Information for Users of Financial Services
I. Introduction
Based on the perceived need to raise the level of awareness and familiarity of users of financial services (hereinafter: the user), who use or intend to use the services of banks, microcredit organisations and leasing companies seated in the Federation of B&H (hereinafter: financial institutions) or an organisational unit of financial institutions seated in Republika Srpska, but operating in the Federation of B&H, in addition to the information prescribed by the Law on Protection of Users of Financial Services, which has been in force since 01.11.2014, the following is information that should be provided to the user by the financial institution and which we consider potentially helpful in terms of a better understanding of the rights and obligations arising from a contractual relationship with a financial institution as well as indicative of certain elements that should be taken into account in the pre-contracting or contracting stage, i.e. when the contract has not yet been concluded.
II. Content of the Information
Financial institutions that operate or intend to conduct business with the user and intend to or conclude a contract on the provision of certain financial services as part of those business operations shall provide the user with the following information:
- The type of product (loan/microloan, credit card, payment (debit) card, overdraft, financial leasing, …);
- The manner of loan repayment with an explanation of what constitutes your debt, what your liability is (annuity), as well as providing an example-simulation of the repayment plan;
- The interest rate level (regular, default), i.e. whether it is fixed or variable (changeable), along with conditions under which rates can change during the contractual relationship, as well as an explanation of monitoring intervals and where you can get information on the trends of variable parameters;
- The conditions and manner of calculating default interest;
- The difference between nominal and effective interest rates;
- Total loan costs and fees (interest, loan application processing fees, commission, taxes, insurance policies, ...);
- The amount of the monthly account maintenance fee and when it is due for payment, in order for one to ensure sufficient funds on one's account;
- The amount of the annual interest rate you pay per the approved overdraft limit on the debit card in order to be able to plan the costs of the spent overdraft balance;
- If the loan is denominated in a foreign currency, i.e. loan repayment is tied to the exchange rate of a foreign currency, the financial institution is obliged to explain, using your case as an example, what impact a change in the exchange rate of the currency to which your debt is tied will have on the debt as a whole and on individual loan payments. A change in the exchange rate of the currency changes the loan payment as well, i.e. there is a strong likelihood that there could be a change in the amount of the loan payment;
- The consequences of a failure to meet contractual obligations, the conditions for terminating or cancelling the contract in case of irregular payments, and a provided for sequence of activating security instruments in the loan agreement, with information on the sequence of activating the security instruments, taking into account existing laws and regulations;
- A list and the contents of all the articles of the General Terms and Conditions that are relevant for the particular product, i.e. the product that you want to use.
- Ako preuzimate obveze za drugoga, kao garant, zatražite informacije o mogućnostima glavnog dužnika da uredno izvršava svoje obveze, njegovim trenutnim zaduženjima, ekonomskom stanju i roku na koji traži odobrenje kredita.
- Kao korisnik, žirant ili neka druga osoba koja osobno osigurava ispunjenje obveze za korisnika imate pravo na prigovor (u pisanoj formi) prema financijskoj instituciji, ukoliko smatrate da se ne pridržava odredaba zakona, nekog drugog propisa ili zaključenog ugovora.
- Obveza financijske institucije je da Vam dostavi odgovor na podneseni prigovor, a ako ne budete zadovoljni s dostavljenim odgovorom ili Vam isti ne bude dostavljen u roku od 30 dana imate pravo obavijesti, odnosno prigovora Ombudsmanu za bankovni sustav FBiH.
III. Recommendations to Users
- We recommend that you request an offer/information sheet and your copy of the preliminary draft of the contract from the financial institution, read it and already in the pre-contract stage thoroughly inform yourself directly at the financial institution regarding your rights and obligations under the contract, the type and severity of the obligations, as well as the legislation, by-laws and internal procedures of the financial institution.
- Compare lending conditions with the conditions of several financial institutions.
- When choosing a loan product, we recommend that you consult persons who are not from the financial institutions that submitted the offer to you, i.e. the draft contract and the simulation of the repayment plan.
- We emphasise in particular that you do not negotiate your obligations with the financial institution, but rather agree on them, i.e. check the content of your contract and whether you are signing everything you have previously agreed on in the pre-contracting stage.
- Once you make a decision and sign the contract, you have the right to cancel the aforementioned within 14 days of the conclusion (the so-called cooling period), without specifiying reasons, and the financial institution cannot give you the funds before the expiry of that period, unless you explicitly request it.
