consequences. Once explicitly cautioned under pared, the parties have not exchanged information a law or contract, the failure to comply with a writ- or message (document) using postal, telegraphic, ten form of the contract leads to its invalidity (e.g. teletype, telephonic, electronic or other means of contract of borrowing, loan contract, bank deposit communication, and the Client’s offer in writing is agreement, etc.) (see Zaruhi Hayrapetyan and Gayane lacking either, so once the Organization had fulfilled Ghazaryan vs. “Baker Tilly Armenia” CJSC judgment of the terms of the contract, the latter would have been 07.04.2017 of the Republic of Armenia Court of Cassa- seen as concluded. The Mediator records that in this tion for a civil procedure No. CCY/0556/02/14). case a written form of the contract is not there, in which circumstance such a contract is null and void. In this case under review, rules calling for compliance with a written form of the transaction are lacking. As to the Individual ticket signed up by Client, it As was mentioned earlier, the contract of 17.04.2017, should be noted that it cannot be considered as together with the “General Terms and Conditions” contract because it does not express the will of the making an integral part thereof, cannot be consid- parties, and it indicates that it does not replace the ered a contract containing elements of a 5-year loan contract, that is issued by the Organization and contract, taking into account the arguments above. signed up by the Client only, in which circumstance Should we then ask to ourselves whether the Indi- it cannot be deemed the Client’s offer, either. Fur- vidual ticket and the receipt, duly signed up, can be ther, pursuant to sub-clause 18 of Appendix 3 to Reg- considered a loan agreement? Subject to the “Gen- ulation 8/05, the individual ticket of essential terms eral Terms and Conditions”, the application for a loan of a consumer loan is a document containing the can be filed other than in writing – verbally at the terms and conditions applicable to the consumer office, by phone or using an electronic portal. In this when entering into a contract for a particular credit, particular case, the Client did not file an application the rights and obligations of the consumer and neg- in writing, an application electronically or by phone ative consequences in case of deferred performance to make an offer for signing a contract. By virtue of of obligations. Pursuant to sub-clause 28 of Appendix legislative requirements referred to above, a con- to the same Regulation, once decision to satisfy con- tract in writing can be concluded by: sumer’s credit application is made, the creditor shall, subject to the terms of credit offered and the docu- 1. replacing one written document, or ments submitted by the consumer before the credit agreement is concluded, provide to the consumer 2. exchanging information or message (document) an Individual ticket in accordance with Appendix 1 with postal, telegraphic, teletype, telephonic, of this Regulation (for lines of credit (overdrafts), electronic or other means of communication pursuant to Appendix 3). According to sub-clause that enable to verify its authenticity and precisely 36 (10) of Appendix to Regulation 8/05, the Individ- determine that it proceeds from the contract, ual ticket contains a notice that it does not replace and is not part of Credit Agreement, and that the 3. taking actions (loading goods, doing works, render- Consumer should follow the terms of the Contract. ing services, paying fees, etc.) in fulfillment of the According to this norm, the Individual ticket is purely
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Precedents/Exemplary Cases informational, is issued before the loan contract is The Client has also requested a reclassification of concluded and does not replace the loan contract. the loan. Pursuant to clause 2.1 of the “Classifica- tion of Loan and Receivables of and Loss Provi- In summary, there was no loan contract signed be- sioning at the Banks Functioning in the Territory tween the parties as the parties did not secure the of the Republic of Armenia’” (adopted under the concluding of the contract in writing. Under such cir- Board of the Central Bank of Armenia Resolution cumstances, the existence of a loan contract cannot No. 63, dated April 23, 1999), loans and receiva- be proved by other evidence too, including written evi- bles (hereinafter assets) include the loans placed at dence, such as the Individual ticket and the cash receipt. a risk on a bank balance sheet, including overdrafts and credit cards; the deposits (including deposits in According to Article 1092 of the RA Civil Code, a per- bank gold) with the banks (excluding the Central son who without reason as established by a statute, Bank); the claims on repurchase agreements (re- other legal acts, or a transaction has acquired or pos), overnights, factoring and financial lease trans- economized property (the recipient) at the expense actions, bank guarantees and letters of credit; the of another person (the victim) shall be obligated to re- amounts receivable from other risk-weighted asset turn to the latter the unjustly acquired or economized transactions of the bank (for investment in securi- property (unjust enrichment), with the exception of ties – only notes) and/or other claims on the third the cases, provided by Article 1099 of this Code. parties (including cash equivalent payment docu- ments, correspondent and frozen accounts with According to Article 1093 of the RA Civil Code, unless the banks (excluding the Central Bank); the short- otherwise provided for by the Code, other laws or term claims on settlements with the bank accounts, other statutes, nor follows from the nature of the the sums receivable from services rendered to the respective relations, the rules provided by the pres- customers, other receivables; the imprest money ent Chapter shall also be applied to: 1) claims for the provided to the bank employees; the prepayments, return of what had been performed under an invalid advances provided to the suppliers; and other cur- transaction (...). rent assets, as well as interest, penalties and fines accrued and outstanding on the above-mentioned In this case, since the loan contract is null and void, claims, as well as the bank's off-balance sheet items one party needs to return to the other party what that contain credit risk. Subject to the procedure they have received from each other. Specifically, the referred to above, assets include not only loans, but Client has received AMD 180,000 from the Organiza- also other sums receivable. tion (16.12.2017) and has paid as follows: AMD 9,000 as immediate withdrawal fee, AMD 9,000 as cash In such case, though the sum provided to the Cli- withdrawal fee (16.12.2017); AMD 13,230 (16.01.2018); ent is not considered a loan, it is considered other AMD 18,900 (24.01.2018); AMD 40,000 (09.04.2018); sum receivable that could be classified. However, in AMD 180,000 (04.09.2018); AMD 9000 (06.09.2018). investigation of the claim, the Organization has con- The total amount paid by the Client to the Organiza- firmed that the asset had been reclassified as ‘stand- tion is AMD 279,130 (two hundred and seventy-nine ard’, in which case the dispute between the Client thousand one hundred thirty Armenian drams). As and the Organization leaves nothing to say about a result, the Company has provided the Client AMD and the asset is reclassified. 180,000, and the Client to the Company, AMD 279,130. Summing up, the Mediator admits that the Client’s Summarizing the foregoing, the Mediator has made claim is justified and must be satisfied at the amount a decision to satisfy the Client’s claim partially, in the of AMD 99.130 (279,130 - 180,000 = 99,130). amount of AMD 99,130.
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Precedents/Exemplary Cases to leave the interest rate the one first specified by the loan contract, as well as compensate for the loss he suffered from an increased interest rate, which at the Case 7 moment of filing the claim amounted to AMD 54,000.
Investigation of the claim A. Mediator’s action Claim investigated Claim against a bank operating in the Republic of Ar- By virtue of Article 11 (1) and (2) of the Republic of menia; regarding increased interest rate of the loan Armenia Law on “Financial System Mediator”, the Mediator asked the Bank to provide, within 14 busi- ness days as specified by the Law on “Financial Sys- Content of the Claim tem Mediator”, explanations and clarifications and/or objections in writing, as well as the following doc- As narrated in the claim, a loan contract was signed uments and information: the loan contract signed between the Client and the Bank on 30.11.2018 for the with the Client, with terms and conditions/tariffs at- amount of AMD 29,880,000. The loan was made for tached thereto, the notice sent to the Client, the ar- a period of 180 months, with an annual nominal inter- rangement made with the Bank, as referred to in the est rate of 8%. Subject to an arrangement between Client’s claim, information and explanation of the the Bank and the employer of the Client reached on change in the nominal interest rate of the loan, the 01.09.2014 and as long as the Client worked in that correspondence between the Client and the Bank, particular firm, a preferred nominal interest rate (the any other information or document that could help Bank’s reference rate of 9.5% less 1.5%) would apply the investigation of the claim. to the loan. On 09.02.2019, the Client received a no- tice from the Bank which said that as an employee of the firm, the Client had vowed to provide a rel- B. Bank’s Viewpoint evant statement of the arrangement between the Bank and the firm in support of the credit, and be- The Office of Mediator has received a letter from cause the promise was broken, the nominal interest the Bank, in which they submitted objections while rate of the loan would be rising to 11% effective from providing grounds in connection with the review of 16.02.2019. The Client noted that he had provided the claim. The Bank wrote, in particular, that a loan the Bank with the statement which was considered contract was signed between the Bank and the satisfactory since the loan was provided under privi- Client, under which the Bank made a loan of AMD leged terms, but no verbal promises had been made 29,880,000 to the Client to purchase a real estate. at all. As regards the changed nominal interest rate, Pursuant to clause 2.2 of the loan contract, the loan no breach of the contract had been committed by provided to the Client had a floating interest rate, the Client so as to induce an increase in the loan which is the Bank’s reference rate plus a fixed mar- interest rate. The Client referred to Appendix 1 to the gin of 2.5%, so at the time of signing the contract the Contract which specifies that the reference rate in floating nominal interest rate amounted to 12% per Armenian drams equals the refinancing Repo rate of annum. The same clause of the contract provided the Central Bank of Armenia plus a fixed margin. As that a preferred nominal interest rate, which is the of 30.01.2019, the repo interest rate has even dropped. Bank’s reference rate less an annual nominal interest rate of 1.5%, would apply to the loan in the duration of In an appeal to the Mediator, the Client asked the Bank
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Precedents/Exemplary Cases an arrangement between the Bank and the Client’s will cease to apply to the loan. The Bank notes that employer (hereinafter the Company) and as long as they have contacted the Employer for the issue of the the Client works in the Company. The Bank noted reference in the required format but the latter did not that the above interest rate is offered to the Compa- provide one. According to the Bank, they acted in ac- ny’s employees in the framework of the arrangement cordance with the legislation of the Republic of Ar- between the Bank and the Company, once certain menia, the Arrangement between the Bank and the preconditions and mandatory requirements are met. Company, and the contract between the Bank and In particular, in accordance with paragraph 3.1 of the the Client, so the Client’s claim is subject to rejection. Arrangement, Employees may apply to the Bank for a preferential loan by submitting a reference in the In order to negotiate with parties, obtain addition- form set out in Annex 1 which makes an integral part al evidence and conduct further investigation of the of the Arrangement. Employees must submit all re- claim, the Mediator has extended the time for ex- quired documents for credit. Pursuant to paragraph amination of the case for another 14 working days. 3.3 of the Arrangement, the Bank has the right to claim from the Company and/or Employees addition- Thus, the essential facts for the investigation of the al documents and information that may be deemed claim are as follows: necessary in making the preferential loans or their proper servicing. The Bank noted that the template in 1. There’s been a loan contract (hereinafter the the Arrangement, in addition to the Company’s em- Contract) concluded between the Bank and the ployee data, points to a number of conditions which Client. Subject to the terms of the Contract, the are essential in considering the loan as privileged. In amount of loan is AMD 29,880,000 and purpose, particular, during a loan term, the Company under- a purchase of real estate. takes to transfer the Employee’s salary and bonuses to the Employee’s account with the Bank and pledg- 2. Pursuant to clause 2.2 of the Contract, the pledge es to immediately notify the Bank of termination of of that real estate serves a means of security. employment relationship with the Employee as and when it happens. Moreover, the reference indicates 3. Pursuant to clause 2.2 of the Contract, the loan that the Company acknowledges that the loan is has a nominal floating interest rate, which is made to the employee on the basis of that letter as the Bank’s reference rate plus an annual 2.5% well. Summing up, the bank wrote that the reference nominal interest rate (Max nominal interest rate set out in the Arrangement is a mandatory prerequi- threshold: 19%; Min nominal interest rate thresh- site for making a loan. Taking the Company’s coop- old: 5%). (Important note: a preferred nominal eration with the Bank wrongly, the employee of the interest rate, which is the Bank’s reference rate Bank has confirmed and executed the Client’s request less an annual nominal interest rate of 1.5%, shall for making the loan. After signing the contract, the apply to the loan in the duration of the Arrange- Client was explained of why submitting the reference ment between the Bank and the Company and is required, but he failed to submit the document to as long as the Client works in the Company. The the Bank in a required manner. Considering that the Nominal interest rate and the Preferred nominal Client uses the Bank’s package of services and prod- interest rate can vary to the effect of a change ucts, the Bank chose an interest rate applicable to in the Bank’s reference rate. In case the employ- that package of banking services, which is 11%. In the ment relationship between the Client and the outcome, the Bank sent a notice in writing to the Cli- Employer or the contractual relationship on any ent that, starting from 16.02.2019, the preferred nomi- reason under the Arrangement between the nal interest rate as provided for under the Agreement Bank and the Employer terminates, the Preferred
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Precedents/Exemplary Cases nominal interest rate applicable to the Credit and the Employer establishes a template to ref- will be replaced by the Nominal interest rate, of erence information which the employee submits which the Client will be notified in the manner to the Bank. referred to in clause 11.4 of this Contract, unless otherwise agreed upon by the parties). 10. The Client has submitted to the Bank a reference information from the Employer, which is not 4. Pursuant to clause 2.2 of the Contract, the annu- identical by content to the template set forth in al actual interest rate is 8.59%. The annual actual Annex 1 to the Arrangement. interest rate is calculated based on the Preferred nominal interest rate. The annual actual interest 11. The Bank has advised in writing to the Client that rate can vary as the Nominal interest rate changes. the preferred nominal interest rate as provided for under the Agreement will cease to apply to the loan, 5. Pursuant to clause 2.2 of the Contract, the Bank but if the Client submits the reference information sets its reference rate on the basis of current to the Bank, that interest rate will apply again. market conditions for a respective currency of- fered for different currencies. The Bank’s refer- 12. The Client has failed to submit the reference ence rate is a floating interest rate that can be information to the Bank in an established time- changed from time to time by the Bank, of which frame and format set forth in Annex 1, which is the Bank shall notify the Client. an integral part of the Arrangement. The Bank has applied an annual nominal interest rate of 11% 6. Pursuant to clause 2.2 of the Contract, the size of to the Client’s loan. principal and interest, the terms of payment are in accordance with the loan repayment schedule 13. On 08.01.2019 the Client paid an installment of as set forth in Annex 2 which makes an integral AMD 285,548.85, of which AMD 189,922.19 to repay part of the Contract. interest and AMD 95,626.66 to repay the principal of the loan. On 05.02.2019 the Client paid anoth- 7. In accordance with the loan repayment schedule er installment of AMD 285,548.85, of which AMD set forth in Annex 2 to the Contract, loan amount 182,786.29 to repay interest and AMD 102,762.56 to is AMD 29,880,000, annual nominal interest rate, repay the principal of the loan. 8%, loan repayment term, 180 months, monthly repayment sum, AMD 285,548.84. 14. On 06.03.2019 the Client repaid AMD 338,941.1, of which AMD 226,068.16 for interest (a loan with an 8. In accordance with Annex 1 to the Contract, the 8% nominal interest rate would accrue an inter- Bank’s reference rate is 9.50% for the Armeni- est fee of AMD 182,155.64) and AMD 112,872.94 for an dram. The reference rate in Armenian dram principal. On 06.04.2019 the Client repaid AMD equals the refinancing Repo rate of the Central 338,941.1, of which AMD 276,244.92 for interest Bank of Armenia plus a fixed margin. The Repo (a loan with an 8% nominal interest rate would rate is publicly available on the Central Bank’s accrue an interest fee of AMD 200,607.03) and website. The reference rate in Armenian dram AMD 62,696.18 for principal. On 06.05.2019 the Cli- shall vary if the Repo rate fluctuates 2% annually, ent repaid AMD 338,941.1, of which AMD 275,659.18 starting from the date on which the Bank’s dram for interest (a loan with an 8% nominal inter- reference rate is revised. The date the dram ref- est rate would accrue an interest fee of AMD erence rate was last revised is 24.11.2017. 199,667.12) and AMD 63,281.92 for principal.
