The State strengthens the regulation of financial services

On September 20, 2019, the Verkhovna Rada of Ukraine has strengthened the regulation of financial services market.

The key changes are the following.

The National Bank of Ukraine receives the function of protecting the rights of consumers of financial services provided by banks and other financial institutions, which are regulated and supervised by the NBU.

The criteria for advertising to be considered as advertising of financial services (what exactly is financial services advertising), criteria of unfairness of advertising of financial services (in particular, the ratio of font size in the relevant printed materials, the speed of text reading in audio and video advertising, the problem of perception of advertising, etc.) was specified.

Forms of conclusion of contracts on financial services were determined and the list of information to be included in this contract was expanded.

A direct prohibition of penalties for early fulfillment by the borrower of its obligations under the financial services contracts, for early termination and waiver of the financial services contract was introduced.

The scope of actions for which fines are imposed on financial institutions providing financial services, intermediaries, credit intermediaries has been expanded. Thus, the fine is imposed for failure to provide the consumer (borrower) with financial information required by law, failure to submit a draft financial services agreement, failure to provide a copy of the financial services contract, for unilateral increase of the interest rate without notifying the consumer, assignment of claims under the contract without notifying the consumer (if such notice is required by law). The amount of fines - from UAH 5100 to UAH 13 600 for each case.

The legislator expanded the list of total cost under consumer credit by including the cost of insurance intermediaries, notaries, other third parties, compulsory insurance, etc., which was not previously included in these costs and was not taken into account in the formation of the cost of the credit.

Thus, financial institutions, credit intermediaries and other financial services market entities must consider appropriate changes to bring their activities and documentation in line with the new requirements.

There are only two months to do this – until 19 January, 2020. It seems like a lot of time, but it is only at first sight. Innovations are large enough, so it is better to start now, without delay.

(Law No. 122-IX as of September 20, 2019 “On Amendments to Certain Legislative Acts of Ukraine on Protection of Rights of Consumers of Financial Services”, adopted by the Verkhovna Rada of Ukraine on September 20, 2019, enters into force on January 19, 2020).

Kyrylo Kazak

Partner

KPD Consulting

Should you have any questions with respect to above or require any additional information, please do not hesitate to contact Mr. Kyrylo Kazak (k.kazak@kpdconsulting.com.ua). We will be pleased to assist You. The information contained in this overview is not intended to provide legal advice and should not be relied on or treated as a substitute for specific advice concerning individual situations.