- During the contractual relationship, you as the user can request amendments to the provisions in the contract from the financial institution, the former of which must be bilateral, i.e. have the signature of all contracting parties (guarantor, co-debtor, ...) as a sign of approval of the aforementioned.
- The payment security instruments represent a guarantee of loan repayment, the most common of which are co-debtorship, guarantorship, bill of exchange, mortgage, lien on moveable property and garnishment (agreement on the seizure of personal income).
- If you are assuming liability for somebody else as a guarantor, request information about the ability of the principal debtor to regularly meet their obligations, their current indebtedness, economic situation and the period of time for which they are requesting loan approval.
- As a user, guarantor or any other party personally ensuring that the user’s obligations be met, you have the right to file a complaint (in written form) to the financial institution if you think that it is not complying with the provisions of the law, other regulations or the concluded contract.
- The financial institution is obligated to submit a response to the filed complaint, and if you are not satisfied with the response or if the aforementioned is not submitted to you within 30 days, you have the right to inform or file a complaint to the Ombudsman for the Banking System of the FB&H.
IV. Security Instruments
1. Co-debtor
If you have obligated yourself to a financial institution as a co-debtor by means of a contract in written form, that you will meet the valid and due obligation of the principal debtor, your responsibility is equal to the obligations of the principal debtor and you are jointly liable for all their obligations.
As a co-debtor, you are in a more difficult position relative to a guarantor, because you are equally (jointly) liable for the collection of all receivables of the financial institutions, just like the principal debtor.
Financial institutions require the participation of co-debtors in a contractual relationship when the principal debtor is not meeting the minimum conditions of creditworthiness required when contracting a specific loan amount. Considering the level of the aforementioned responsibilities of the co-debtor, as a rule, co-debtors should be persons from a shared household, parents, spouses or business partners.
It is in the interest of co-debtors to submit all information on the principal debtor (change of employer, place of residence, ...) to the financial institution in order to make the collection of the debt easier.
2. Guarantor
A guarantor agreement is not a contract, but it is an integral part of the loan agreement.
By signing the loan agreement as a guarantor, you are authorising a financial institution to, in the event that the principal debtor does not settle the payments (exhausts all means of forced execution against the principal debtor) and in order to collect the debt from the basic loan agreement, possibly seek payment from you as the guarantor in accordance with the provisions of the Law on Protection of Guarantors. It is worth noting that the collection procedure against the principal debtor can be time-consuming, court proceedings last for several years, and that final court decisions cannot be made in some cases due to a lack of subjects to and means of execution, which puts you as the guarantor at a disadvantage, considering that during this period, the creditor's claims significantly increase by default interest and proceedings costs.
In case you as the guarantor also sign a bill of exchange in addition to the loan agreement, the financial institution is obligated to demand payment from you as the guarantor only after exhausting all the possibilities in the collection from the principal debtor in accordance with the Law on Protection of Guarantors.
In accordance with an issued bill of exchange, you run the risk of losing all your property, including cash earnings.
For the aforementioned reasons, you should arrange with the financial institution that it regularly report to you on delays and measures taken in terms of collection against the principal debtor and other participants in the loan relationship.
It is important to note that, if you pay the accrued liability for the principal debtor, you have the right to request a refund in that amount from the principal debtor and the other guarantors (if that particular contract has multiple guarantors) by right of recourse through a recourse lawsuit.
If you as a guarantor pay the entire obligation of the principal debtor, that claim with all ancillary rights and guarantees is, by operation of law, transferred to you as a guarantor and you can request all the guarantees that have been provided as security by the debtor from the financial institution in order to ensure a faster and more efficient collection of the obligation you paid for the principal debtor (legal subrogation) in the future collection process.
Request confirmation from the financial institution that you have fully or partially paid off the debt for the principal debtor. The financial institution is obligated to issue such a confirmation to you at no charge.
It is of particular importance to ensure that the contact information, addresses and telephone numbers you provided to the financial institution when signing the contract be up-to-date, so that you be informed about a possible delay of the principal debtor in a timely manner.
3. Drawee
The bill of exchange as a security is a written document that obligates you as its drawee to fulfill the obligation in the amount specified by the financial institution on the day of the bill's maturing as the rightful holder of the bill.
The signature on the bill of exchange creates a stand-alone bill-of-exchange legal relationship between you as the drawee and the financial institution on the grounds of the contract as a basic legal affair for which it was issued.
