Ombudsman will make disputes settlement simpler

Dmitry Davydenko

Muranov, Chernyakov & Partners

+7 495 783-74-50

Going to court every time you believe your bank is unfair to you is an approach only an ingrained quarreler would welcome. At the same time just dropping your grievance is not a happy option either. For the bank both maintaining numerous litigations with clients and yielding to every client’s demand are not promising ways of business development too. This mutual dilemma can be solved by introducing in their relations a neutral which would be less formal than a judge and which would assist to meeting of the minds of both sides. A client feels much more comfortable if she knows that if she has a complaint towards the bank not understood by the bank personnel there is another opportunity to take advantage of before applying at court as a last resort.

Such opportunity is provided by an ombudsman, a neutral peace-maker and complaint-conveyor. In world practice an ombudsman’s job is not only to hear a claim and translate it to the other side and to manage the fruitful discussion of the matter between them. He also collects and analyses information on typical reasons for complaints and presents his conclusions to the bank, which is to decide whether some organizational and structural changes should be adopted to prevent future troubles.

A new voluntary mechanism of dealing with banking and finance disputes is introduced in Russia by the Association of Russian Banks (“ARB”) – a finance ombudsman. This person will help to settle controversies between banks and other credits organizations on one side and their clients on the other. This role is conferred to deputy Pavel Medvedev, member of the State Duma committee on financial market. Establishing an ombuds-office is implementation of the primary item of the 2007 ARB plan for stabilization of the consumer credits market. The establishment was preceded by banking community survey and numerous consultations with bankers and legislators. On 30 August 2010 the ARB management board approved the Regulation and the Rules of the finance ombuds-office which will hear the claims since October 2010.

The finance ombuds-office concept is worked out in accordance with German model. Ombuds-office is not a state body or a state-governed formation. The ombudsman is independent, his services are free for the complainer and he can handle only disputes with limited amount (300 000 Russian rubles – some 10 000 USD).

Presence of a competent neutral in settlement negotiations trusted by both parties often affects their tone so that they become more constructive.

Of course, the mechanism works in the other direction as well: the ombudsman can manage the bank’s claims towards client. In practice, though, usually it is the client who approaches the ombudsman if a controversy comes in existence.

An important thing is that the bank ombudsman should be competent not just in banking and finance. Even more crucial is his competence in negotiating and mediation. Otherwise his participation is unlikely to lead to considerable positive results.

Introducing an out-of-court complaint handling system is an essential part of good corporate governance. A number of Russian banks, usually with foreign capital, including Raiffeisen Bank, Uniastrum Bank and NB Trust, already declared their adherence to this new system of dispute settlement. Let us see who comes next.