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Risks may arise with some cross-border electronic invoice and card services

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2022-08-13 14:34

Budapest, February 24, 2020 – The MNB supports fintech innovations that enable simpler, cheaper financial services, but only if they guarantee financial stability and customer safety. Although its consumer protection supervision tools against cross-border fintech companies are limited, the central bank will still take decisive action if it continues to experience regular violations of the law, even minor ones, informational or other deficiencies affecting Hungarian consumers.

In Hungary, an increasing number of financial technology (fintech) companies provide - often with more favorable conditions for certain transactions compared to classic banks - free account management, cash transfers and ATM cash withdrawals, interbank or close to mid-rate currency exchange, and various bank card services (including, for example, those that allow a single all our bank cards that can be used with the card).

Domestic customers include Revolut Ltd based in Great Britain, TransferWise Ltd, also British, and PayPal (Europe) S.á r.l. from Luxembourg. et Cie, S.C.A. has become the most popular so far. None of these is a bank based in Hungary, but rather an electronic money issuer, payment service provider, or credit institution registered to provide cross-border services in Hungary.

The MNB supports the specific innovation that makes financial services more favorable and simpler for Hungarian customers if it continues to guarantee the stability of the domestic financial system and the safety of consumers. It is also advisable for customers to be careful, study the contractual conditions thoroughly in advance, and avoid "impulse buying" - which is more likely due to the possibility of concluding a contract quickly - before establishing a business relationship with a new, hitherto unknown fintech company.

However, according to customer reports and press reports received by the Hungarian Central Bank, some fintech companies sometimes block the customer´s account (even containing a larger amount) for an indefinite period of time - or even for several months - without reason, and request documents to unblock it.

On the websites of several service providers, information in Hungarian is missing or only fragmentary on the electronic user interfaces. There is no live customer service - or even one that can be visited in person in Hungary (customers can sometimes only communicate in English with chatbots that provide insufficient information).

Some customers indicated that due to insufficient information, they were not informed, e.g. that weekend transactions are "surcharged" by the given service provider, card transaction fees suddenly become more expensive (e.g. in the case of certain bank and credit cards, the amount of money uploaded to the service provider is considered a cash withdrawal), in some countries the fintech company´s card is not accepted. Another problem is that customer complaints are responded to slowly or not at all.

The business reliability and consumer protection supervision of cross-border service providers is carried out by the financial supervisory authority of their home country based on the European Union (and corresponding domestic) legislation. The Magyar Nemzeti Bank (MNB) - as a "host country" supervisor - has only limited consumer protection rights for their operations.

In cases where the Hungarian central bank violates the interests of customers and the public good, it can therefore primarily initiate measures with the supervision of the home country. In the event of an immediate emergency, the MNB may only take a proportionate temporary measure against a cross-border fintech service provider if it violates the law on the prohibition of unfair commercial practices by seriously harming the collective interest of its customers.

In addition to all this, the Hungarian central bank will continue to act in all cases and, if necessary, inform the public, the supervision of the fintech company´s home country and the corresponding European Union organizations, if it experiences regular violations of law, even minor ones, affecting consumers in Hungary.

The funds in the customer accounts of these fintech companies are not covered by the protection of the National Deposit Insurance Fund (or any other guarantee fund in Hungary). According to their home country, electronic money issuing and payment institutions are not members of the deposit guarantee system either. In the case of these, the repayment of customer money thus depends solely on their own regular operation, so it is not ensured by a third party. EU regulation e.g. for them, that they cannot dispose of customer money as their own, they must keep it in escrow accounts of credit institutions or in low-risk assets, or even cover it with a guarantee or guarantor insurance.

In the event of a legal dispute, a customer in Hungary - in the language specified in the contract concluded with the cross-border fintech company for the form of communication - can address the complaint directly to the given company. If the company´s response is not satisfactory, you can appeal to the dispute resolution forum at its headquarters within 6 months - in Great Britain, the Financial Ombudsman Services. C

omplaints about transactions related to customer accounts can also be submitted to the Financial Conduct Authority, the British financial consumer protection watchdog. Clients with a place of residence/residence in Hungary can also use the procedure of the European financial dispute resolution forum, FIN-Net, in which the Financial Conciliation Board working alongside the MNB acts as a coordinator.

Source: Hungary National Bank

Taguri: banca  


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