The uncertainty is greater if you have issued a blank bill of exchange with a draft authorisation by which you authorise the financial institution to fill in the amount of your obligation on the maturity date and submit the bill of exchange for payment. In this case, you do not know your obligations when issuing the bill of exchange, nor do you know the amount you will be charged on the maturity date by the financial institution.
Therefore, request the signing of a contract from the financial institution, the former of which will allow you to familiarise yourself with the content and all rights and obligations arising from the contractual relationship.
We recommend that you do not sign the bill of exchange alone, without a contract in which you are a guarantor, because only then will the provisions of the Law on Protection of Guarantors apply to you.
According to the issued bill of exchange, you are liable with your entire property and the financial institution may seek settlement from all your property, including cash earnings, immoveable and moveable property, in enforcement proceedings.
4. Bill-of-Exchange Guarantor
If you have decided to issue a bill of exchange for the purpose of insuring claims, request from the financial institution that the bill of exchange first be signed by the principal debtor on the drawee's place of signature, and following that, you can put your signature on the place of the bill-of-exchange guarantor and thereby take on the obligation of a drawee.
The bill-of-exchange guarantor is jointly responsible with the principal debtor, and the financial institution can immediately contact you for the collection of its debt.
Being a bill-of-exchange guarantor entitles you to, if you pay off the monthly sum for the debtor, by the right of recourse, request settlement from all those for whom you acted as guarantor, including other bill-of-exchange guarantors who put their signature on the same bill of exchange.
According to the issued bill of exchange, you are liable with your entire property and the financial institution may seek settlement from all your property, including cash earnings, immoveable and moveable property, in enforcement proceedings.
5. Lien Debtor
In contrast to the aforementioned payment security instruments, the lien debtor with their signature on the pledge agreement (mortgage, lien on moveable property) runs only the risk of, in case the principal debtor does not pay their obligations, the financial institution possibly collecting its claim only from the pledged property, i.e. only from the property pledged voluntarily.
In the contractual relationship with a financial institution, it is not necessary that the lien debtor be the same person who is also the principal debtor.
As a lien debtor you run the risk of, in the event of an untimely meeting of obligations by the principal debtor, losing the property that you voluntarily pledged. Therefore, we recommend that, prior to making the decision to be someone's lien debtor, the principal debtor previously provide you with adequate security that would allow you to cover your expenses if you end up having to pay their obligations in the execution proceedings with respect to your property.
6. Declaration of Conformity - Seizure of Wages/Garnishment
Whether you are obligated as a principal debtor, co-debtor or guarantor under the contract, the financial institution will request that your employer verify a decision on garnishment and that the competent municipal or other public authority verify the declaration of conformity to seize your wages or other steady cash earnings in order to collect the financial institution's receivables, except insofar as those earnings are exempt from execution.
A declaration of conformity issued in such a manner has a legal effect immediately upon the obligation's maturing and, according to the legal order of settlement from the contractual relationship, the credit institution can request a suspension of pay from your employer without prior court activities in accordance with the limitations prescribed by the Law on Executive Proceedings.
Execution on pay (cash earnings) can be carried out up to the amount of 1/2 of the salary in accordance with the Labour Law, and insofar as the claims exceed KM 1 000.00 per month, the execution can be carried out up to the amount of 2/3 of the claims in accordance with the Law on Executive Proceedings.
V. Contact Information of the Banking Agency of the FB&H for Users' Complaints:
For further information, please contact::
The Banking Agency of the Federation of B&H
Ombudsman for the Banking System
Address: Zmaja od Bosne No. 47b,
71000 Sarajevo
E-mail: agencija@fba.ba, ombudsmen@fba.ba
Legal Framework
- Law on Obligations of the Federation of B&H (“Official Gazette of the RB&H”, No. 2/92, 13/93 and 13/94)
- Law on Bill of Exchange of the FB&H („Official Gazette of the Federation of B&H“, No. 32/00, 28/03)
- Law on Protection of Users of Financial Services („Official Gazette of the Federation of B&H“, No. 31/14)
- Law on Guarantor Protection in the FB&H („Official Gazette of the Federation of B&H“, No. 100/13)
- Law on Executive Proceedings of the FB&H („Official Gazette of the Federation of B&H“, No. 32/03, 52/03, 33/06-corr., 39/09, 74/11 and 35/12)