9. Annex 1 to the Arrangement between the Bank 15. The Client filed a complaint to the Bank asking
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Precedents/Exemplary Cases to leave the interest rate as it was under the loan lending contract is a contract by which the Credi- contract, since no breach had been committed tor provides and undertakes to provide the Borrower by him and he had supplied the Bank with ap- a housing mortgage credit. propriate documents (and received a preferred loan as a result), as well as to compensate for the According to Article 7 (1) of the Law, the creditor shall loss he suffered from an interest rate increase. ensure that a credit agreement at least incorpo- rates: 1) the information provided for in sub-clauses 16. In an appeal to the Mediator, the Client asked to (1), (2), (4), (5), (6), (9), (10), (12) and (14) of the second urge the Bank to leave the interest rate as it was part of Article 4 of the Law; 2) the annual percentage specified by the loan contract, since he hasn’t rate of credit, as well as the information provided breached anything and supplied the Bank with for in Article 4 (2) 2 of the Law. According to Article appropriate documents (and received a preferred 4 (2), each information bulletin should contain the loan as a result), as well as to compensate for the following information: 1) the purpose of credit; 2) the loss he suffered from an interest rate increase, size and type of the nominal interest rate of credit which at the moment of filing the claim amount- (fixed or floating, and more to the point, these types ed to AMD 54,000. cannot be named otherwise than provided for by this Law); and in case of a floating nominal interest Thus, after making a comprehensive review of the rate, the conditions and procedure for changing it, as complaint-related documents as well as based on well as the explanation of the factors that affect the the requirements of the RA law, the Mediator has interest rate change “...”. come to the following conclusion: According to Article 3 (1) 6 of the Law, a floating in- According to Article 887 (1) of the Civil Code of the terest rate is the nominal interest rate of credit that Republic of Armenia, the bank or another credit or- can change (increase or decrease) during the term ganization (creditor) is obliged to provide the bor- of the credit agreement depending on a change in rower with sums of money (loan) in the amount and specific and published indicators and the indicators terms stipulated by the contract, and the borrower not determined by the Creditor, which underlie the is obliged to repay the received sums of money and calculation of that interest rate. The prudential indi- pay interest on them. cators underlying the calculation of a floating rate or the criteria for selecting indicators are defined by According to Article 3 (1) 2 of the RA Law "On Hous- a relevant regulation of the Central Bank. ing Mortgage Lending" (hereinafter the Law), hous- ing mortgage credit, mortgage credit or credit in- The interpretation of the aforementioned norms volves a credit, a loan provided by the creditor, or suggests that the loan provided for a purchase of an other financing provided under the following terms: apartment in return for a certain reimbursement, the a) the purpose of providing a credit is to acquire, recoverability of which is secured by a mortgage on construct, rebuild, repair, improve or upgrade an that apartment is a housing mortgage credit. Under apartment, and b) repayment of a credit is secured a housing mortgage lending contract, the Creditor by mortgage on the apartment or mortgage on the provides and undertakes to provide the Borrower multi-apartment building under construction, in ac- a housing mortgage credit, and the contract must, cordance with Article 270 of the Civil Code of the among others, include the size of annual interest rate Republic of Armenia, or “...” and c) a credit was pro- of the credit, the size of nominal interest rate of the vided against a certain According to Article 3 (1) 3 of credit. Moreover, the nominal interest rate of credit the Law, a housing mortgage lending contract or can be set as floating interest rate, which can vary
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Precedents/Exemplary Cases during the term of the credit agreement depending purpose of the contract. More to the point, all rel- on a change in specific and published indicators and evant circumstances, including pre-contract negoti- the indicators not determined by the Creditor, which ations and correspondence, established practices in underlie the calculation of that interest rate. the mutual relations of the parties, customary busi- ness practices, further behavior of the parties shall In this particular case, under the loan contract be- be taken into account. tween the Bank and the Client, Client has been pro- vided with AMD 29,880,000 to purchase an apart- In this case, the literal interpretation of the contract ment. Pursuant to clause 2.2 of the contract, the leads to the following: in order for the Preferred nominal interest rate is a Floating rate, which is the nominal interest rate to apply, the contract has stip- Bank’s reference rate plus an interest rate of 2.5% an- ulated that conditions such as the effective term of nually. the Arrangement between the Bank and the Com- pany and the working relationship of the Client with According to Annex 1 to the contract, the Bank’s the Company be simultaneously available, both of reference rate is 9.50% for Armenian dram. Pursu- which existed at the time of signing the Contract. ant to clause 2.2 of the contract, a preferred nomi- Annex 2, which makes an integral part of the con- nal interest rate, which is the Bank’s reference rate tract, sets an annual 8% preferred nominal interest less an annual nominal interest rate of 1.5%, shall rate for the credit, and under the contract the an- apply to the loan in the duration of the Arrange- nual interest rate for the credit is 8.59%, which was ment between the Bank and the Company and as calculated using the preferred nominal interest rate. long as the Client works in the Company. Accord- Consequently, an annual 8% preferred nominal inter- ing to clause 2.2 of the contract, the annual inter- est rate was applied in accordance with “Loan prin- est rate is 8.59%. The annual actual interest rate cipal and interest repayment schedule”, setting the has been calculated using the Preferred nominal amount of repayment by the Client. interest rate. In accordance with clause 2.2 of the contract, the size of principal amount and interest Thus, based on the literal interpretation of the con- rates and terms of repayment are as per the loan tract, the Mediator admits that the contract has repayment schedule as set forth in Annex 2 which applied a preferred nominal interest rate which is an integral part of this contract. Pursuant to An- amounted to 8% per annum. nex 2 to the contract, the annual nominal interest rate of the loan is 8%. In view of the position of the Bank which it had presented in a written form, the Mediator finds it According to Article 447 (1) of the Civil Code of the appropriate to touch upon the regularizations under Republic of Armenia, when interpreting the terms of the arrangement concluded between the Bank and the contract, the court shall take into account the the Employer (hereinafter the Arrangement). Spe- literal meaning of the words and phrases contained cifically, paragraph 1 of the Arrangement establish- therein. In case the literal meaning of the term of the es that Preferred loans are loans in Armenian dram contract is not clear, it shall be defined by comparing made to the employer’s personnel at a privileged in- the other terms of the contract and the thorough terest rate and under privileged terms. Further, par- meaning of the contract. Under part 2 of the same agraph 1 of the Arrangement defines the personnel article, where the rules contained in paragraph 1 of as natural persons who are in a working relationship this Article do not allow for the determination of the in accordance with the current legislation of the Re- content of the contract, the true common will of the public of Armenia with the Company at the moment parties shall be determined, taking into account the of receiving a loan, who have passed the trial peri-
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Precedents/Exemplary Cases od established by internal rules and procedures of en to transfer to the Bank sums due for final settle- the Company. Paragraph 1 of the Arrangement also ment for the employee after all debts of the employ- deals with monetary funds, specifying that these are ee to the Company shall have been paid off, unlike funds required for the provision of Preferred loans the template to the reference information set out in under the Arrangement, which the Bank undertakes Annex 1 which prioritizes the transfer of these sums to secure in its respective bank account according to the account with the Bank. to paragraph 2.2 of the Arrangement. Paragraph 2.2 of the Arrangement further says that the Compa- All that follows from the foregoing makes to think ny hereby undertakes to secure the funds in its re- that the Client did not submit the reference infor- spective account with the Bank and acknowledges mation as specified by the Arrangement, which is that the availability of cash is a primary condition for a document deliverable under the Arrangement, but a Preferred interest rate throughout the Preferred the Bank and the Client have nonetheless conclud- loan period under this Arrangement. In accordance ed a contract which set a preferred nominal inter- with paragraph 3.1 of the Arrangement, employ- est rate. That is, failure to comply with a procedure ees may apply to the Bank for a Preferred loan by prior to the concluding of a contract did not result also submitting reference information in the man- in a non-applied preferred interest rate. What is ner described in Annex 1, which is an integral part more, the contract has stipulated that the two con- of this Arrangement. Pursuant to paragraph 3.2 of ditions – the effective term of the Arrangement be- the Arrangement, Preferred loans are approved and tween the Bank and the Company and the working provided at the Bank’s discretion. According to para- relationship of the Client with the Company – be si- graph 3.3 of the Arrangement, the Bank has the right multaneously available, both of which existed at the to request from the Company and/or its employees time of signing the Contract. additional documents and information which might be necessary for making preferred loans or their According to Article 289 of the Civil Code of the proper servicing. Republic of Armenia (hereinafter the Code), trans- actions are the actions of citizens and legal entities Annex 1 to the Arrangement between the Bank and aimed at establishing, modifying or terminating civil the employer has established a template to the ref- rights and obligations. According to Article 436 (1) of erence information employees submit to the bank, the Code, a contract is the consent of two or more which also stipulates that …the employer shall be persons aimed at establishing, modifying or termi- required to pay the salary of ____, as well as the bo- nating civil rights and obligations. According to Arti- nuses payable to the employees during the term of cle 437 (1) of the Code, citizens and legal entities are the employment contract to the account with the free to conclude a contract. Bank until a full repayment of credit shall have been ascertained by the Bank. The reference information Article 448 (1) of the Code provides that a contract the Client has submitted to the Bank is not iden- shall be deemed to have been concluded if all the tical by content with the template to reference in- essential terms of the contract have been reached formation set out in Annex 1 to the Arrangement; in the form required by the parties. Essential are the in particular, the Company has undertaken to pay terms that are pertinent to the subject of the con- the employee bonuses throughout the term of the tract, that are named in a statute or other legal acts employment contract with the Client to the account as essential or necessary for contracts of the given with the Bank, yet it has not undertaken to fulfil this type, and also all those terms with respect to which obligation until a full repayment of loan is certified by declaration of one of the parties an agreement by the Bank. Moreover, the employer has undertak- must be reached.
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Precedents/Exemplary Cases The Mediator records that any transaction (con- The contract between the Bank and the Client was tract) is, first and foremost, a voluntary act, which concluded on a mutual agreement, and the combi- is aimed at bringing in certain legal consequenc- nation of the inner will and outer expression of will es. Concepts of ‘will’ and ‘expression of will’ are of of the parties has facilitated the setting of a pre- primary importance for signing the deal. The ‘will’ ferred nominal interest rate of 8% per annum, and is the individual’s inner wish, demand, aspiring, in- the actual interest rate of credit of 8.59% per annum tending, deliberation, and consent; the ‘expression has been calculated and set based on it. of will’ is the outward form, way and method of ex- pressing the will. In other words, the transaction is As to the Bank having sent an advance notice in writ- a combination of inner will and outer expression ing to the Client that they had applied an 11% annual of will of those who signed it (see Nelli Hako- nominal interest rate to the Client’s loan, the Mediator byan and others vs. “Hamkhach” LLC judgment of has to emphasize the following: According to Article 17.07.2015 of the Republic of Armenia Court of Cas- 466 (1) of the Code, alteration and rescission of the sation for a civil procedure No. CCY/1013/02/13). For contract are possible by agreement of the parties, un- the sake and in support of the argument, it must less otherwise provided for by the law or the contract. be repeated that the reference information of the The second part of the same article provides that at Client is not identical by content with the template a request by one of the parties, the contract may be to reference information set out in Annex 1 to the amended or resolved by a court decision only in case Arrangement. The Company has undertaken to pay of a substantial breach of the contract by the other the employee bonuses throughout the term of the party or in other cases provided for by the law or the employment contract with the Client to the account contract. A breach of a contract by one party shall be with the Bank, yet it has not undertaken to fulfil recognized substantial if it entails such damage for an- this obligation until a full repayment of loan is cer- other party that deprives them of what they had been tified by the Bank. Moreover, the employer has un- entitled to expect upon conclusion of the contract. dertaken to transfer to the Bank sums due for final settlement for the employee after all debts of the According to Article 10 of the Law, credit agreement employee to the Company shall have been paid off, cannot contain a provision that allows the credi- unlike the template to the reference information set tor to unilaterally amend the terms of the contract. out in Annex 1 which prioritizes the transfer of these Stipulating a provision in the credit agreement that sums to the account with the Bank. All this leads us the borrower may allow the creditor to unilaterally to think that the Client did not submit the reference change the terms of the credit agreement in future information as specified by the Arrangement, which is prohibited. is a document deliverable under the Arrangement, but the Bank and the Client have nonetheless con- The legislative arrangements referred to above im- cluded a contract which set a preferred nominal ply that alteration and rescission of the contract is interest rate. That is, failure to comply with a pro- possible if agreed upon the parties, unless otherwise cedure prior to the concluding of a contract did not provided by the law or contract. Credit agreement result in a non-applied preferred interest rate. What cannot contain a provision that allows the creditor is more, the contract has stipulated that the two to unilaterally amend the terms of the contract. At conditions – the effective term of the Arrangement the same time, once initiated by one of the parties, between the Bank and the Company and the work- the contract may be amended judicially only in the ing relationship of the Client with the Company – event: a) there is a substantial breach of the con- be simultaneously available, both of which existed tract, b) circumstances have changed considerably, at the time of signing the Contract. (c) as provided for by law or contract.
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Precedents/Exemplary Cases Subject to clause 2.2 of the Contract, in the event the the annual actual interest rate of 8.59%, and having employment relationship between the Client and applied an 11% nominal interest rate, it had breached the Employer or the contractual relationship on any its obligation. reason under the Arrangement between the Bank and the Employer terminates, the Preferred nominal Pursuant to Article 408 of the Code, a breach of ob- interest rate applicable to the Credit will be replaced ligation means nonperformance or performance of by the Nominal interest rate, of which the Client will it in an improper manner (untimely, with defects be notified in the manner referred to in clause 11.4 of of goods, work, and services or with violations of this Contract, unless otherwise agreed upon by the other conditions determined by the content of the parties. Further, clause 2.2 of the Contract says that obligation). According to Article 409 (1) of the Code, the annual actual interest rate can change as the the debtor who has breached the obligation shall nominal interest rate changes. The nominal inter- be required to compensate to the creditor for the est rate and preferential nominal interest rate may loss. Pursuant to the second part of the same article, change in case of a change in the Bank’s reference losses are determined in accordance with the rules rate. Pursuant to clause 11.2 of the Contract, the pro- provided for in Article 17 of the Code. Under Article visions of the Contract may be amended upon the 17 (1) of the Code, a person whose rights have been parties’ mutual consent in writing. violated can claim a full compensation for the dam- age caused to him/her, unless the law or the con- The review of the said provisions of the contract tract provides for compensation for losses in a lesser makes it clear that the annual nominal interest rate, amount. The second part of the same article says including the preferential interest rate, hence the that losses means the expenses that the person annual actual interest rate may vary in the event: whose right was violated made or must make to reinstate the right that was violated, the loss of or 1. the Bank’s reference rate is revised, injury to his/her property (actual damage), and also income not received that this person would have 2. the employment relationship between the Client received under the customary civic practices if his/ and the Company terminates, her right had not been violated (forgone benefit). In this case, the Bank had, since 16.02.2019, applied 3. the Arrangement between the Company and the a nominal interest rate of 11% per annum to the Cli- Bank terminates, ent’s loan, thereby having breached a contractual obligation, whereas the nominal interest rate appli- 4. the parties reach a mutual consent in writing. cable under the legislative regularization referred to above makes up 8% per annum. As a consequence In this case, none of the aforementioned conditions of the aforementioned breach, the Client has, from exists, so the Bank could not make a change in the 16.02.2019 to 06.05.2019 inclusive, overpaid AMD annual preferential nominal interest rate of 8% and 195.602.24 as an interest fee, which is the damage to the annual actual interest rate of 8.59%. Whereas, as the Client and needs to be refunded to the Client. the Bank had applied an 11% nominal interest rate to the Client’s loan, the interest fee overpaid by the Summing up, the Mediator finds that the Client’s Client as of 07.05.2019 had been AMD 195.542.47. claim must be satisfied.
Summarizing what has been stated above, the Me- diator believes that the Bank didn’t have to alter the annual preferential nominal interest rate of 8% and
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Precedents/Exemplary Cases Mediator asked the Organization to provide, within 14 business days as specified by the “Law on Finan- cial System Mediator”, explanations and clarifications and/or objections in writing, as well as other docu- Case 8 ments and information, including the loan contract signed between the Organization and the Client, and the attachment(s), terms or tariffs, making an integral part thereof, the extract showing all entries Claim investigated and withdrawals by the Client throughout a loan re- Claim against a credit organization operating in payment period, the loan repayment schedule and the Republic of Armenia; regarding the penalties an altered schedule, if any, communication in writing imposed by the organization between the Client and the Organization, any other information that can be helpful for the investigation.
