ANNUAL REPORT 2014 ANNUAL REPORT 2 0 14 TABLE OF CONTENTS 4 Address of Chairman of the Board 5 Address of Financial System Mediato 6 About the Office of Financial System Mediator 10 About activities carried out in 2014 18 About activities to be carried out in 2015 22 Statistics about consumer complaints 44 Financial statements and audit opinion 52 Customary business practices and case studies 64 Questions and Answers 68 Acknowledgments The year of 2014 was prominent in that the Government of Armenia approved a na- tional strategy for financial education, and the Financial System Mediator was involved in the national strategy development and im- plementation committee. This was a major achievement for us because we consider the financial education an issue that encompass- es public, national and global perspectives and brings in the possibility to focus more re- sources and make the projects more targeted. CHAIRMAN OF THE BOARD OF As Chairman of Board of Trustees of the TRUSTEES OF THE OFFICE OF FINANCIAL Office of Financial System Mediator, I very SYSTEM MEDIATOR much appreciate all the efforts and projects the Office carried out to promote financial education of consumers, which, I strongly be- Dear reader, lieve, provided most important incentives for the achievements we had. erformance of the Office of Financial P System Mediator in 2014 stood out In the end of my address, let me wish the by scale and nature if we compare it Financial System Mediator and the entire with prior years. It is noteworthy that in recent team endless energy while expecting that years the number of users of financial services they would further be strong enough to over- has increased in parallel with the increase in come new challenges. the number of complaints addressed to the Mediator. What is more encouraging is that complaints are becoming more substantive, and people - more demanding. This is a good progress which is based on increasing public awareness of consumers' rights and obliga- tions and the level of financial literacy. Over these years, the Office of Financial System Mediator has done tremendous job in the field of financial education of consumers, Sincerely, and I am pleased to admit that this has be- Vakhtang Abrahamyan, come noticeable. Citizens who are well aware of their rights not only are able to rehabilitate BOARD MEMBER OF THE a broken right through the Mediator but also CENTRAL BANK OF ARMENIA prompt the financial system to be more alert CHAIRMAN OF THE BOARD OF to whatever violation, thereby reducing the TRUSTEES OF THE OFFICE OF FINANCIAL 4 number of possible infringements and abuses. SYSTEM MEDIATOR Address of Chairman of the Board Just a few figures of what we have done in the course of the past year. We had re- ceived a total of 3907 claims and complaints, of which 2667 were eligible for review by the Office of Mediator. But in the first year of op- erations of the Office, these numbers were dramatically, tenfold, smaller. About 5 per- cent of complaints filed were satisfied by fi- nancial institutions in their preliminary stage of application and roughly 71 percent of the cases investigated by the Mediator were re- solved through reconciliation of the parties. FINANCIAL In the course of these six years we have SYSTEM MEDIATOR been moving forward slowly but firmly. We will continue going ahead with our goals, with a clear certainty that building a sta- Dear reader, ble financial system which serves financially educated, informed and protected citizens is his report rounds up the 6th year of our what we try to achieve. We go forward and T activities. Six years, it seems, is not a believe that there are no undefeatable prob- long time to break deeply-rooted ste- lems along the way; we just need to break reotypes, handle serious system-specific prob- stereotypes… lems and build public trust. But this is only at a first glance… It seemed that no one would ever think of authority that pledges to help, abso- lutely free, solve personal problems because, the stereotype goes, “free cheese is only trapped in there”. It seemed that no financial organiza- tion would ever commit itself to willingly pay money to a regular citizen while acknowledg- ing their failure or guilt because “the weak is always sinful before the strength”. Today, six years into the job, I am so happy and confident to say that we have broken these stereotypes. An increasing number of citizens visiting our of- fice with their complaints, their trust toward us and belief that they would receive an unbiased support for solution to their problems point to the above statement. This is also well proved Yours truly, by the fact that financial institutions now are Piruz Sargsyan, taking more careful approach to the solution of problems as they try to be as much helpful FINANCIAL and ready to cooperate as possible. SYSTEM MEDIATOR 5 Address of Financial