Content of the claim B. Credit organization’s viewpoint The Client purchased two consumer loans online from the credit organization (the Organization). The The Office of Mediator has received a letter from regular installments on either of the loans were due the Organization, in which they voiced objections on 17.09.2017, a date that coincided with a non-work- while providing grounds for their viewpoint in re- ing day (Sunday), followed by another non-working spect of the claim. The Organization wrote, in par- day (Memorial Day). Although repaid on the day fol- ticular, that there were two loan contracts signed lowing the non-working day, as it is provided for by between the Organization and the Client. The loan law, the loan was fallen overdue as the Client did not repayment schedules, making an integral part of made a pay the day specified in the contract. The Cli- the contracts, clearly set out the dates for regu- ent has used the option of making payments at the lar loan installments, one of which coincided with bank. Since neither the bank nor the Organization 17.09.2017 (Sunday). By reference to clause 3.3 of the were open on a non-working days, the payment has Contract, Articles 347 and 447 of the Civil Code of been made on the first business day. According to the Republic of Armenia, the Organization stated the Client, all options under the law are provided for that, with repayment schedules and clearly indicat- the Client’s convenience and the Client has chosen ed dates, including that of 17.09.2017, the parties ac- the way most convenient to him. knowledged that they had agreed to make regular repayments, namely payment obligations stipulat- In an appeal to the Mediator, the Client demanded that ed by the contracts, on those days. Referring to the the Organization refund him the AMD 666.22 fine, un- Client’s right and ability to choose an the option un- reasonably charged from him, and handle all subsequent der the contract to make regular loan repayments, installments correctly, without penalties and fines. the Organization wrote that there is no provision that restricts the rights and abilities of the Client, so for a full and proper performance of the obliga- Investigation of the claim tion, all the Client had to do was make the install- A. Mediator’s action ments in advance or on the same day, i.e. 17.09.2017, using the opportunity of paying through payment By virtue of Article 11 (1) and (2) of the Republic of and settlement systems, which is allowed under Armenia Law on “Financial System Mediator”, the the contracts. As noted by the Organization, the
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Precedents/Exemplary Cases offices of PSOs work every day and visiting them Thus, the essential facts for the investigation of the and carrying out the required payments by mere- claim are as follows: ly showing the loan contract number and identi- fication document is possible. The information on 1. The first loan contract concluded between the addresses of partner PSO offices is publicly avail- Client and the Organization has provided the able on the Organization’s website, and the Client Client with a consumer loan of AMD 200,000 had the option of scrolling down the addresses and with a 1-year maturity period, at a 24% nominal choosing one most appropriate to him. The Organ- interest rate and 130.48% actual interest rate per ization also mentioned that the Client might make annum. the payments due on 17.09.2017, regardless of the fact that it was Sunday, using one of the branch 2. According to clause 1.1 of the first contract, the offices of the Bank pointed out by the Organiza- contract is concluded remotely, i.e. the Creditor tion by putting cash onto a banking account duly makes an offer to sign the contract and the Bor- designated by the Organization in the contracts. As rower accepts it electronically onto his person- per information available on the official website of al page by entering the code received from the the Bank, two branch offices of the Bank are open mobile phone. The entered code as well as data on Sundays. The Organization also pointed out that related to the contract signing will be encrypt- in a telephone conversation between an employ- ed as QR code and will be shown at end part ee of the Organization and the Client on the day of the contract concluded. The loan contract can of signing the first loan contract, the Client was be concluded in other ways too, if so chosen by presented with the options for making a regular the Creditor, under law. Once a complete and loan repayment and how to make the payments irrevocable acceptance of the terms of the loan on non-working days. Asked whether or not the contract by the Borrower is executed, the con- making of payments will move to the next working tract shall be deemed to be concluded in writing day in the event a regular payment date falls on in accordance with Article 296 (1) 2, Article 450 (3) a non-working day, the employee of the Organiza- and 4 and Article 454 (3) of the Civil Code of the tion had informed in the course of that telephone Republic of Armenia. conversation that, subject to the contract, the pay- ments falling on non-working days would have to 3. Pursuant to clause 3.2 of the first contract, the be made either in advance, using a bank, or on the loan shall be repayable in equal installments, at same day, through payment terminals, to avoid the 30-day intervals. The Borrower undertakes to penalties that would accrue for overdue sums. make the payments in accordance with the loan repayment schedule set forth in the Contract. Referring to clause 4.1 of the contracts, the Organi- zation noted that the Client has breached the con- 4. Pursuant to clause 3.3 of the first contract, the tractual obligations as loan repayment was made Borrower shall make the payments in Armenian on 19.09.2017 and resulted in a penalty accrued in dram by: a) having the sums due for payment the amount of AMD 666.22 (AMD 334.84 on the first entered or transferred onto the Creditor’s bank and AMD 331.38 on the second contract, respectively) account (in case of making payments through and charged from the amounts paid by the Client the bank, all the sums due shall be placed in on 19.09.2017. As to whether a loan delinquency has the Creditor’s account and one has to consid- been registered with the ACRA Credit Bureau, the er that making the sums of money available on Organization stated that no such data have been the Creditor’s account takes two or more days, processed in the credit bureau. so payments must be made in advance in order
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Precedents/Exemplary Cases for the sums due to arrive the destination in ed as QR code and will be shown at end part accordance with the repayment schedule set of the contract concluded. The loan contract can out in the contract); b) using payment systems be concluded in other ways too, if so chosen by (payment can be made every day), c) visiting the the Creditor, under law. Once a complete and Creditor’s office. irrevocable acceptance of the terms of the loan contract by the Borrower is executed, the con- 5. Pursuant to clause 4.1 of the first contract, if the tract shall be deemed to be concluded in writing Borrower fails to pay the sums due in a timely in accordance with Article 296 (1) 2, Article 450 (3) manner, a penalty will accrue on the overdue and 4 and Article 454 (3) of the Civil Code of the sum at the rate of 1 (one) percent of that sum per Republic of Armenia. day falling overdue. 11. Pursuant to clause 3.2 of the second contract, 6. According to the repayment schedule set out in the loan shall be repayable in equal installments, the first contract, the amount payable by the Cli- at 30-day intervals. The Borrower undertakes to ent on 17.09.2017 reached AMD 16,541.43. make the payments in accordance with the loan repayment schedule set forth in the Contract. 7. The reason of failed payment as of 17.09.2017 un- der the first contract has exposed the Client to 12. Pursuant to clause 3.3 of the second contract, penalty which amounted to AMD 334.84. the Borrower shall make the payments in Ar- menian dram by: a) having the sums due for 8. On 19.09.2017, the Client paid an installment of payment entered or transferred onto the Credi- AMD 17,000 under the first contract, of which tor’s bank account (in case of making payments AMD 7,398 was used to pay the principal, AMD through the bank, all the sums due shall be 3,267.02 to pay the interest, AMD 144.74 to pay placed in the Creditor’s account and one has to a fine on overdue payment, AMD 6,000 paid as consider that making the sums of money availa- a service fee, AMD 4.76 paid as an interest fee on ble on the Creditor’s account takes two or more the bank reference rate, AMD 120 paid as interest days, so payments must be made in advance in on the sum overdue, and AMD 65.34 paid as in- order for the sums due to arrive the destination terest fine. in accordance with the repayment schedule set out in the contract); b) using payment systems 9. The second loan contract concluded between (payment can be made every day), c) visiting the the Client and the Organization has provided Creditor’s office. the Client with a consumer loan of AMD 200,000 with a 1-year maturity period, at a 24% nominal 13. Pursuant to clause 4.1 of the second contract, if interest rate and 130.48% actual interest rate per the Borrower fails to pay the sums due in a time- annum. ly manner, a penalty will accrue on the overdue sum at the rate of 1 (one) percent of that sum 10. Pursuant to clause 1.1 of the second contract, the per day falling overdue. contract is concluded remotely, i.e. the Creditor makes an offer to sign the contract and the Bor- 14. In accordance with the repayment schedule set rower accepts it electronically onto his person- out in the second contract, the amount paya- al page by entering the code received from the ble by the Client on 17.09.2017 made up AMD mobile phone. The entered code as well as data 16,541.43. related to the contract signing will be encrypt-
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Precedents/Exemplary Cases 15. The reason of failed payment as of 17.09.2017 un- provided by the contract, and the borrower is obli- der the second contract has exposed the Client gated to return the monetary amount received and to penalty which had accrued to AMD 331.38. to pay interest on it. The second paragraph of the same article says that the rules provided by Chap- 16. On 19.09.2017, the Client paid an installment of ter 46 of the Code shall be applied to relations un- AMD 17,000 under the first contract, of which der the credit contract, unless otherwise established AMD 6,587.15 was used to pay the principal, AMD by the rules of the present Chapter or follows from 3,811.47 to pay the interest, AMD 130.86 to pay the nature of the credit contract. According to Article a fine on overdue payment, AMD 6,000 paid as 880 (2) of the Code, the amount of interest-free loan a service fee, AMD 4.30 paid as an interest fee on can be returned by the borrower early. Unless oth- the bank reference rate, AMD 120 paid as interest erwise provided by the contract of loan, the sum of on the sum overdue, and AMD 76.22 paid as in- a loan with interest may be returned early with the terest fine. consent of the lender.
17. The Client has filed a complaint to the Organiza- According to Article 1 (1) of the RA Law on “Consumer tion but the latter has turned it down. Credits” (hereinafter the Law), a credit is the right to payment at a varied timeframe of a liability, loan, 18. In an appeal to the Mediator, the Client demands borrowing, financial leasing or any other agreement that the Organization refund him the fine of or arrangement, with the view to financing the pur- AMD 666.22 which was unreasonably charged chase of goods, services or works. from him, and handle all subsequent installments correctly, without penalties and fines. In accordance with Article 347 of the Code, obliga- tions must be performed in a proper manner, in ac- Thus, following a comprehensive review of the doc- cordance with the terms of the obligation and the umentation related to the claim, as well as based on requirements of a statute, other legal acts, and in the requirements of the RA law, the Mediator has the absence of such terms and requirements, in ac- concluded as follows: cordance with the customary business practices or other requirements usually offered. According to Article 345 (1) of the Civil Code of the Republic of Armenia (hereinafter referred to as the In accordance with Article 408 of the Code, a breach Code), by force of an obligation one person (the debt- of the obligation is the failure to perform or improp- or) is obligated to take for the use of another person erly perform an obligation (in an untimely manner, a defined action, such as: to pay money, to trans- with defects found with regard to goods, works, and fer property, to perform work, etc., or refrain from services or with breach of other conditions deter- a defined action, and the creditor has the right to mined by the content of the obligation). demand from the debtor the obligation to perform. The second part of the same article says that the ob- According to Article 326 (1) of the Code, a timeframe ligations arise from the contract, as a result of caused designated by a transaction or by court under a stat- damage and other grounds specified in this Code. ute, other legal acts is determined at the expiring of a certain period of time calculated as a calendar year, According to Article 887 (1) of the Code, under a cred- month, week, day, or hour. According to Article 329 of it contract, a bank or other credit organization (the the Code, if the last day of the time period coincides creditor) is obligated to provide money funds (credit) with a non-working day, the end of the time period to the borrower in the amount and on the conditions will be the working day that follows that time period.
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Precedents/Exemplary Cases In this case under review, two loan contracts have What we have is that the Client has made a pay- been concluded between Client and Organization, ment of AMD 34,000 (AMD 17,000 plus AMD 17,000) and the Client has received funds of AMD 200,000 under the two contracts as of 19.09.2017. As the Cli- under each contract. Clause 3.2 of the two contracts ent has paid on the last day of the contractual term, stipulates that the loan by repaid in equal install- which was on 19.09.2017, the Mediator records that ments at a 30-day interval, which the borrower has the Client did not something that has entailed a de- to perform in line with the established loan repay- ferral of obligations, which means that the Organi- ment schedule. zation’s action to have a penalty accrued in respect of that period of time is not lawful and they there- The Mediator records that, subject to clause 3.2 of fore must refund the Client the sum of AMD 666.22 the two contracts, the loans, among other terms (334.84 + 331.38) which had been unjustifiably charged and conditions, will be repaid in equal installments from him as a fine. totaling AMD 16,541.43 each (in line with the sche- dule). Payments will be made at a 30-day interval as Thus, summing up what has been stated above, the defined in the loan repayment schedule. The amount Mediator finds that the Client’s claim must be satis- per instalment is AMD 16,541.43 due to be paid once fied in the amount of AMD 666.22. in every 30 days, with the last day duly set out in the schedules.
According to Article 155 (1) of the Labor Code of the Republic of Armenia, the general non-working day is Sunday and in the case of a five-day working week, Saturday and Sunday, except for cases provided for by parts 2-4 of that article and by other statutes.
According to Article 19 of the RA Law “On Holidays and Memorial Days of the Republic of Armenia”, on the occasion of the holidays and memorial days of the Republic of Armenia, the Government of Arme- nia may move up the working days. Under the Gov- ernment of the RA decision No. 991-N, the workday of September 18, 2017 was moved up on Septem- ber 23, 2017, which was Saturday.
What the Mediator found out in the course of ex- amining this case was that September 18, 2017 was a day of payment under the contracts. That day was Sunday, i.e. a non-working day. Because the day that followed was moved up to 23.09.2017 under the gov- ernment decision No. 991-N, that day was happened to be non-working too. It turns out that the end of the period in question is the next working day, i.e. 19.09.2017.
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Precedents/Exemplary Cases the RA Law on “Consumer Credits”, the Organization should in addition pay him a sum of AMD 300,000 for the above infringement.
Case 9 In an appeal to the Mediator, the Client required from the Organization to refund him AMD 67,500 as unjustifiably charged monthly service fees and pay the sum of AMD 300,000 as provided for by the RA Claim investigated Law on “Consumer Credits”. Claim against a credit organization operating in the Republic of Armenia; regarding breached provisions of the law on Consumer Credits Investigation of the claim A. Mediator’s action
Content of the claim By virtue of Article 11 (1) and (2) of the Republic of Armenia Law on “Financial System Mediator”, the The loan contract was signed between the Client Mediator asked the Organization to provide, within and the Organization (the Organization) on 15.04.2016 14 business days as specified by the Law on “Finan- provided a loan in the amount of AMD 1,500,000, at cial System Mediator”, explanations and clarifications the interest rate of 24% and actual interest rate of and/or objections in writing, as well as other docu- 66.9665% per annum. The Client had made early loan ments and information, including the loan contract repayments and at the time of filing the claim has signed between the Organization and the Client, almost AMD 1,140,000 repaid as a principal amount and the attachment(s), terms or tariffs, making an plus the relevant interest fees. According to clause integral part thereof, the extract showing all entries 1.8 of the Contract, the Client pays the Organiza- and withdrawals by the Client throughout a loan re- tion a monthly fee of 1.1% of the loan amount, which payment period, the loan repayment schedule and makes up AMD 16,500 per month. As told by the an altered schedule, if any, communication in writing Client, the payments were made ahead of schedule between the Client and the Organization, any other and the loan amount has reduced as a result, yet information that can be helpful for the investigation. the Organization has not factored this in through- out the contract term and the diluting balance of the loan amount notwithstanding, the monthly ser- B. Credit organization’s viewpoint vice fees continued to be charged at the same rate, i.e. AMD 16,500. The Client referred to Article 10 (2) of The Office of Mediator has received a letter from the the RA Law on “Consumer Credits” which says that Organization, in which they voiced objections along in case of early fulfillment (settlement) of liabilities with grounds provided in support of their viewpoint established under credit agreement, the total cost for the claim. The Organization wrote, in particu- on crediting of the consumer shall be reduced pro- lar, that a consumer loan contract was signed be- portionally. The Organization fails to reduce the Cli- tween the Organization and the Client. Under the ent’s monthly loan service fees proportionally, which contract, the Client made regular installments on is a breach of the abovementioned law, according the loan ahead of the loan repayment schedule. to the Client. The Organization has overcharged as Citing clause 1.8 of the contract, the Organization much as AMD 67,500 from the Client as a service fee. pointed out that the Client has undertaken to re- The Client believes that, to the effect of Article 20 of pay a fixed sum each month, at the rate of 1.1% of
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Precedents/Exemplary Cases the loan amount, which will not be reduced as the Thus, the essential facts for the investigation of the loan balance dilutes. Moreover, that fee is payable claim are as follows: to the Organization for servicing the loan and will therefore remain so until a full repayment of the 1. There’s been a consumer loan contract (hereinaf- loan under the contract. In other words, by signing ter the Contract) concluded between the Client the contract, the Client has, among other terms of and the Organization, under which the Client the contract, unconditionally agreed and undertak- has received a loan of AMD 1,500,000 (one mil- en to pay the above-mentioned monthly service fee lion five hundred thousand Armenian drams) at to the Organization in the amount and timeframe an annual interest rate of 24% up until 08.10.2017. specified by the contract. As to Article 10 (2) of the Subject to clause 1.11 of the Contract, the actual RA Law on “Consumer Credits”, the Organization interest rate of loan is 66.9665% per annum. notes that they reduce the total crediting costs in the form of reduced interest fees, which has been 2. Pursuant to clause 1.8 of the Contract, the Bor- exercised in respect of the Client as well. However, rower pays to the Creditor a monthly fee of 1.1% as to the question of reducing the service fee defined of the loan amount, in accordance with a repay- in the loan contract for a reason of the requirement ment schedule set out in Annex 1. The charging to reduce the monthly service fee provided for in of service fees will end as the date of repayment the loan contract, the Organization draws on the of the loan as provided for in clause 1.2 to the episode of a full repayment of loan in advance when Contract expires. the consumer fulfills all of its obligations under the loan contract. The Organization further notes that, 3. Annex 1 to the Contract has established a loan regardless of installments by the consumer ahead repayment schedule containing 18 installments of the loan repayment schedule, it will continue in a row. Each installment totals AMD 115,774.46 maintaining a fixed monthly fee in so far as the loan (excluding the last installment of 08.10.2017, has been repaid in full. This was the approach also which amounts to AMD 115,774.40). Further, applied to the Client. Referring to the Client’s claim each installment consists of the principal and for paying compensation of AMD 300,000, the Or- of the interest of the loan, and a service fee of ganization finds that they did not do anything con- AMD 16,500. The loan repayment schedule is tradicting and believes that the claim is groundless. presented below:
N Date of Sum due Interest due Loan servicing Total sum due Principal of repayment to be repaid to be repaid fee (AMD) to be repaid the loan (AMD) (AMD) (AMD) (AMD) 1. 10/05/16 80,534,73 18,739.73 16,500.00 115,774.46 1,419,465.27 2. 08/06/16 72,207.40 27,067,06 16,500.00 115,774.46 1,347,257.87 3. 08/07/16 72,698.41 26,576,05 16,500.00 115,774.46 1,274,559.46 4. 08/08/16 73,294.40 25,980.06 16,500.00 115,774,46 1,201,265.06 5. 08/09/16 74,788.40 24,486.06 16,500.00 115,774.46 1,126,476.66 6, 10/10/16 75,572.16 23,702.30 10,500.00 115,774.46 1,050,904.50 7. 08/11/16 79,235.29 20,039 17 16,500.00 115,774.46 971,669.21 8. 08/12/16 80,107.29 19,167.17 16,500.00 115,774.46 891,561.92 9, 09/01/17 80,515.02 18,759.44 16,500.00 115,774.46 811,046.90
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Precedents/Exemplary Cases N Date of Sum due Interest due Loan servicing Total sum due Principal of repayment to be repaid to be repaid fee (AMD) to be repaid the loan (AMD) (AMD) (AMD) (AMD) 10. 08/02/17 83,275.73 15,998.73 16,500.00 115,774.46 727,771.17 11. 08/03/17 85,875.49 13,398.97 16,500.00 115,774.46 641,895.68 12. 10/04/17 85,346.20 13,928.26 16,500.00 115,774.46 556,549.48 13. 08/05/17 89,027.85 10,246.61 16,500.00 115,774.46 467,521.63 14. 08/06/17 89,744.70 9,529.76 16,500.00 115,774.46 377,776.93 15. 10/07/17 91,325.62 7,948.84 16,500.00 115,774.46 286,451.31 16. 08/08/17 93,812.26 5,462.19 16,500.00 115,774.45 192,639.05 17. 08/09/17 95,347.79 3926.67 10,500,00 115,774.46 97,291,26 18. 08/10/17 97,291.26 1,983.14 16,500.00 115,774.40 0.00 Total 1,500,000.00 286,940.21 297,000.00 2,083,940.21
4. The timetable below shows the Client’s pay- the schedule and the total amount of early re- ments, including those of made in advance of payments, by date:
21/04/2016 Cash entered Cash entered Total amount of ahead of schedule early installments 17/05/2016 124,100.00 221.33 221.33 08/06/2016 116,000.00 452.50 452.50 14/07/2016 122,600.00 373.47 373.47 12/08/2016 120,494.00 487.63 487.63 08/09/2016 115,800.00 527.19 527.19 03/10/2016 115,400.00 10/10/2016 517.44 517.44 24/10/2016 100,000.00 100,000.00 100,517.44 08/11/2016 21,282.15 15/11/2016 37,600.00 752.24 22,034.39 01/12/2016 300,000.00 186,124.65 208,159.04 26/12/2016 200,000.00 177,701.34 385,860.38 09/01/2017 305,345.36 31/01/2017 180,000.00 164,452.84 469,798.21 08/02/2017 386,522.48 06/03/2017 22,400.00 386,522.48 09/03/2017 300,646.99 10/04/2017 22,400.00 215.300.79
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Precedents/Exemplary Cases 5. The Organization has charged a monthly service Article 347 of the Code establishes that obliga- fee of AMD 16,500 for the installments made by tions must be performed in a proper manner, in the Client on the dates, as follows: AMD 124,100 accordance with the terms of the obligation and on 17/05/2016; AMD 116,000 on 08/06/2016; AMD the requirements of a statute, other legal acts, and 122,600 on 14/07/2016; AMD 120.494 on 12/08/2016; in the absence of such terms and requirements, in AMD 115.800 on 08/09/2016; AMD 115,400 on accordance with the customary business practices 03/10/2016; AMD 37,000 on 15/11/2016; AMD 300,000 or other requirements usually offered. According to on 01/12/2016; AMD 200,000 on 26/12/2016, AMD Article 349 of the Code, the creditor has the right 180,000 on 31/01/2017, AMD 22,400 on 06/03/2017; not to accept performance of an obligation part by AMD 24,400 on 10/04/2017. part, unless otherwise provided by a statute, oth- er legal acts, or terms of the obligation or follows 6. The Client has lodged a complaint to the Organ- from the customary business practices or the na- ization and requested the latter to refund him ture of the obligation. AMD 67,500, a sum representing unjustifiably charged monthly service fees, and pay the sum According to Article 887 (1) of the Code, under of AMD 300,000 as provided for by the RA Law a credit contract, a bank or other credit organiza- on “Consumer Credits”. tion (the creditor) is obligated to provide money funds (credit) to the borrower in the amount and 7. The Organization has rejected the Client’s com- on the conditions provided by the contract, and plaint. the borrower is obligated to return the monetary amount received and to pay interest on it. The sec- 8. In an appeal to the Mediator, the Client demand- ond paragraph of the same article says that the ed that the Organization refund him AMD 67,500, rules provided by Chapter 46 of the Code shall be as the latter had unjustifiably charged from him applied to relations under the credit contract, un- in the form of service fees, and pay the sum of less otherwise established by the rules of the pres- AMD 300,000 as provided for by the RA Law on ent Chapter or follows from the nature of the credit “Consumer Credits”. contract. According to Article 880 (2) of the Code, the amount of interest-free loan can be returned Thus, following a comprehensive review of the doc- by the borrower early. Unless otherwise provided umentation related to the claim, as well as based on by the contract of loan, the sum of a loan with in- the requirements of the RA law, the Mediator has terest may be returned early with the consent of concluded as follows: the lender.
According to Article 345 (1) of the Civil Code of the According to Article 1 (1) of the RA Law on “Con- Republic of Armenia (hereinafter referred to as the sumer Credits” (hereinafter the Law), a credit is Code), by force of an obligation one person (the debt- the right to payment at a varied timeframe of or) is obligated to take for the use of another person a liability, loan, borrowing, financial leasing or any a defined action, such as: to pay money, to trans- other agreement or arrangement, with the view fer property, to perform work, etc., or refrain from to financing the purchase of goods, services or a defined action, and the creditor has the right to works. Article 10 (1) of the Law says that a con- demand from the debtor the obligation to perform. sumer is entitled to early (ahead of schedule) The second part of the same article says that the ob- fulfillment (settlement) of liabilities established ligations arise from the contract, as a result of caused under credit agreement, irrespective of the fact damage and other grounds specified in this Code. whether such right has been established under
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Precedents/Exemplary Cases credit agreement or not. Pursuant to the second considered as a type of target credit, which is to part of the same article, in the event of early ful- finance the consumer’s purchase of goods, servic- fillment (settlement) of liabilities established in es or works. Fulfilling an obligation ahead of the the credit agreement, the total cost of crediting schedule in the case of interest-bearing loans, of the consumer will be reduced proportionally. which is attributable to credit too, is permitted Further, according to the third part of the same ar- only with the lender’s consent, unless otherwise ticle, a consent which limits the consumer’s right provided for by law or the loan contract. In this as provided for in parts 1 and 2 of this Article and case, the Law provides otherwise by availing the which imposes liability as provided for in part 4 of consumer of the opportunity to fulfill contractu- this Article, is null and void. Finally, part 4 of the al obligations (repayment of loan) ahead of time article establishes that where the consumer exer- (repayment schedule) irrespective of whether such cises his/her right as provided for in parts 1 and 2 right is envisaged under the credit agreement. of this Article, the creditor cannot apply sanctions That is to say, consumers may anyway enjoy an (penalties or any other measure that aggravates imperative norm of the law in fulfilling an obli- the consumer’s condition). gation ahead of time (schedule) and, when doing so, the total cost of consumer crediting will be According to Article 2 (1) 7 of the Law, the total cost reduced proportionally. The total cost of crediting of consumer crediting is all interest and other pay- consists of all interest and other payments that ments that the consumer is obliged to pay (make) the consumer is obliged to pay (make) for and in for crediting. Sub-clause 1 (5) of the same article the course of crediting, and paragraph 4 of Regu- defines that the Annual Percentage Rate or APR is lation 8/01 not only specifies the list of other fees the total cost of consumer credit, expressed as an included in the total cost but has the credit service annual percentage of the credit granted and calcu- fee incorporated into these fees. So, the Mediator lated using the formula provided in Article 13 of the records that in case of early fulfillment of obliga- Law. Pursuant to paragraph 2.3 of Regulation 8/01 tions under the consumer credit agreement, the “Explanations and examples of the calculation total consumer crediting costs, including a loan of annual percentage rate of charge” as adopted service fee which is incorporated in these total under the Board of the Central Bank Resolution consumer crediting costs, have to be reduced pro- No. 363-N of 16.12.2008 (hereinafter referred to as portionally. More to the point, paying on a con- Regulation 8/01), the total cost of consumer cred- sumer loan ahead of time (schedule) means: iting involves all interest and other payments the a) repayment of the principal of the loan or part consumer must pay (make) for and in the course thereof at the moment when the obligation of the of crediting. Paragraph 2.2 of Regulation 8/01 says borrower to do so is designated for some future that the elements included in other payments are time, and b) repayment of the nearest upcoming defined in paragraph 4 of Regulation 8/01. Pursuant part(s) of the loan in the event the contract stip- to paragraph 4 (4) of Regulation 8/01, other pay- ulates the performing of obligation part by part, ments considered in the calculation of the total unless otherwise agreed upon between the par- crediting costs, hence the annual percentage rate, ties or instructed by the person who pays ahead include the following payments the consumer must of schedule. In other words, if there is no borrow- make for and in the course of crediting (if any): (...) er’s specific instruction about which period of time a credit service fee. an early repayment of loan should go to or if the parties have not agreed upon other arrangements, A thorough analysis of the regulatory arrange- the amount of early repayment of loan should ments above suggests that a consumer loan is fund the nearest installment due, while the bor-
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Precedents/Exemplary Cases rower will be free of the obligation to pay an up- of the loan liability in so far as the loan is consid- coming installment to the extent of an installment ered that much repaid ahead of schedule, and if on paid earlier. If there is an early repayment of the the day of a regular installment the borrower fails obligation under the credit agreement, the total to pay any amount or pays less than provided for credit costs should be reduced proportionately. It originally under the contract, then the amount re- should be mentioned that this norm is imperative paid earlier will be treated as an amount due for and the parties have no right to provide for anoth- a regular installment; starting this moment, the er arrangement by mutual consent. Regarding the loan will not be considered repaid ahead of sched- Organization’s objection that the monthly service ule proportionately and the monthly service fee will fee is reduced only when there’s been a full repay- increase proportionately, too. ment rather than a partial repayment of the loan, the Mediator finds that a liability repaid ahead of The investigation of this claim found out that the schedule, regardless of whether it’s been repaid in Client and the Organization has entered into a con- full or in part, is considered repayment of the li- sumer loan contract, by which a consumer loan of ability ahead of schedule. Or else, this assurance AMD 1,500,000 was made to the Client. Clause 1.8 the RA Law on “Consumer Credits” gives to con- of the contract provides that the Client shall pay to sumers would just be illusive and defective in its the Organization a monthly fee of 1.1% of the loan applicability. Therefore, whether early repayment amount, pursuant to a schedule set out in Annex 1 is in part or in full, the total cost of consumer cred- to the contract. The schedule sets a fixed month- iting should be reduced. ly loan service fee which amounts to AMD 16,500. Subject to clause 1.10 of the contract, the money In view of further examining and seeking out a solu- the Borrower pays will repay in an order of priori- tion to this claim, an answer to the following ques- ty the penalties, monthly loan service fees, interest tion is essential for the Mediator: as the liability on fees, the loan amount and credit costs, including a consumer loan is repaid ahead of schedule, how litigation costs. From 17.05.2016 to 10.04.2017 the should the monthly loan maintenance/service fee, Client has made installments on the loan ahead which is part of total crediting costs, be reduced of schedule, according to dates and amounts as proportionately? attested in the Mediator’s decision. However, the Organization has charged a monthly maintenance The Law does not provide a formula for propor- fee of AMD 16,500 for that period. This leads the tional reduction, yet, the Mediator thinks, the word Mediator to posit that even though the Client has ‘proportional’ itself implies that a service charge fulfilled contractual obligations ahead of time in has to be deductible inasmuch as the loan amount the period referred to above, the Organization has has reduced because the borrower had that loan failed to reduce the monthly maintenance fee pro- amount repaid ahead of schedule. Once the bor- portionally, thereby violating the consumer right as rower has repaid ahead of schedule, the logic that provided for in Article 10 (2) of the RA Law on “Con- the principal of the loan had been that much lesser sumer Credits”. Had the principle of trimming the should play out. In other words, the implication of maintenance fee down on a pro rata basis worked, a monthly loan service fee reduced on a pro rata the total loan service fee paid by the Client in the basis is to measure the ratio of the loan amount period 17.05.2016–10.04.2017 would have been AMD paid earlier to the original amount of loan and use 16,387.15 less than actually paid. that ratio to trim down the monthly service fee. Furthermore, reducing total crediting costs propor- Below is a tabular calculation: tionally should work starting from early repayment
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Precedents/Exemplary Cases 21/04/2016 Loan Interest Mainte- Mainte- Penalty set Amount Cash Cash Total Loan principal nance fee nance fee under the overdue entered entered amount of principal due charged contract ahead of early (balance) schedule installments 10/05/2016 80,534.73 18,739,73 16,500.00 16,500.00 115,774,46 1,419,465.27 17/05/2016 8,104.21 124,100.00 221.33 221.33 1,419,243.94 08/06/2016 81,986.07 27,063.86 16,497.57 16,500.00 116,000.00 452.50 452.50 1,346,805.37 08/07/2016 72,245.91 26,567.12 16,495.02 16,500.00 115,308.05 1,274,559.46 14/07/2016 6,918.48 122,600.00 373.47 373.47 1,274,185.99 08/08/2016 72,920.93 25,973.92 16,495.89 16,500.00 115,390.74 1,201,265.06 12/08/2016 4,615.63 120,494.00 487.63 487.63 1,200,777.43 08/09/2016 74,300.77 24,477.40 16,494.64 16,500.00 115,800.00 527.19 527.19 1,125,949.47 03/10/2016 18,508.76 115,400.00 1,050,379.43 10/10/2016 75,044.97 4,834.62 16,494.20 16,500.00 517.44 517.44 1,050,379.43 24/10/2016 100,000.00 100.000.00 100,517.44 950,379.43 08/11/2016 - 19,042.85 15,394.31 16,500.00 34,437.16 21,282.15 950,379.43 15/11/2016 2,410.60 37,600.00 752.24 22,034.39 949,627.19 01/12/2016 14,364.95 16,257.62 16,500.00 300,000.00 186,124.65 208,159.04 683,395.76 08/12/2016 - 3,145.49 683,395.76 26/12/2016 8,088.41 14,210.25 16,500.00 200,000.00 177,701.34 385,860.38 505,694.42 09/01/2017 - 12,743.57 12,743.57 305,345.36 505,694.42 31/01/2017 2,803.59 180,000.00 164,452.84 469,798.21 341,241.58 08/02/2017 - 9,110.28 11,332.22 16,500.00 20,442.49 386,522.48 341,241.58 06/03/2017 5,315.05 3,357.54 22,400.00 386,522.48 341,241.58 09/03/2017 - 6,506.96 12,248.25 16,500.00 22,112.76 300,646.99 341,241.58 10/04/2017 - 7,180 13,193 16,500.00 7,177 25,262.55 24,400.00 215,300.79 341,241.58 Total 181,612.85 198,000.00
In the table above, the loan service (maintenance) fee According to Article 20 of the Law, in the event due has been calculated using the following formula: the creditor has violated any of consumer rights as provided for under the Law, the consumer shall be E = (1,500,000 – K) * 1.1% entitled to resort to the court or Financial System Mediator direct, and in the case provided for by law, Where: to commercial arbitrage. Where the fact of violat- ing rights of a consumer using the creditor’s services E – loan service (maintenance) fee due, has been confirmed, three hundred thousand drams shall be levied in benefit to the customer by a court 1,500,000 – principal amount of the loan, award, or by decision of the Financial System Medi- ator. Moreover, the right of a consumer stipulated K – total amount of early installments, herewith cannot be construed as a provision limiting or annulling the consumer right to claim compensa- 1.1% – ratio of the monthly maintenance fee to the tion for the losses incurred. principal amount of the loan.
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Precedents/Exemplary Cases Thus, Article 20 of the Law defines the adverse con- sequences the Organization must face for a failure to perform or for improperly performed obligations before the person whom they have signed a credit agreement with. It is known that where performing Case 10 of an obligation does not comply with the require- ments of the obligation, the law and other stat- utes or, in the absence of such requirements and/or terms, with the requirements to customary business Claim investigated practices or common necessities, such performing Claim against a credit organization operating in will be deemed inappropriate. The aforementioned the Republic of Armenia; regarding the failure to article states that the Organization’s obligation to send bank statements to the client pay the sum as referred to in the RA Law on “Con- sumer Credits” to the Client may arise only when the fact of violated consumer right has been cor- Content of the claim roborated. In this case, because the fact of violation of the right of the Client is evident as the Organi- An agreement was signed between the Client and zation failed to trim down the total credit costs (a the Bank on 10.04.2012 to open a card account and loan maintenance fee, in particular) in proportion to to issue and maintain a bank card, which allowed the installments of the Client made ahead of the the Client to have a payment card. The agreement loan repayment schedule, the Organization will be was renewed on 25.04.2015. On 10.02.2015 the Client required to also pay a penalty to the Client, in ac- signed another agreement on issuing and servicing cordance with the Law. an overdraft instrument (designed for the employ- ees of the Bank) under which a consumer loan was Thus, the Mediator finds that the Client’s claim channeled onto the said payment card account to needs to be satisfied in the amount of AMD 316,387.15, finance the Client’s purchases. According to para- of which AMD 300,000 as a penalty for violation of graph 1.3 of the agreement renewed as of 25.04.2015, consumer right and AMD 16,387.15 as a sum deducti- the previous month’s account statement may be ble from the total credit costs. made available to the Cardholder in the manner pre- ferred by him/her (through postal service, e-mail or in person) until 10th of the next month. The Client received these account statements via a personal e-mail, and although the statements kept on arriv- ing electronically at the same e-mail address after the Bank had joined another bank since the summer of 2016, the Bank has since April 2017, stopped issuing account statements, unlike email notifications which continued to be sent by the Bank. The Client filed a complaint but got a reply letter with refusal.
In an appeal to the Mediator, the Client demanded that the Bank pay a penalty of AMD 300,000 under the law as well as requested to send all those statements electronically that had been omitted since April of 2017.