System Mediator 6 About the Office of Financial System Mediator ABOUT THE OFFICE OF FINANCIAL SYSTEM MEDIATOR he Office of Financial System Media- Management of the Office of T tor is an establishment with an in- Financial System Mediator consists of: dependent management system. Its founder is the Central Bank of the Republic of • Board of Trustees, and Armenia. The Office is called to settle out any • Manager of the Office, i.e. the Mediator. property disputes that arise between con- sumers as natural person and financial or- According to the Republic of Armenia Law on ganizations. The services of Financial System Financial System Mediator, the Board of Trustees Mediator are free of charge; the process of of the Office of Financial System Mediator con- review of complaint is explicit, fast and trans- sists of 7 members, and they are appointed as fol- parent. lows: The Office of Financial System Mediator was established pursuant to the Republic of • one member by the Republic of Armenia Armenia Law on Financial System Mediator, Government, passed on June 17, 2008. The Office of Finan- • one member by the Board of the Central cial System Mediator started professional ac- Bank of Armenia, tivity from January 24, 2009. According to the • one member by organizations that advo- said law, the Financial System Mediator is ap- cate protection of consumer rights, and pointed by the Board of Trustees of the Office • four members by unions of organizations. of Financial System Mediator. The first meet- ing of the Board of Trustees on December 22, 2008 appointed Piruz Sargsyan, a lawyer by profession, as Mediator. In 2012, Ms. Sargsyan was reappointed by the Board. The following objectives The Office of Financial System Mediator per- forms in pursuit of the following objectives: • Protection of consumer rights and inter- ests in the financial field; • Fast, effective and free of charge review and handling of claims of clients; and • Enhancement of the public confidence in the financial sector. 7 About the Office of Financial System Mediator ccording to the said law, the Financial A System Mediator is appointed by the Board of Trustees for a 4-year term. Furthermore, the law requires the Financial System Mediator to have higher education, firm authority and at least five years’ work experience. The Financial System Mediator shall not be a person who has worked in any financial organization in the last three years. The Office has an audit function. The au- ditor is appointed by the Board and reports to the Board direct. The auditor takes on a function which involves independent and impartial investigation and evaluation of the operations of the Office through checkups/ examinations. • Case handling and investigating group which makes sure the Office performs its profession- The Office of Financial System Mediator al duties as prescribed by the law. This group has two pillars which make sure the Office consists of: operates fluently. THESE ARE: • specialists who accept complaints, or otherwise, the front office, which receive the visits of clients and provide primary con- sulting, and • specialists who investigate claims, or otherwise, the back office, with the main function of claim investigation, explanation/ clarification, legal attendance of the Office, international cooperation. This year the Office invited another group • Support group which performs adminis- of young professionals to join. The group is trative tasks, and its main function is to make primarily responsible for making visits to sure day-to-day activities of the Office are in schools and getting involved in activities re- place. The group includes a personnel man- lated to the consumer education program, as agement specialist, an accountant, a ledger well as assisting in claim investigation pro- clerk and a car driver. cess. 8 About the Office of Financial System Mediator STRUCTURE 6 1 BOARD AUDITOR OF TRUSTEES 4 1 1 SUPPORT ASSISTANT GROUP MEDIATOR TO MEDIATOR 1 HEAD OF THE CASE HANDLING AND INVESTIGATING GROUP 6 6 5 COMPLAINTS CASE SPECIALISTS SUPPORTING HANDLING SPECIALISTS INVESTIGATERS CASE INVESTIGATORS 9 About the Office of Financial System Mediator 10 About activities carried out in 2014 ABOUT ACTIVITIES CARRIED OUT IN 2014 n January 24th we met to mark the Children were especially encouraged to O fifth anniversary of the activities of the attend seminars organized in capital Yerevan. Office. The press conference arranged To this end, we rented buses to take school- on this occasion rounded up past performance children to the capital to participate in the of the Office of Financial System Mediator, as seminars, which we had especially tailored well as we had a communiqué on the com- for them. A total of 45 pupils attended each plains accepted and claims investigated and seminar. We availed ourselves an opportunity talked about the projects carried out.