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Precedents/Exemplary Cases Investigation of the claim and maintaining a bank card. In an application filed A. Mediator’s action to the Bank on 08.02.2015, the Client said that, as a preferred way of communication, he/she decided By virtue of Article 11 (1) and (2) of the Republic of Ar- to receive all information (including account state- menia Law on “Financial System Mediator”, the Me- ments) relating to the terms of credit agreement, diator asked the Bank to provide, within 14 business the setting, alteration and termination of rights and days as specified by the Law on “Financial System obligations and the sanctions to be imposed in the Mediator”, explanations and clarifications and/or ob- event of non-fulfillment or improper fulfillment of jections in writing, and other support documenta- liabilities in person, at the premises of the Bank. Un- tion and deliverables, such as the agreement/rules til April of 2017, the account statements were sent for opening a card account between the Client and onto the Client’s e-mail. With a claim lodged against the Bank, for issuing and servicing a bank card, the the Bank, the Client asked to clarify why the account Client’s request to conclude an agreement with the statements had, starting from April 2017, stopped Bank, as well as any changes to the agreement, the arriving electronically onto his/her e-mail, while de- overdraft agreement/rules concluded between the manding a compensation in the amount of AMD Client and the Bank, the Client’s request for conclud- 300,000. In a reply letter, the Bank has reminded ing the overdraft agreement as well as any changes the Client of the preferred way of getting account to the overdraft agreement, if any, a documented statements and of the opportunity to modify it, and reply to whether or not the Bank has provided the refused to pay compensation to the Client. Referring Client with bank and loan account statements start- to the provisions of paragraph 1.3 of the agreement ing from April 2017 prior to the Client’s appeal to the and of Articles 408 and 417 of the Civil Code of the Mediator, if yes, how and when the statements were Republic of Armenia, the Bank wrote that for a lia- provided, in which way the Client’s account state- bility to arise, an obligation needs to go unperformed ments were provided before April 2017, the copies of and/or be performed improperly. An obligation not correspondence between the Client and the Bank, performed or performed improperly notwithstand- action taken by the Bank after having received the ing, the debtor will be held liable only when its fault complaint from the Client, any other information/ is there. The Bank noted that the Client has chosen document related to the case and might be helpful the method of obtaining information in person, at for investigation of the claim. the Bank’s premises. The Bank has informed the Cli- ent in writing about the way the Client could receive bank statements, while suggesting an alternative B. Bank’s viewpoint to that option upon request. The Client remained committed to the option of receiving information The Office of Mediator has received a letter from the in person, so the statements for the relevant period Bank, in which they voiced their objections while were kept with the Bank, ready to be provided to providing explanations and support documents the Client upon request. The Bank did not take any related to the complaint. The Bank wrote, in par- obligation to send account statements to the Cli- ticular, that the Client and legal predecessor of the ent’s e-mail, so they did not violate any contractu- Bank had entered into an agreement on issuing and al commitments. Accordingly, paying a fine of AMD servicing an overdraft instrument, dated 10.02.2015, 300,000 for not providing account statements to the which granted an AMD 2,295,000-worth of loan to Client shall be ruled out, too. The Bank reckoned the Client with a repayment term up until 10.02.2018. that sending these statements electronically to the On 25.04.2015 the Bank and the Client signed an Client would be possible only if the latter decided agreement on opening a card account and issuing to receiving ones through an e-mail as an option of
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Precedents/Exemplary Cases communication with the Bank. However, no such draft Instrument, designed for the employees of request had been submitted to the Bank by the Cli- the Bank (hereinafter also referred to as the Loan ent. The Bank has requested the Mediator to turn Agreement). down the Client's claim. 4. According to clause 2.1 of the Loan Agreement, Thus, the essential facts for investigation of the the Bank shall extend an overdraft on to the claim are as follows: Borrower’s plastic card account as referred to in clause 1.1.1 of the Agreement under the terms and 1. On 10.04.2012 an agreement was signed be- conditions set forth in clause 3.1 herewith. Pursu- tween the Client and the Bank to open a card ant to clause 3.1 of the Loan Agreement, the Bank account and to issue and maintain a bank card. shall extend a loan on to the Borrower’s card ac- Pursuant to clause 2.1 of the agreement, the count with the following terms and conditions: Bank shall provide the Cardholder with a plas- set up a credit limit of AMD 2,295,000 and term tic card, as indicated in the Cardholder’s letter of of usage: 10.02.2018. request, which will be used a certain period of time to withdraw cash from and/or make pay- 5. According to clause 3.7 of the Loan Agreement, ments through ATMS all over the world, and to the terms and tariffs of charges for payment and make payments in trade/service outlets within settlement services provided to the Borrower by that payment system. According to clause 3.2.2 the Bank shall be determined under the 10.04.2012 of the agreement, the Bank shall be required to agreement to open a card account and to issue open a card account as per the Cardholder’s let- and maintain a bank card. ter of request. 6. On 25.04.2015 the Bank and the Client signed an 2. On 08.02.2015 the Client applied to the Bank for agreement on opening a card account and issu- an overdraft/line of credit instrument. By doing ing and maintaining a bank card (hereinafter also so, the Client requested the Bank to provide him/ referred to as the Bank Account Agreement). her with a loan under the following terms: peri- od of maturity, 36 months, annual interest rate, 7. Subject to the Bank Account Agreement, the 12%, loan amount, AMD 2,295,000. On 08.02.2015 card number is specified as xxxx, the card ac- the Client sent a letter to the Bank, with the count number, as xxxx xxxy. following content: ‘As a customer of the Bank, I hereby prefer to receiving information in writ- 8. According to clause 1.3 of the Bank Account ing (account statements) relating to the terms Agreement, the Cardholder may receive the pre- of credit agreement, the setting, alteration and vious month’s account statement in a preferred termination of rights and obligations and the option (postal service, e-mail, other means of sanctions to be imposed in the event of non-ful- communication or in person) by the 10th of the fillment or improper fulfillment of liabilities in following month. person, at the premises of the Bank, by using any of the following means of communication’, and 9. According to clause 3.2.2 of the Bank Account the line “Receive the information at the premises Agreement, the Bank shall open a card account of the Bank” was ticked to show the sign ‘V’. xxxx xxxx xxxy as requested by the cardholder.
3. On 10.02.2015 the Bank and the Client signed an 10. According to clause 7.9 of the Bank Account Agreement on Issuing and Servicing an Over- Agreement, the agreement shall enter into force
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Precedents/Exemplary Cases starting 30.04.2015 and shall be valid until the va- ments (account plus payment card plus cred- lidity of the card expires. On the front side of the it line) by indicating the bank account number, payment card, the card’s validity period spans up credit card number, and the credit limit of AMD until 04/18. 2,295,000.
11. The Bank Account Agreement contains no indi- 15. As informed by the Bank, following the merg- cation of the methods on how to obtain a bank er of the banks, no changes were made to the account statement, and the Bank did not provide loan agreement concluded on 10.02.2015, the card any evidence that upon or after signing the agree- account opening agreements concluded, re- ment the Client has waived the right to receive spectively, on 10.04.2012 and 25.04.2015. The bank bank account statements through postal service accounts opened and maintained at the Bank and chosen some other way to receive the ones. effective from 26.11.2016 were replaced by the ac- counts of the successor bank, that is there’s been 12. Under a decision of the Board of the Central a change in the account and card numbers only Bank of Armenia, the Bank has joined another while the cards issued by the Bank were replaced bank operating in Armenia. As informed by the by new ones (the Client did not receive a new Bank, the agreements for issuing and servicing card from the Bank). The new card is valid up an overdraft instrument, and for opening a bank to 30.11.2021. account and issuing and maintaining a payment card concluded on 10.04.2012 and 25.04.2015, re- 16. According to the Bank and the Client, except spectively, as well as the rights and obligations for the above three agreements, no credit, bank arising therefrom had passed to the legal succes- account agreements were signed between the sor bank. parties.
13. According to the documents provided by the 17. Starting from April 2017, the Bank has not pro- Client, the Bank has forwarded account state- vided the Client with account statements in any ments to the Client’s e-mail by August 2016. manner, nor has the Client received the ones in These statements sent to the Client included: a) any manner in the course of the time specified. for March and April: ‘statements on the details of the agreement’; b) from May 2015 to May 2016: 18. From April 2017 to 16.20.2017, the Bank has not ‘statements on the details of the agreement’ as submitted any evidence that it had contacted the well as ‘payment card statements’ by indicating Client and offered to receive account statements the following data: bank account number, card in any manner. number, credit limit of AMD 2,295,000; c) for May, June and July of 2016: ‘account statements’ 19. In a loan repayment notice sent to the Client by indicating the account number, card number, on 01.11.2017, the Bank wrote that the Client has credit limit of AMD 2,295,000. failed to properly fulfill credit obligations and re- quested to pay off the loan debt plus the interest 14. Starting from August 2016, the legal successor and penalties. bank had sent the ‘Account Statements’ to the same e-mail of the Client by indicating the ac- 20. The account statement which the Bank replaced count number, card number, and credit limit of for the Client showed the following entries after AMD 2,295,000. For January, February and March April 2017: AMD 24,000 on 02.05.2017, AMD 24,000 of 2017, the Bank had sent further account state- on 31.05.2017, AMD 16,000 on 05.06.2017, AMD
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Precedents/Exemplary Cases 24,000 on 30.06.2017, AMD 24,000 on 26.07.2017, definition of credit as the right for repayment, in AMD 25,000 on 04.09.2017, AMD 30,000 on a variable period of time, of liability, loan, borrow- 16.10.2017, AMD 20,000 on 07.11.2017, AMD 25,000 on ing, financial lease, or any other agreement or ar- 28.11.2017, AMD 25,000 on 27.12.2017, AMD 2,215,610 rangement, with the view of financing procurement on 15.01.2018. These payments were used to repay of goods, services or works. According to the sec- the liabilities under the Loan Agreement. ond sub-clause of the same article, the creditor is considered to be a bank, a branch office of a foreign 21. As informed by the Bank, the Client’s loan agree- bank, a credit organization or a pawnshop providing ment terminated as the loan amount had been a credit. The third sub-clause says that credit agree- repaid, whereas the bank account agreement ment is a transaction by which the creditor extends, continues as no request to end it has been made. or agrees to extend a credit to the consumer, and sub-clause 6 defines that consumer is a citizen re- 22. The Client has filed a claim to the Bank demand- ceiving credit exclusively for ordering or purchasing ing that the latter pay AMD 300,000 provided for goods (works, services) not related with entrepre- by the Law. The Client has also requested that neurial activities, for personal, family, house, or other the Bank forward the relevant statements, omit- consumption purposes. ted since April 2017 to date, to the e-mail. Article 17 (2) of the Law establishes that the credi- 23. The Bank has rejected the Client’s claim while tor shall provide the consumer with information in offering to apply to the Bank for receiving the writing about the consumer’s liabilities arising from relevant statements electronically. credit agreement, the reasons for their occurrence and repayment, including a comprehensive list of 24. In an appeal to the Mediator, the Client demand- applicable and applied sanctions against failure or ed that the Bank pay a penalty of AMD 300,000 improper fulfillment of consumer’s liabilities (pen- under the law as well as requested to send all alty or any other measure having negative effect those statements electronically that had been on consumer’s standing), and cases and terms of omitted since April of 2017. their application, with a frequency established inde- pendently or through a credit agreement, but not Thus, following a comprehensive review of the doc- less than on a thirty-days basis, through mail ser- umentation and deliverables related to the claim, as vice, except in cases indicated under part 3 hereof. well as based on the requirements of the RA law, According to sub-clause 3 of the same article, by the Mediator has concluded as follows: filing an application, including through electronic communication, consumer may renounce his right According to Article 887 (1) of the Civil Code of the of receiving information established under parts 1 Republic of Armenia (hereinafter the Code), under and 2, hereof, through mail service, requesting in- a credit contract, a bank or other credit organization formation subject to mandatory provision through (the creditor) is obligated to provide money funds electronic or other communication services, or at (credit) to the borrower in the amount and on the the premises of the bank. conditions provided by the contract, and the bor- rower is obligated to return the monetary amount The analysis of the aforementioned norms sug- received and to pay interest on it. gests that one party (a bank or other credit organ- ization) provides a loan under the loan agreement, Article 2 (1) 1 of the RA Law on “Consumer Credits” and the other party (the borrower) undertakes (hereinafter also referred to as the Law) gives the to repay the loan and pay interest for it. In case
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Precedents/Exemplary Cases of consumer loan, the bank provides a loan only means of communication’, and the line “Receive the to citizens exclusively for ordering or purchasing information at the premises of the Bank” was ticked goods (works, services) not related with entrepre- to show the sign ‘V’. As a result, the Bank and the neurial activities, for personal, family, house, or Client entered into the Agreement on Issuing and other consumption purposes. In case of consum- Servicing an Overdraft Instrument (designed for the er credit, the law has established additional safe- employees of the Bank) on 10.02.2015. guards to be made by the creditor to protect con- sumer rights. One of these safeguards is the bank’s Pursuant to clause 1.1.4 of the Loan Agreement, over- obligation to provide the Client with the informa- draft is the sum of money made available on a card tion under law at regular frequencies, but not less account as a loan by the Bank for consumer pur- than in 30-day intervals. Thus, the creditor shall poses. provide the consumer with information in writing about the consumer’s liabilities arising from credit Pursuant to clause 2.1 of the Loan Agreement, the agreement, the reasons for their occurrence and Bank shall extend an overdraft on to the Borrower’s repayment, including a comprehensive list of ap- plastic card account as referred to in clause 1.1.1 of the plicable and applied sanctions against failure or Agreement under the terms and conditions set forth improper fulfillment of consumer’s liabilities (pen- in clause 3.1 herewith. Pursuant to clause 3.1 of the alty or any other measure leaving a negative effect Loan Agreement, the Bank shall extend a loan on on the consumer’s standing), and cases and terms to the Borrower’s card account with the following of their application, with a frequency established terms and conditions: set up a credit limit of AMD independently or through a credit agreement, but 2,295,000 and period of usage: 10.02.2018. not less than in a 30-day period, through mail ser- vice, except where by filing an application, includ- Pursuant to clause 3.4 of the Loan Agreement, the ing through electronic communication, the con- Borrower may receive the statement to the trans- sumer waives their right of receiving information actions carried out in the previous month starting through mail service and has chosen to receive the from the second workday of the upcoming month. information through electronic or other commu- nication services, or to receive it in person at the Pursuant to clause 3.7 of the Loan Agreement, the premises of the bank. terms and tariffs of charges for payment and settle- ment services provided to the Borrower by the Bank The investigation of this case found out that the Cli- shall be determined under the 10.04.2012 agreement ent had applied to the Bank for an overdraft/line of to open a card account and to issue and maintain credit instrument. By doing so, the Client intended a bank card. to take out a loan of AMD 2,295,000 for a period of 36 months with a 12% annual interest rate. On the Pursuant to clause 4.2.1 of the Loan Agreement, the same day the Client filed an application to the Bank, Bank undertakes to supply each month to the Bor- with the following content: ‘As a customer of the rower a statement to the card account transactions Bank, I hereby prefer to receiving information in carried out in the previous month. writing (account statements) relating to the terms of credit agreement, the setting, alteration and ter- That is, as well as applying for a loan agreement, the mination of rights and obligations and the sanc- Client has filed an application stating his/her inten- tions to be imposed in the event of non-fulfillment tion to receive information on the repayments (ac- or improper fulfillment of liabilities in person, at the count statements) under the loan agreement ‘at the premises of the Bank, by using any of the following premises of the Bank’”. The documents provided by
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Precedents/Exemplary Cases the Client and the Bank indicate that the Bank had to each account of deposit with the bank, and such by August 2016 and starting from August 2016 up to account statement shall, without any confusing, in- April 2017 forwarded the account statements to the tricate or misleading formulations, present: Client’s e-mail. However, no statements had been forwarded since April 2017. The Bank had withheld 1. the funds debited/credited on the account, and sending the statements electronically because, as account balances for each day, it reasoned, there was no application of the Client wishing to receive the ones electronically, which is 2. the annual percentage yield earned, why sending statements electronically to those cus- tomers who have chosen to receive the ones in per- 3. the amount of interest received, son had been stopped. 4. the fees and penalties charged, The circumstances mentioned above infer that the Bank had no obligation to send account statements 5. the number of days in the reporting period. to the Client electronically, as the parties did not provide any evidence that the Client had applied for Pursuant to the second part of the same article, receiving the statements electronically in the frame- the bank shall not be required to provide an ac- work of the loan agreement dated 10.02.2015. What count statement to the depositor if the bank did had been applied for according to that loan agree- not have funds debited or credited in the account ment was the Client’s application stating that he/ during the reporting period. In accordance with she opted to receive the account statements at the part 5 of the same article, the statements defined premises of the Bank. hereof shall be provided in writing, through mail service, except when the depositor waives its As for the issuing of statements in the framework right of receiving the account statement through of the bank account agreement, the Mediator has mail service, while requesting to receive the state- come to concluding as follows: ment through electronic or other communication services or to receive in person at the premises of According to Article 912 (1) of the Code, under a bank the bank. account agreement, the bank undertakes to accept and deposit the incoming funds onto the account The investigation of this claim also found out that opened by the client (account holder), execute the the Bank and Client have signed the Agreement for client order to make transfers from the account, Opening a Card Account and Issuing and Maintaining provide required amounts and perform other opera- a Bank Card. Pursuant to clause 2.1 of the said agree- tions through the account. ment, the Bank shall provide the Cardholder with a plastic card, as indicated in the Cardholder’s let- According to Article 2 (1) 1 of the RA Law on “Attrac- ter of request, which will be used a certain period of tion of Bank Deposits”, a bank deposit means a de- time to withdraw cash from and/or make payments posit with the bank or monetary funds available on through ATMS all over the world, and to make pay- a bank account. ments in trade/service outlets within that payment system. According to clause 3.2.2 of the agreement, According to Article 6 (1) of the RA Law on “Attrac- the Bank shall be required to open a card account tion of Bank Deposits”, except as otherwise provided as per the Cardholder’s letter of request. Appendix 1, for in part 2 hereof, the bank must provide to the de- which makes an integral part of the said agreement, positor, with at least a 30-day frequency, statement specifies the card’s type.
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Precedents/Exemplary Cases Pursuant to clause 1.1 of the bank account agree- ‘Subject to clause 1.3 of the agreement, the state- ment, card account is a bank account opened and ment shall be provided to the customer the way maintained on behalf of the Cardholder by way of chosen by that customer. The Client did not provide using a payment card. a preferred way of receiving account statements, and the Bank, knowing that bank account and credit Pursuant to clause 1.3 of the bank account agree- account statements are being sent out as a single ment, the Cardholder may receive the previous statement (and the Client preferred to receive the month’s account statement in a preferred option statement in person, at the Bank’s premises), has (postal service, e-mail, other means of communica- ceased, starting from 2017, to issue the statements tion or in person) by the 10th of the following month. electronically’.
Pursuant to clause 2.1 of the bank account agreement, Pursuant to sub-clause 25.1 of Regulation 8/05 on the Bank shall provide the Cardholder with a plastic the “Procedure, Terms, Forms and the Minimum Re- card, as indicated in the Cardholder’s letter of re- quirements for Communication between Bank and quest, which will be used a certain period of time to Depositor, Creditor and Consumer”, as approved un- withdraw cash from and/or make payments through der the Board of the Central Bank of Armenia Reso- ATMS all over the world, and to make payments in lution No. 229-N, dated July 28, 2009, the statements trade/service outlets within that payment system. issued to customers by a financial institution within a timeframe stipulated by the laws on “Attraction of Pursuant to clause 3.2.2 of the bank account agree- Bank Deposits” and on “Consumer Credits” shall at ment, the Bank shall be required to open a card ac- least include the elements set out in Annex 5, ac- count as per the Cardholder’s letter of request. cording to specifications.
Pursuant to clause 7.9 of the bank account agree- In accordance with sub-clause 25.2 of the Reg- ment, the agreement enters into force and is effec- ulation, a financial institution shall be guided by tive until the date on which the card expires. a template to providing a statement set forth in Ap- pendix 6, as per service type. Where the financial in- The Bank Account Agreement neither contains indi- stitution chooses another form of providing a state- cation of how the statements to a bank account are ment, it should at least ensure that the elements to be obtained, nor has the Bank provided evidence of the template bear a full resemblance to that of that upon or after signing the agreement the Cli- normally used by financial institutions (see Appen- ent has waived his/her right to receive bank account dix 5) in the format, sequence, content, font and statements through postal service, as provided for colors. When issued as a printout, the statement in Article 6 of the RA Law on “Attraction of Bank can be without the required colors. In accordance Deposits” and chosen some other way to receive the with sub-clause 25.3 of the Regulation, the financial ones. In other words, the Bank has failed to demon- institution provides the consumer with statement(s) strate the Client’s intention to forego his/her right on the service(s) which the latter uses. For exam- receive bank account statements through a postal ple, where the consumer has only a bank account service under the bank account agreement. Conse- with no overdraft and/or payment card, they will quently, in the absence of such a request, the Bank receive a statement to the bank account but where would have to supply to the depositor, with at least the bank account is overdraft and/or payment card, a 30-day frequency, statement to the account with a single statement to the payment card and over- the bank, which it has failed to do since April 2017. draft instrument will be issued pursuant to the tem- The Bank clarified the said circumstance as follows: plates set out in Appendix 6.
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Precedents/Exemplary Cases The aforementioned viewpoint of the Bank is de- As per statement to the Client’s account, issued by void of any legal and factual grounds as there is the Bank, the following entries have been made no evidence that the Client has waived his/her through that account after April 2017: AMD 24,000 on right to receive the statements through a postal 02.05.2017, AMD 24,000 on 31.05.2017, AMD 16,000 on service. The Client having applied to the Bank on 05.06.2017, AMD 24,000 on 30.06.2017, AMD 24,000 on 10.02.2015 requesting that they would like to receive 26.07.2017, AMD 25,000 on 04.09.2017, AMD 30,000 on the statement at the Bank contains no indication 16.10.2017, AMD 20,000 on 07.11.2017, AMD 25,000 on about the way the account statements are issued 28.11.2017, AMD 25,000 on 27.12.2017, AMD 2,215,610 on in the framework of the bank account agreement. 15.01.2018. These payments were used to repay the lia- What is more, the Bank Account Service Agree- bilities under the Loan Agreement. ment and the Loan Agreement are different con- tracts, and the account statements as referred to in As the Client’s account has had funds credited and Article 6 of the RA Law on “Attraction of Bank De- debited since April 2017, the Bank would have to posits” do not fall in with the information provided provide the Client with account statements for the for in Article 17 (2) of the RA Law on “Consumer relevant months (May, June, July, and so on) in an Credits”, while sub-clause 25.3 of Regulation 8/05 established manner, i.e. through a postal service, in “Procedure, Terms, Forms and the Minimum Re- a 30-day frequency, which it has failed to do so. quirements for Communication between Bank and Depositor, Creditor and Consumer” is pertinent to Moreover, even if the Bank was to provide the ac- the form of statement. The same regulation further count statements to the Client at its premises un- establishes that a financial institution may choose der the said bank account agreement, it has none- another form of issuing a statement, provided that theless violated the Client’s right to receive the the elements of the standard form are fully identi- statement. In particular, pursuant to sub-clause 25.7 cal with the standard format. The norms set out in of Regulation 8/05 “Procedure, Terms, Forms and the said regulation do not exempt the Bank from the Minimum Requirements for Communication the obligation to issue account statement to the between Bank and Depositor, Creditor and Con- customer as well as do not limit the customer’s sumer”, where the statement in issued in the “in right to receive ones. person” manner, the financial institution shall make sure the consumer receives the statement upon vis- Under Article 6 (2) of the RA Law on “Attraction of iting that institution and using any services of the Bank Deposits”, the bank shall not be required to employee therefrom. In the event that the financial provide an account statement to the depositor if organization fails to provide an account statement that bank did not have funds debited or credited in to the consumer for a period of four months, the the account during the reporting period. financial institution shall at least once attempt to contact the consumer and suggest another way of As informed by the Bank, following the merger of receiving the statement. In the event the consum- the banks, no changes were made to the loan agree- er does not agree to receive the statement in any ment of 10.02.2015 and to the card account agree- other way or the consumer cannot be contacted, ments of 10.04.2012 and 25.04.2015, respectively. How- the financial institution will retain any proofs of ever, the bank accounts opened and maintained at the consumer refusal or inability to contact with, the Bank effective from 26.11.2016 were replaced by such as recording, written consent, etc. In case of the account numbers of the successor bank, which consumer consent, the financial institution shall, means there’s been a change in respect of the ac- subject to its internal rules and procedures, provide count and card numbers only. also the statements of the months omitted and
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Precedents/Exemplary Cases shall maintain the written authority for issuance of Bureau established under the RA Law on “Circulation these statement for at least one year. of credit information and activities of credit bureaus”.
The investigation of this case found out that the Based on the foregoing, the Mediator believes that Client did not receive statements to his/her account the Client’s claim should be satisfied in the amount after April 2017; the Bank did not provide any evi- of AMD 300,000 (three hundred thousand Armenian dence that they had contacted the Client after April drams) but should be ended on the part of issuance 2017 (with the Client having not received account of account statements. statements for 4 months). The Bank noted that they had tried once to contact and but it was not possi- ble (no evidence available). In addition, the Bank has informed the Client of the availability of the state- ments and of the possibility to get them.
In accordance with Article 12 (1) of the RA Law on “Attraction of Bank Deposits”, where the fact of vio- lated right of the depositor using the bank’s services has been confirmed, the bank shall pay to the de- positor three hundred thousand drams within a 30- day period.
Summing up what has been stated above, the Me- diator finds that the Client’s claim on the part of paying a fine is justified as the account statements provided for by the RA Law on “Attraction of Bank Deposits” were not made available to him/her start- ing from April 2017, and violation of the right of the depositor to receive account statements under the said law leads to the fine which amounts to AMD 300,000 (three hundred thousand Armenian drams).
Referring to the Client requiring that the account statements be forwarded to a personal e-mail starting from April 2017, the Mediator records the following:
According to Article 3 (1) of the RA Law on “Finan- cial System Mediator”, the Mediator has the right to examine the claims filed by the Client against the Company, which are related to the services provided by the Organization and which contain a property claim not exceeding ten million Armenian drams or an equivalent foreign currency, and a non-property claim, in the event of claims lodged against Credit
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Precedents/Exemplary Cases Investigation of the claim A. Mediator’s action
By virtue of Article 11 (1) and (2) of the Republic of Case 11 Armenia Law on “Financial System Mediator”, the Mediator asked the Bank to provide, within 14 busi- ness days as specified by the Law on “Financial Sys- tem Mediator”, explanations and clarifications and/or Claim investigated objections in writing, and other support documen- Claim against a bank operating in the Republic of tation, namely the Bank Account Agreement con- Armenia; regarding the failure to send bank state- cluded between the Client and the Bank, the state- ments to the client ments to bank account of the Client, any grounds for charging a commission fee of AMD 5,000, the correspondence in writing between the Bank and Content of the claim the Client, any other information or document that might be helpful for investigation of the claim. The Client signed an agreement with the Bank on 27.06.2015 for opening a card account and issuing and maintaining a payment card. From the date of B. Bank’s viewpoint signing the agreement until the date of filing the claim the Client hasn’t received monthly statements The Office of Mediator has received a letter from to the account, issuing of which is free of charge un- the Bank, in which they explained their viewpoint der the law. As the Client applied to the Bank with with regard to the Client’s claim. The Bank wrote, a request to receive all account statements due, the in particular, that on 19.06.2015 the Client applied to Bank said that issuance of a statement to account the Bank with a request to open a card account and is a paid service and it costs AMD 5,000. According issue and maintain a payment card. An agreement to the Client, although not disposed to be charged, for opening a card account and issuing and main- the Client has still paid, as he/she needed the state- taining a payment card was concluded between the ment. As explained by the Client, failing to issue Bank and the Client on 27.06.2015 by which the Bank account statements at a 30-day time interval, the has established a bank account and issued a relevant Bank has violated the requirement of the RA Law payment card. The Client has chosen the option of on “Attraction of Bank Deposits”, which imposes receiving the information subject to mandatory pro- a fine of AMD 300,000 as a consequence. vision at the premises of the Bank. On 23.09.2017 the Client applied to a branch office of the Bank ask- In an appeal to the Mediator, the Client demand- ing to issue an account statement for a period from ed that the Bank pay a penalty of AMD 300,000 as 19.06.2015 to 23.09.2017. The Client filed a complaint provided for in the RA Law on “Attraction of Bank with the Bank, seeking an explanation why the Bank Deposits” for each month’s statement not provided failed to issue account statements at a 30-day time (AMD 3,600,000 in total) and to refund AMD 5,000 interval, while demanding that the Bank pay a pen- the Bank has charged for issuing an account state- alty of AMD 300,000 for each month’s statement ment. not issued from September of 2016 until the date of filing the complaint (which makes up a total AMD 3,600,000) and refund him/her AMD 5,000 the Bank has charged for issuing the statement.
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Precedents/Exemplary Cases The Bank noted that subject to the Effective Tar- service/maintain a payment card, by which the iffs of the Bank, a commission fee of AMD 5,000 is Bank has established a bank account and issued chargeable for issuing statement to a bank account a relevant payment card designed to serve the if the period for the statement is more than 1 year. account transactions in accordance with the The period the Client sought for the account state- terms and conditions set forth in the agreement. ment spanned from 19.06.2015 to 23.09.2017, i.e. it ex- ceeded one year. 4. Pursuant to clause 4 (d) of Effective Tariffs “Open- ing and maintaining an account”, issuance of Referring to Article 6 (3) of the RA Law on “Attrac- statements to the account for transactions car- tion of Bank Deposits” and to clause/sub-clause 1.2, ried out for more than one year is AMD 5,000. 2.3.3, 2.3.10, 4.1 of the Agreement on Opening a Card Account and Issuing and Maintaining a Payment 5. On 23.09.2017 the Client applied to a branch man- Card, concluded between the Bank and the Client ager of the Bank with a request to issue an ac- on 27.06.2015, the Bank noted that they have an ob- count statement covering a period from 19.06.2015 ligation to provide the Client with statement to the to 23.09.2017. bank account and, consequently, charge a fee sub- ject to the Effective Tariffs of the Bank. The facts of 6. For issuing an account statement for a period this case infer that the Client has applied to the Bank 19.06.2015–23.09.2017 the Client was charged a fee requesting to issue an account statement for a cer- of AMD 5,000, according to the claim of the Cli- tain period of time, which the Bank has fulfilled and ent and a letter of the Bank. has charged the rate according to the Effective Tar- iffs. Charging a fee for issuing an account statement, 7. The Client has filed a claim to the Bank which the Bank explained, was driven by the circumstance was turned down by the Bank. that the Client did not request an issuance of state- ments the Bank is required to provide free of charge 8. In an appeal to the Mediator, the Client demand- anyway each month, so the Bank has, by virtue of ed that the Bank pay a penalty of AMD 300,000 provisions of legal and contractual statutes above, as provided for in the Law for each month’s charged a fee from the Client. statement omitted (AMD 3,600,000 in total) and to refund him/her AMD 5,000 the Bank has Thus, the essential facts for investigation of the charged for issuing the statement. claim are as follows: Thus, a comprehensive review of the documents and 1. The Client has applied to the Bank with a re- deliverables related to the claim, as well as reference quest to open a bank account and issue a pay- to the provisions of the RA law has led the Mediator ment card. to conclude as follows:
2. Subject to the RA Law on “Attraction of Bank De- According to Article 345 (1) of the Civil Code of the posits” (hereinafter also referred to as the Law), Republic of Armenia (hereinafter referred to as the the Client has chosen the option of receiving the Code), by force of an obligation one person (the debt- mandatory information in person, at the Bank’s or) is obligated to take for the use of another person premises. a defined action, such as: to pay money, to trans- fer property, to perform work, etc., or refrain from 3. On 27.06.2015 the Client and the Bank signed an a defined action, and the creditor has the right to agreement to open a card account and issue and demand from the debtor the obligation to perform.
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Precedents/Exemplary Cases The second part of the same article says that the ob- within a 30-day period. Under part 2 of the same ligations arise from the contract, as a result of caused article, the first paragraph of this Article cannot be damage and other grounds specified in this Code. interpreted as a provision limiting or excluding the right of the depositor to claim damages. In accordance with Article 347 of the Code, obliga- tions must be performed in a proper manner, in ac- The penalty is an additional obligation aimed at se- cordance with the terms of the obligation and the curing the proper fulfillment of the main obligation. requirements of a statute, other legal acts, and in The RA Law on “Attraction of Bank Deposits” envis- the absence of such terms and requirements, in ac- ages a legitimate penalty which follows a logic that cordance with the customary business practices or where the fact of the violated right of a depositor other requirements usually offered. using bank services has been corroborated, the bank pays a penalty of AMD 300,000. Article 408 of the Code says that a breach of the obligation is the failure to perform or improperly According to Article 912 (1) of the Code, under a bank perform an obligation (in an untimely manner, with account agreement, the bank undertakes to accept defects found with regard to goods, works, and ser- and deposit the incoming funds onto the account vices or with breach of other conditions determined opened by the client (account holder), execute the by the content of the obligation). client order to make transfers from the account, provide required amounts and perform other opera- According to Article 369 of the Code, a penalty tions through the account. (forfeiture, fine) is a monetary sum determined by a statute or contract that a debtor must pay to the According to Article 2 (1) 1 of the Law, a bank deposit creditor in case of non-performance or improper means a deposit with the bank or monetary funds performance of an obligation, in particular in case available on a bank account. Under part 2 of the of a delayed performance. In demanding payment same article, a deposit contract is a contract con- of a penalty, the creditor is not obligated to prove cluded with a view of attracting the deposit as pro- that damage was caused to it. Under part 2 of the vided for in this law. same article, a penalty secures only a valid claim, and part 3 of the same article establishes that the cred- The regulatory arrangements above suggest that itor does not have the right to demand payment of monetary funds available on a bank account are a penalty if the debtor does not bear liability for the considered a bank deposit, so agreement on a bank nonperformance or improper performance of the account on which the sums of money are to be obligation. credited is also considered a deposit agreement. In this case, the Bank and the Client have entered into According to Article 371 (1) of the Code, The creditor a bank account relationship. has the right to demand payment of a penalty de- fined by a statute (a statutory penalty) regardless of According to Article 6 (1) of the Law, except as oth- whether or not the obligation to pay it is provided erwise provided for in part 2 hereof, the bank must by an agreement of the parties. provide to the depositor, with at least a 30-day fre- quency, statement to each account of deposit with In accordance with Article 12 (1) of the Law, where the bank, and such account statement shall, with- the fact of violated right of the depositor using the out any confusing, intricate or misleading formula- bank’s services has been confirmed, the bank shall tions, indicate: (1) the funds debited/credited on the pay to the depositor three hundred thousand drams account, and account balances for each day; (2) the
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Precedents/Exemplary Cases annual percentage yield earned; (3) the amount of about a waiver to use the right to receive account interest received; (4) the fees and penalties charged; statements through a postal service. Further, Arti- (5) the number of days in the reporting period. Un- cle 6 (6) of the Law provides that once receiving ac- der part 2 of the same article, the bank shall not be count statements in person at the premises of the required to provide an account statement to the de- bank has been chosen, the Bank will be required to positor if it has had no funds debited or credited on retain the account statements, unclaimed by the the account in the period under review. depositor, for at least 3 years. It turns out that, with an option to get account statements personally at Under part 5 of the same article, account statements the premises of the bank, the depositor may at any as referred to herewith shall be issued to the deposi- time visit the bank and request a free account state- tor in writing, through a postal service, except where ment unclaimed for at least the last 3 years. the depositor has waived his/her right to receive ac- count statements via postal communication on the So, considering the facts in this case, we know basis of his/her request whether made in writing or that the Client has chosen the option of receiving electronically, and has instead chosen some other the mandatory information in person, at the Bank’s way to receive the ones (whether electronically or premises, subject to the RA Law on “Attraction of by other means of communication or in person at Bank Deposits”. On 23.09.2017 the Client applied to the premises of the bank). A stipulation or agree- a branch manager of the Bank with a request to ment limiting the depositor’s right to receive ac- issue an account statement covering a period from count statements electronically or by other means 19.06.2015 to 23.09.2017. For issuing the account state- of communication or in person at the premises of ment claimed for a period 19.06.2015–23.09.2017, the the bank is null and void. Moreover, the bank is not Client was charged a fee of AMD 5,000. entitled to compel the depositor, including by way of creating unfavorable situation for him/her, to fore- As to the legitimacy of charging a fee for provision go the right to receive account statements through of account statements, the Mediator believes that a postal service. Paragraph 6 of the same article de- the depositor’s right to receive account statement fines that where account statements are handed to under law is not necessarily linked to paying a fee in the depositor at the bank’s premises, the bank must order to exercise this right. According to Article 6 (3) retain the account statements unclaimed by the de- of the Law, at the request of the depositor the positor for at least 3 years. bank must provide the depositor with statement to their account within a 5-day period, subject to The legislative norms mentioned above imply that the effective tariffs of the bank, but the Mediator the Bank is required to provide the depositor with records that this rule applies to the cases when the an account statement which should contain the depositor has already exercised his/her right to re- information provided for in the Law, except when ceive a free account statement, which means that the Bank has had no funds debited or credited the Bank shall only be able to charge for provision of on that account in the period under review. With further account statements after the depositor shall a procedure allowing to provide account state- have used his/her statutory right to receive the ones ments through a postal service, Article 6 (5) of the free of charge. Law gives the depositor a dispositive ability to de- termine how they want to receive account state- Having chosen the option of receiving account state- ments – whether electronically or by other means ments in person at the premises of the Bank, the Cli- of communication or in person at the premises of ent has been able to visit the Bank any time and get the bank – once they have filed a request in writing a free account statement due. By linking an exercise
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Precedents/Exemplary Cases of this right to charging a fee, the Bank has violated the Client’s right to receive free account statements as provided for by the RA Law on “Attraction of Bank Deposits”, so it will be required to pay a penalty, as specified in Article 12 of the Law, at the amount of Case 12 AMD 300,000. The Bank shall also compensate the losses caused to the Client as a result of the vio- lation, as Article 12 of the Law establishes that the penalty imposed under this law cannot be interpret- Claim investigated ed as a provision limiting or excluding the right of Claim against a credit organization operating in the depositor to claim damage. the Republic of Armenia; regarding the failure to deliver statements to the client According to Article 17 (1) of the Code, a person whose rights have been violated can claim a full compensation for the damage caused to him/her, Content of the claim unless the law or the contract provides for com- pensation for losses in a lesser amount. The second A loan contract was concluded between the Cli- part of the same article says that losses means the ent and a credit organization (the Organization) on expenses that the person whose right was violated 20.11.2017 by which the Organization provided the made or must make to reinstate the right that was Client with a loan in the amount of AMD 500,000 violated, the loss of or injury to his/her property (ac- and at a 24% interest rate per annum. Under the tual damage), and also income not received that this contract, the information subject to mandatory person would have received under the customary provision should be made available at the creditor’s civic practices if his/her right had not been violated premises. By virtue of the requirements laid down in (foregone benefit). In this case, the Client had to pay parts 2, 3 and 4 of Article 17 of the RA Law on “Con- a commission of AMD 5,000 for getting what he/she sumer Credits”, on 03.03.2019 the Client visited the should have been given free of charge. Organization and requested to provide statements. The Organization has provided a statement issued Subject to the requirement of the RA Law on “At- for 469 days. According to the Client, the creditor traction of Bank Deposits”, the Bank shall also be has violated the requirement of issuing statements required to compensate against the damage caused in at least a 30-day frequency, so the Client filed as a result of violation by refunding the Client AMD a claim with the Organization on 04.03.2019, de- 5,000 which the latter paid as a service fee. manding that the Organization pay a penalty of AMD 300,000 for failure to issue the statements. Thus, taking the aforementioned into account, the In a reply letter, the Organization turned down the Mediator decided to satisfy the Client’s claim par- claim of the Client. tially, in the amount of AMD 305,000 (three hundred and five thousand Armenian drams). In an appeal to the Mediator, the Client asked the Mediator to make a decision and oblige the Organi- zation to pay a penalty of AMD 300,000 (three hun- dred thousand Armenian drams) for violating the requirement laid down in Article 17 of the Law.
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Precedents/Exemplary Cases Investigation of the claim Thus, the essential facts for the investigation of the A. Mediator’s action claim are as follows:
By virtue of Article 11 (1) and (2) of the Republic of 1. A loan contract dated 20.11.2017 was concluded Armenia Law on “Financial System Mediator”, the between the Client and the Organization (here- Mediator asked the Organization to provide, within inafter the Contract) by which the borrower has 14 business days as specified by the Law on “Finan- received a loan of AMD 500,000 (five hundred cial System Mediator”, explanations and clarifications thousand Armenian drams) at annual interest and/or objections in writing, and other support doc- rate of 24% with a repayment period up until uments and deliverables, including the loan contract 17.05.2020. signed between the Client and the Organization, with annexes attached thereto, the Client’s loan 2. Pursuant to clause 1.2 of the Contract, the terms package (loan application, decision on approval, etc.), of the loan are established as “Terms of Lending” a letter on how the Client chooses to receive state- set forth in Annex 7.1 which is an integral part of ments (if any), evidence that the statements were the Contract. issued, the proof of correspondence between the Organization and the Client, any other information 3. Pursuant to part 5 of Annex 7.1, the loan has been or document that might be helpful for investigation made for consumer purposes. of the claim. 4. Pursuant to clause 13 of the Contract where sec- tion ‘Notifying mandatory information at the B. Credit organization’s viewpoint Borrower choice’ has fields like ‘through postal service’, “electronically”, ‘at the premises of Cred- The Office of Mediator has received a letter from the itor’, and ‘other means of communication’, the Organization, in which they voiced objections while field ‘at the premises of Creditor’ has been ticked explaining their viewpoint with regard to the claim. to show a sign ‘V’. The same field has a notice The Organization wrote, in particular, that they that ‘The Borrower may send any time a written signed a loan contract with the Client on 20.11.2017. notice to the Lender to modify the way of ob- Under the contract, the Client has chosen the option taining mandatory information’. ‘at the premises of the creditor’ for receiving man- datory information. The Organization believed they 5. The Client has filed a claim with the Organiza- did not violate any requirement of Article 17 of the tion and demanded that the Organization pay a RA Law on “Consumer Credits”; moreover, upon the penalty of AMD 300,000 for failure to issue the Client’s visit on 03.03.2019 the Organization has of- statements at an established time interval. fered and provided the Client with a statement fully in line with requirements to content. The informa- 6. In a reply letter, the Organization has declined tion in the statement covered not only the previous the Client’s claim. 30-day period, but also the entire period starting the day when the loan was granted. By observing the 7. In an appeal to the Mediator, the Client asked requirements laid down in Article 17 (4) of the RA the Mediator to make a decision and urge the Law on “Consumer Credits”, the Organization has re- Organization to pay a penalty of AMD 300,000 tained unclaimed information electronically and has (three hundred thousand Armenian drams) for therefore made all relevant information available to violating the requirement laid down in Article 17 the Client. of the RA Law on “Consumer Credits”.
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Precedents/Exemplary Cases Thus, a comprehensive review of the documents and the premises of the lender is null and void. Moreover, deliverables related to the claim, as well as reference the lender is not entitled to compel the consumer, to the provisions of the RA law has led the Mediator including by way of creating unfavorable situation to draw the following conclusion: for them, to forego the right to receive mandatory information through a postal service. Under part 4 According to Article 887 (1) of the Civil Code of the of the same article, where mandatory information is Republic of Armenia (hereinafter referred to as the delivered to the consumer at the lender’s premises, Code), the bank or another credit organization the lender must retain that information, unclaimed (creditor) is obliged to provide the borrower with by the consumer, in hard copies or electronically, for sums of money (loan) in the amount and terms stip- at least 3 years. ulated by the contract, and the borrower is obliged to repay the received sums of money and pay inter- The legislative arrangements mentioned above sug- est on them. gest that the creditor must in a frequency not less than 30 days, provide the consumer with account Article 2 (1) 1 of the RA Law on “Consumer Credits” statement which should contain the information provides the definition of credit as the right for re- provided for in Article 17 (2) of the RA Law on “Con- payment, in a variable period of time, of liability, sumer Credits”. Article 17 (2) of the Law envisages the loan, borrowing, financial lease, or any other agree- providing of account statement through a postal ment or arrangement, with the view of financing service while enabling the consumer to waive his/ procurement of goods, services or works. her right, based on a request in writing, to receive account statements through a postal service and According to Article 17 (2) of the same law, the cred- choose instead an option to receive the ones elec- itor shall provide the consumer with information in tronically or by other means of communication. writing about the consumer’s liabilities arising from credit agreement, the reasons for their occurrence In this case, the Client and the Organization con- and repayment, including a comprehensive list of cluded the loan contract on 20.11.2017, by which the applicable and applied sanctions against failure or borrower has received a loan of AMD 500,000 (five improper fulfillment of consumer’s liabilities (penalty hundred thousand Armenian drams) at an annu- or any other measure having negative effect on con- al interest rate of 24% and with a maturity peri- sumer’s standing), and cases and terms of their ap- od up until 17.05.2020. Pursuant to clause 1.2 of the plication, with a frequency established independent- Contract, the terms of the loan are established as ly or through a credit agreement, but not less than “Terms of Lending” set forth in Annex 7.1, which is an on a thirty-days basis, through mail service, except integral part of the Contract. Pursuant to clause 13 in cases indicated under part 3 hereof. Under part 3 of the Contract where section ‘Notifying mandatory of the same article, by filing an application, including information at the Borrower choice’ has fields like through electronic communication, the consumer ‘through postal service’, “electronically”, ‘at the prem- may renounce his right of receiving information es- ises of Creditor’, and ‘other means of communica- tablished under parts 1 and 2 hereof, through mail tion’, the field ‘at the premises of Creditor’ has been service, requesting information subject to mandato- ticked to show a sign ‘V’. The same field has a notice ry provision through electronic or other communica- that ‘The Borrower may send any time a written no- tion services, or at the premises of the bank. A stip- tice to the Lender to modify the way of obtaining ulation or agreement limiting the consumer’s right mandatory information’. The Client accepted that to receive mandatory information electronically or he/she has chosen the option of receiving the state- by other means of communication or in person at ment (written information on the liability, reason for
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Precedents/Exemplary Cases occurrence thereof and how it should be paid off) a period of 469 days. Based on the foregoing, the in person, at the premises of the Organization, Mediator considers that the Information has been which has also been confirmed by the Organization provided to the Client in the manner preferred by in its objections. So, having selected the option ‘at the Client, i.e. at the premises of the Organization the premises of Creditor’ out of all possible options for the entire period of validity of the Contract. The prescribed by law, the combined will of the parties fact that the Client has claimed the Information for coincide in a sense that both the Client and the Or- a specific period of time but has not received the ganization wanted the statement (written informa- one was not identified. tion on the liability, reason for occurrence thereof and how it should be paid off) to be made availa- The Mediator believes that the fact of violation of the ble at the Creditor’s premises. This fact has been Client’s right to receive a statement under the loan acknowledged by the Client and the Organization contract concluded between the Client and the Or- in a complaint on the one hand and in the objec- ganization has not been identified, the Client’s claim tions on the other, making this an indisputable fact. is groundless and must therefore be turned down. In such circumstances, the Mediator considers that the Client has waived the right to receive the state- ment (written information on the liability, reason for occurrence thereof and how it should be paid off) through a postal service but chosen to get it at the premises of the Organization. This implies that the Client might request the information at the Organ- ization and, in a sense of the requirements of the Law on “Consumer Credits”, only failure to provide that information would result in the violation of the right of the Client as a consumer.
In this case, on 03.03.2019 the Client filed a complaint with the Organization requesting to provide the statements. The Organization has provided a state- ment issued for 469 days. According to the Client, the Creditor has violated the requirement of issuing statements at a 30-day time interval, so the Organ- ization will pay a penalty of AMD 300,000 for failure to issue the statements in an established frequency.
Referring to the Client’s claim, Mediator records that the Client has preferred to receive the information (the Information) provided for in Article 17 (2) of the Law on “Consumer Credits” in person, at the prem- ises of the creditor. During examination of the claim, there was no evidence which period the Client has claimed the Information for. Either of the parties – the Client and the Organization – have admitted that the Client has been provided a statement for
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Precedents/Exemplary Cases Clients expressing their gratitude to the Office
American Arbitration Association
The American Arbitration Association was established in 1926 following the adoption of the Federal Arbitration Act, which aimed to offer the arbitration as a means to resolve extrajudicial disputes. It was signed by the Congress and President Calvin Coolidge. The AAA’s mission and vision are based on three core values: honesty, managing dispute resolution, and servicing the parties. The AAA has developed strict etiquette rules and standards for arbitrators and mediators to ensure fair and impartial dispute resolution. The AAA also actively promoted the use of mediation around the world and is one of the co-founders of the International Mediation Institute. A ‘Thank-you’ note A ‘Thank-you’ note
I would like to express deep appreciation to the I would like to say special thanks to Eleonora Tara- Office of Financial System Mediator, particularly khchyan, a claim investigating expert at the Office of Lilit Gabrielyan and Laura Poghosyan, for a very Financial System Mediator. kind attitude and high professionalism. My special thanks to Mrs. Piruz Sargsyan and all the Truly, A. G. staff of the Office! March 28, 2018
Sincerely, A. K. January 29, 2018
A ‘Thank-you’ note
I express my deep gratitude to the Office of Fi- A ‘Thank-you’ note nancial System Mediator for an organized and fair assistance provided by Lilit Simonyan, a claim in- Let me express my gratitude to the Office of Fi- vestigating specialist. nancial System Mediator, particularly Emilia Haru- tyunyan, with the help of whom my complaint Best regards, A. G. against an insurance company was satisfied and March 30, 2018 the insurance company compensated me the en- tire amount.
Sincerely, A. S. February 9, 2018 A ‘Thank-you’ note
Let me say thank you to the Office of Financial Sys- tem Mediator for your considerate attitude.
A ‘Thank-you’ note Sincerely, R. H. May 17, 2018 I express my gratitude to the Office of Financial System Mediator, Anahit Khachatryan and Eleonora Tarakhchyan in particular, for their professionalism and friendly attitude to me. I wish your Office even more success and achieve- A ‘Thank-you’ note ments! I am so grateful to Hayk Hovhannisyan and Emilia Ha- Sincerely, Ts. S. rutyunyan for a good job; it was really my pleasure February 28, 2018 dealing with such professionals who do their work per- fectly. I am delighted with Emilia Harutyunyan’s work.
Candidly, S. H. June 15, 2018
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Clients expressing their gratitude to the Office A ‘Thank-you’ note A letter of gratitude
Dear Ms. Emilia Harutyunyan, I would once again like I am surgeon and I had a difficult problem. But by to thank you and all the staff of the Office of Financial a twist of fate I did go to the Office of Financial System Mediator, as it was your kind assistance which System Mediator. My claim was satisfied thanks to helped me to satisfy the complaint against the Bank. Anahit Khachatryan, a case handling specialist, and I express my deepest gratitude to her. Yours truly, M. M. May God bless Anahit Khachatryan! June 27, 2018 Truly, N. M. November 5, 2018
A ‘Thank-you’ note
I cordially express gratitude to Anahit Khachatryan for A letter of gratitude a very kind, patient and easy-going attitude shown to me. I would have never imagined that such an organ- ization could exist in Armenia to handle the prob- Sincerely, A. P. lems of mere mortals impartially. I express my deep July 15, 2018 gratitude to the entire personnel of the Office of Fi- nancial System Mediator with a heartfelt wish to see more offices in this country with such intelligent and friendly staff.
A ‘Thank-you’ note Sincerely, L. G.
Dear Financial System Mediator’s Office, the entire staff of “Lusabats” Camp thanks you for a happy day which you organized for our children.
Sincerely, “Lusabats” Camp July 17, 2018
A ‘Thank-you’ note
My thanks to Ashot Terteryan for helping me achieve reconciliation with the Bank on the matter of my discontent and complaint I had against it.
Best regards, A. A. October 1, 2018
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Clients expressing their gratitude to the Office 2 Board Chairman’s Address
3 Financial System Mediator’s Address
4 Office of Financial System Mediator
8 Events Calendar
16 Programs Carried Out in 2018
22 Programs to be Implemented in 2019
26 Statistics of Claims
50 Financial Statement and Audit Opinion
58 Precedents/Exemplary Cases
130 Clients' Letters of Gratitude to the Office
134 The List of Organizations that have not Signed the Covenant The list of organizations THAT HAVE NOT SIGNED the covenant
International Mediation Institute
The International Mediation Institute was established in 2007. It is the only organization in the world that develops international professional standards for mediators and lawyers who are engaged in dispute resolution, negotiation and mediation. International standards which the IMI elaborates add value to the transparency and effectiveness in dispute resolution. One of the important publications of the IMI is the “Professional Mediator Activity Regulation”. The IMI also releases training materials for mediators and conducts training in countries where reconciliation is not yet developed. Banks 12. “Byblos Bank Armenia” CJSC 1. “ARMECONOMBANK” JSC (If the property claim exceeds AMD 250.000 or an (If the property claim exceeds AMD 250.000 or an equivalent foreign currency; and if the transaction amount equivalent foreign currency; and if the transaction amount exceeds AMD 500.000 or an equivalent foreign currency). exceeds AMD 500.000 or an equivalent foreign currency). 13. “Artsakhbank” CJSC 2. “ARARATBANK” JSC (If the property claim exceeds AMD 250.000 or an (If the property claim exceeds AMD 300.000 or an equivalent foreign currency; and if the transaction amount equivalent foreign currency). exceeds AMD 500.000 or an equivalent foreign currency). 3. “ID Bank” CJSC 14. “VTB-Armenia Bank” CJSC (If the property claim exceeds AMD 500.000 or an (If the property claim exceeds AMD 250.000 or an equivalent foreign currency). equivalent foreign currency; and if the transaction amount 4. “EVOCABANK” CJSC exceeds AMD 500.000 or an equivalent foreign currency). (If the property claim exceeds AMD 250.000 or an 15. “UNIBANK” JSC equivalent foreign currency; and if the transaction amount (If the property claim exceeds AMD 250.000 or an exceeds AMD 500.000 or an equivalent foreign currency). equivalent foreign currency; and if the transaction amount 5. “ARMBUSINESSBANK” CJSC exceeds AMD 500.000 or an equivalent foreign currency). (If the property claim exceeds AMD 250.000 or an 16. “Ardshinbank” CJSC equivalent foreign currency; and if the transaction amount (If the property claim exceeds AMD 250.000 or an exceeds AMD 500.000 or an equivalent foreign currency). equivalent foreign currency; and if the transaction amount 6. “Ameriabank” CJSC exceeds AMD 500.000 or an equivalent foreign currency). (If the property claim exceeds AMD 250.000 or an 17. “ARMSWISSBANK” CJSC equivalent foreign currency; and if the transaction amount (If the property claim exceeds AMD 250.000 or an exceeds AMD 500.000 or an equivalent foreign currency). equivalent foreign currency; and if the transaction amount 7. “Converse Bank” CJSC exceeds AMD 500.000 or an equivalent foreign currency). (If the property claim exceeds AMD 250.000 or an equivalent foreign currency; and if the transaction amount Credit Organizations exceeds AMD 500.000 or an equivalent foreign currency). 1. “AGROLEASING LEASE CREDIT ORGANIZATION” LLC 8. “Mellat Bank” CJSC 2. “ANIV” UCO LLC (If the property claim exceeds AMD 250.000 or an 3. “First Factoring Company” UCO CJSC equivalent foreign currency; and if the transaction amount 4. “AREGAK” UCO CJSC exceeds AMD 500.000 or an equivalent foreign currency). 5. “Arfin” Credit Union LLC 9. “HSBC Bank Armenia” CJSC 6. “BLESS” UCO LLC (If the property claim exceeds AMD 250.000 or an 7. “Housing for Youth” RCO CJSC equivalent foreign currency; and if the transaction amount 8. “GARNI INVEST” UCO CJSC exceeds AMD 500.000 or an equivalent foreign currency). 9. “GOODCREDIT” UCO CJSC 10. “INECOBANK” CJSC 10. “Express Credit” UCO LLC (If the property claim exceeds AMD 250.000 or an 11. “ECLOF” UCO LLC equivalent foreign currency; and if the transaction amount 12. “KAMURJ” UCO CJSC exceeds AMD 500.000 or an equivalent foreign currency). 13. “CREDIT CORP” UCO CJSC 11. “ACBA-Credit Agricole Bank” CJSC 14. “CREDO FINANCE” UCO CJSC (If the property claim exceeds AMD 250.000 or an 15. “UNILEASING” UCO CJSC equivalent foreign currency; and if the transaction amount 16. “Nor Horizon” UCO LLC exceeds AMD 500.000 or an equivalent foreign currency). 17. “G & A” UCO LLC 18. “Varks AM” UCO CJSC
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The list of organizations which did not sign the covenant 19. “SEF INTERNATIONAL” UCO LLC 5. “Rosgosstrakh - Armenia” ICJSC 20. “Parvana Credit” UCO LLC (Excluding claims on insurance policy signed under 21. “CARD AgroCredit” UCO CJSC a social security package). 22. “Fides Mortgage Company” UCO CJSC 6. “SIL INSURANCE” ICJSC 23. “FINCA” UCO CJSC (Excluding claims on insurance policy signed under 24. “EXPORT FINANCE” UCO CJSC a social security package). 25. “ACBA LEASING” CO CJSC 7. “I.S.G.” ILLC (If the property claim exceeds AMD 250.000 or an equivalent foreign currency; and if the transaction amount Insurance Brokers exceeds AMD 500.000 or an equivalent foreign currency). 1. “RESOLUTION INSURANCE BROKER” LLC 26. “MYCREDIT” UCO LLC 27. “MOGO” UCO LLC Pawnshops 28. “Premium Credit” UCO CJSC 1. “Alexworld” LLC (If the property claim exceeds AMD 100.000 or an 2. “Aghdad” LLC equivalent foreign currency; and if the transaction amount 3. “Amalik Credit” LLC exceeds AMD 300.000 or an equivalent foreign currency). 4. “Amuni Group” LLC 29. “Armenia Development and Investment Corpora- 5. “AMS” LLC tion” UCO CJSC 6. “Ashot Frangulyan” Private entrepreneur (If the property claim exceeds AMD 250.000 or an 7. “First Pawnshop” LLC equivalent foreign currency; and if the transaction amount 8. “AS MASTER” LLC exceeds AMD 500.000 or an equivalent foreign currency). 9. “AUTO CREDIT” LLC 30. “First Mortgage Company” UCO LLC 10. “Arag Finance” LLC (If the property claim exceeds AMD 250.000 or an 11. “Arangel Provider” LLC equivalent foreign currency; and if the transaction amount 12. “Arbon” LLC exceeds AMD 500.000 or an equivalent foreign currency). 13. “Ar-Et” LLC 31. “Fast Credit Capital” UCO CJSC 14. “Artsate Gavat” LLC (If the property claim exceeds AMD 100.000). 15. “Arman and Gnel” LLC 32. “Norman Credit” UCO CJSC 16. “Art Credit” LLC 33. “Micro Capital Armenia” UCO CJSC | Komitas ave. 26, Yerevan, Armenia | 34. “Gazel Finance” UCO LLC 17. “ART CREDIT” LLC | P. Sevak st, 51/1, Qanaqer-Zeytun, Insurance Companies Yerevan, Armenia | 1. “ARMENIA INSURANCE” LLC 18. “Artyom Ghahramanyan” Private entrepreneur (Excluding claims on insurance policy signed under 19. “Best Credit” LLC a social security package). 20. “Guarant Credit” LLC 2. “Armenia Export Insurance Agency” ICJSC 21. “Gev - Star” LLC 3. “NAIRI INSURANCE” ILLC 22. “Gevasar Credit” LLC (Excluding claims on insurance policy signed under 23. “Gevorgyan and Co” LLC a social security package). 24. “Gold Idea” LLC 4. “RESO” ICJSC 25. “Gold and G.B.” LLC (Excluding claims on insurance policy signed under 26. “Gold and Money” LLC a social security package). 27. “Gold Credit” LLC 28. “Gold Street” LLC 29. “Gold Cash” LLC
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The list of organizations which did not sign the covenant 30. “Gold Consulting” LLC 65. “Shogh” LLC 31. “Goodavi” LLC 66. “Voske Luma” LLC 32. “Gr-Av-Mo” LLC | Andraniki st, 134/8, Yerevan, Armenia | 33. “Gravatun777” LLC 67. “Voske Luma” LLC 34. “Diamond Credit” LLC | Tumanyan st, 10, Vanadzor, Armenia | | Gorky st, 68, Facility 3, Gyumri, Armenia | 68. “Voske Vtak” LLC 35. “Diamond Credit” LLC | Komitas ave., 34 apt 46b, Yerevan, Armenia | | Arshakunyants 35, Shop 53, Yerevan, Armenia | 69. “Voske Vtak” LLC 36. “Dramatun” LLC | Shirazi st, 32, apt 80, Yerevan, Armenia | 37. “EuroCredit Capital” LLC 70. “White-Soliter” LLC 38. “M V M Anna” LLC 71. “Uster Geghamik” LLC 39. “Express VIP Service” LLC 72. “Proffinance” CJSC 40. “Trust Credit” LLC 73. “Real Credit” LLC 41. “Trader” LLC | Khorenatsu st, 8, Shop 4/1, Gyumri, Armenia | | Tigran Metsi, 13/10 shop, Yerevan, Armenia | 74. “Real Credit” LLC 42. “Zhirayr Aharonyan” Private entrepreneur | Sayat Novayi st, 9/9 a, Basement 15, Gyumri, Armenia | 43. “Inrim Credit” LLC 75. “Royal Credit” LLC 44. “Legat Credit” LLC 76. “ROYAL FINANCE GROUP” LLC 45. “Leylo” LLC 77. “S.U.R.-72” LLC 46. “Lombardia” LLC 78. “Sargis & Nana” LLC 47. “Lombardstreet” LLC 79. “Serve-Edar” LLC 48. “Karen Mets” LLC 80. “Sicor” LLC 49. “Credit Alliance” LLC 81. “Simnor” LLC 50. “Credit City” LLC 82. “SSS Credit” LLC 51. “Hamar Mek Gravatun” LLC 83. “V.I.A.” LLC 52. “Hot Credit” LLC 84. “Vantig” LLC 53. “Huso Lusniak” LLC 85. “Via-Gold” LLC 54. “Manioka” LLC 86. “Vilmar Mek” LLC 55. “Marlia” LLC 87. “TER-YESAYAN ASSOCIATION” LLC 56. “Max Credit” LLC 88. “Five Minutes” LLC 57. “Mosoyan-AAA” LLC 89. “Fast Cash” LLC 58. “Yana-Gor” LLC 90. “LOMBARD PLUS” LLC 59. “Umoneyline” LLC | Qajaznunu st, 5, Facility 26, Yerevan, Armenia | | Teryan st 68a, Shop 3, Yerevan, Armenia | 91. “LOMBARD PLUS” LLC 60. “Umoneyline” LLC | Tigran Metsi ave., 33/27, Yerevan, Armenia | | Aram Manukyan 1/76, Kapan, Armenia | 92. “MVM-Finance” LLC 61. “Umoneyline” LLC | Acharyan st, 30/2, Yerevan, Armenia | | Getahovit, 2nd st, Trade Hall 47, Tavush region, 93. “MVM-Finance” LLC Armenia | | Erebouni, 11, Facility 59, Yerevan, Armenia | 62. “Ninela” LLC 94. “VARD GRIEG” LLC 63. “Nomidisc” LLC 95. “Narine Arzumanyan” Private entrepreneur | Hanrapetutyan st, 11, Facility 1/1, Abovyan, Armenia | 96. “Sedrak Gagik Muradyan” Private entrepreneur 64. “Nomidisc” LLC 97. “Julietta Ohanyan” Private entrepreneur | Hatis st, 1/69, Abovyan, Armenia | 98. “Money Credit” LLC
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The list of organizations which did not sign the covenant 99. “Igit Sedrak Igityan” Private entrepreneur 35. “Arsen Papyan” Private entrepreneur 100. “ED-HAK” LLC 36. “Artak Yesayan” Private entrepreneur 101. “Morvik” LLC 37. “Artyom Davtyan” Private entrepreneur 102. “Voske Vtak” LLC 38. “Arpine Taguhi” LLC 103. “Guarant-Credit” LLC 39. “BASENI GOVQ” LLC 104. “BUSINESS CREDIT” LLC 40. “BEGO TRANS” LLC 105. “MELQONYAN COMPANY” LLC 41. “Berkut 555” Commercial undertaking 106. “HOS CREDIT” LLC 42. “Gagik Jndoyan” Private entrepreneur 43. “Gazprom Armenia” CJSC Foreign Currency Traders 44. “Gayane Askaryan” Private entrepreneur 1. “GROSS REALTOR” LLC 45. “Gegham Arqa” LLC 2. “Azat Khachatryan” Private entrepreneur 46. “Gorik Stepanyan” Private entrepreneur 3. “Azatuhi Blikyan” Private entrepreneur 47. “Gvidon Lazaryan” Private entrepreneur 4. “Albert Papoyan” Private entrepreneur 48. “Danielyan” LLC 5. “ALS Erzrumtsi” LLC 49. “Zaven Chagharyan” Private entrepreneur 6. “Anahit Virabyan” Private entrepreneur 50. “EN. PA” LLC 7. “Anatoly Sahakyan” Private entrepreneur 51. “Khachatur Ghahramanyan” Private entrepreneur 8. “Andaco” LLC 52. “Khachatur Petrosyan” LLC 9. “Andranik Hakobyan” Private entrepreneur 53. “TSIATSAN” LLC 10. “Andranik Mkrtchyan” Private entrepreneur 54. “CAPITAL TRADER” LLC 11. “Andrey Shaqaryan” Private entrepreneur 55. “Karin Gohar” LLC 12. “Anush Zaqaryan” Private entrepreneur 56. “Karine Araqelyan” Private entrepreneur 13. “Ashot Harutyunyan and Sons” LLC 57. “Kon-Brosel” LLC 14. “AUTO PLAZA” LLC 58. “Hakob Hovhannisyan” Private entrepreneur 15. “Aram Araqelyan” Private entrepreneur 59. “Hamlet Barseghyan” Private entrepreneur 16. “Aram Barseghyan” Private entrepreneur 60. “Hayastan Trade Center Hayrapetyan Brothers” 17. “Arthur Araqelyan” Private entrepreneur CJSC 18. “Arthur Danielyan” Private entrepreneur 61. “Hasmik Balasanyan” Private entrepreneur 19. “Arthur Qochinyan” Private entrepreneur 62. “Hasmik Tadevosyan” Private entrepreneur 20. “Aristakes Atoyan” Private entrepreneur 63. “Harutyun Arsenyan” Private entrepreneur 21. “Ardzaganq” LLC 64. “Harutyun Harutyunyan” Private entrepreneur 22. “ARM & ART CHANGE MARKET” LLC 65. “Hovhannes Khachatryan” Private entrepreneur 23. “Arman Baghdasaryan” LLC 66. “Hovsep Harutyunyan” Private entrepreneur 24. “Arman Qosyan” Private entrepreneur 67. “Hrachik Hakobyan” Private entrepreneur 25. “Armen Bairamyan” Private entrepreneur 68. “Hrachia Araqelyan” Private entrepreneur 26. “Armen Yenoqyan” Private entrepreneur 69. “Hrachia Hakhverdyan” Private entrepreneur 27. “Armen Hamik Brothers JV” LLC 70. “Hrachia Minasyan” Private entrepreneur 28. “Armen Maleryan” Private entrepreneur 71. “Manuk Sargsyan” Private entrepreneur 29. “Armen Mkhitaryan and Friends” Full partnership 72. “Mill AG” CJSC 30. “Armenia” Hotel Complex CJSC 73. “Yotniak” LLC 31. “Armenia” International Airports CJSC 74. “Nairi Matinyan” Private entrepreneur 32. “Armine Marabyan” Private entrepreneur 75. “Norayr Martirosyan” Private entrepreneur 33. “Arsen Bareghamyan” Private entrepreneur 76. “VOSKE GETAK” LLC 34. “Arsen Galstyan” Private entrepreneur 77. “PARMA” LLC
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The list of organizations which did not sign the covenant 78. “PLAZA SYSTEMS” CJSC 122. “VOSKE KAR” LLC 79. “Jemma Baghramyan” Private entrepreneur 123. “ART 555” LLC 80. “Julietta Gabrielyan” Private entrepreneur 124. “CITY” LLC 81. “R.G.A.T” LLC 82. “Rudik Khachatryan” Private entrepreneur Investment Companies 83. “Ruzanna Araqelyan” Private entrepreneur 1. “AlphaSecurities” LLC 84. “Sahak Hagoyan” Private entrepreneur 2. “ARMENBROKE” JSC 85. “Samvel Amirjanyan” Private entrepreneur 3. “Divisa AM” CJSC 86. “Samvel Ghazaryan” Private entrepreneur 4. “Capital Investments” CJSC 87. “Sedik Sahakyan” Private entrepreneur 5. “Cub Invest” CJSC 88. “Sergei Aghayan” Private entrepreneur 6. “Renessa” CJSC 89. “Sev Kakach” Commercial undertaking 7. “Tonton” ILLC 90. “SIMAO” LLC 8. “Prime Capital Investment” LLC 91. “Smbat Aslanyan” Private entrepreneur 9. “Future Capital Market” LLC 92. “SPARAPET” LLC 10. “Dimension” CJSC 93. “Stoic” LLC 94. “Valeri Navasardyan” Private entrepreneur INVESTMENT FUND MANAGERS 95. “Vahagn Khachatryan” Private entrepreneur 1. “Amundi-ACBA Asset Management” CJSC 96. “VAGHARSH & SONS CONCERN” LLC 2. “C-Quadrat Ampega Asset Management Armenia” 97. “Vatou” LLC LLC 98. “Vardan Baghdasaryan” Private entrepreneur 99. “Vardan Vardazaryan” Private entrepreneur MONEY REMITTANCE ORGANIZATIONS 100. “VARDAN & MONIKA” LLC 1. “TELL-SELL” CJSC 101. “Varuzhan Avetisyan” Private entrepreneur 2. “IDRAM” LTD 102. “VLV CENTER” LLC 3. “EASY PAY” LTD 103. “VHM” LLC 4. “HayPost” CJSC 104. “TASHIR INVEST GROUP” CJSC 5. “MONEYTUN” LTD 105. “Tigran Sargsyan” Private entrepreneur 6. “Mobi Dram” CJSC 106. “Tigran Vahradyan” Private entrepreneur 7. “STAK MONEY TRANSFER” CJSC 107. “TUNAR” CJSC 8. “Upay” CJSC 108. “TUREX GOLD” LLC 109. “Parandzem Hakobyan” Private entrepreneur CREDIT BUREAU 110. “P S R” LLC 1. “ACRA Credit Reporting” CJSC 111. “PRETTY WAY” LLC 112. “Armine Khachatryan” Private entrepreneur INSURANCE BUREAU 113. “NAR-AR” LLC 1. “Armenian Motor Insurers’ Bureau” ULE 114. “PLATIN” LLC 115. “ZIM” LLC 116. “Voske AGA” LLC 117. “AGE P Group” LLC 118. “PC Electronics” LLC 119. “Okey” LLC 120. “PAR-ART” LLC 121. “HOTEL CENTRAL” LLC
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The list of organizations which did not sign the covenant "Elite Plaza" Business Center 7th floor 15 M. Khorenatsi street, 0010 Yerevan, Armenia
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