Alternative Dispute Resolution through Mediation in Romanian Retail Banking

Bălan, Carmen Article Alternative Dispute Resolution through Mediation in Romanian Retail Banking Amfiteatru Economic Journal Provided in Cooperation with: The Bucharest University of Economic Studies Suggested Citation: Bălan, Carmen (2010) : Alternative Dispute Resolution through Mediation in Romanian Retail Banking, Amfiteatru Economic Journal, ISSN 2247-9104, The Bucharest University of Economic Studies, Bucharest, Vol. 12, Iss. 28, pp. 504-518 This Version is available at: https://hdl.handle.net/10419/168697 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/4.0/ AE Alternative Dispute Resolution through Mediation in Romanian Retail Banking Amfiteatru Economic 504 ALTERNATIVE DISPUTE RESOLUTION THROUGH MEDIATION IN ROMANIAN RETAIL BANKING Carmen Bălan∗ Academy of Economic Studies, Bucharest, Romania Abstract This article aims at exploring the stage of implementation of mediation as method for the alternative resolution of disputes among consumers and providers of banking services, in Romania. The importance of the topic stems from the increase in the number of customer complaints about banking services in Romania and from the current preoccupation at European level to identify extra-judicial methods for consumer disputes. The main objectives of the research consist in studying: the regulatory framework relative to mediation at the European Union level; the mediation schemes focused on banking services, in the Member States; the present regulatory framework relative to mediation in Romania; the existing mediation schemes and their development level on the Romanian banking service market. The research method applied has an exploratory character. The conclusions clarify the present state of mediation related to banking service disputes in Romania. Within this framework, the recommendations refer, among other aspects, to the organization of a further research phase that may contribute to the substantiation of future decisions aiming to enhance the protection of the rights and interests of consumers. Keywords: alternative dispute resolution, mediation, mediator, banking services JEL Classification: G28, K29, L84, M31, M38 Introduction The importance of the article topic stems from two reasons. The former refers to the Romanian banking market that has witnessed an increasing number of customer complaints during the last two-three years. With an insignificant negotiation power, numerous customers faced ever-greater costs entailed by their contracts with the banks. The latter reason consists in the current trend in the Member States of the European Union (EU) to develop and implement ways of dispute resolution that are more convenient to customers in terms of time and financial resources, compared to the classical judicial system. In Romania, consumers presented numerous complaints to the banks and to the National Authority for Consumer Protection (NACP). A total number of 4,000 complaints relative to ∗ Author’s contact: e-mail: [email protected] Protection of Consumers’ Rights and Interests AE Vol XII • No. 28 • June 2010 505 the banking services were received by the NACP during the year 2008 (Ştefan, 2009). For the entire year 2009, the total number of complaints reached 3,000 (National Authority for Consumer Protection, 2010). Most complaints referred to the unjustified increases in the bank commissions and in the interest rates for credit contracts that have been already signed by banks and customers, and to other modifications of the clauses after the conclusion of the contract and without customer acknowledgement and agreement. Undoubtedly, not all the complaints are well substantiated and rightful. The conceptual definition of the alternative dispute resolution (ADR) was the object of numerous international debates. The meanings attached to this concept varied on a continuum between very narrow to very broad perspectives (Cappelletti, 1993, p. 282). On one side, there is a strict technical meaning that refers only to the non-judicial devices that may be used for out-of-court dispute resolution. On the other side, there is a broad definition according to which alternative dispute resolution refers to non-judicial as well as to judicial devices that are an alternative to the ordinary or traditional procedures. Since the 1970s until the present decade, specific procedures and bodies for the out-of-court settlement of consumer disputes were developed in the Member States of the European Union. At the same time, the EU analyzed the existing national systems and recommended principles with which all the out-of-court bodies responsible for consumer dispute settlement should comply to ensure the confidence of all parties in ADR. In January 2007, the results of a research made by the Study Centre for Consumer Law – Centre for European Economic Law of the Katholieke Universiteit Leuven (Belgium) were published. The European Commission, Health and Consumer Protection Directorate- General Directorate B – Consumer Affairs commissioned this study that focused on the analysis and evaluation of means of consumer redress other than redress through ordinary judicial proceedings (Stuyck, et al., 2007). According to the study made in 25 Member States of the EU as well as Australia, Canada and the USA, the ADR may be defined as a continuum between no action and reliance on ordinary court procedures. There are five categories of mechanisms to obtain redress (other than individual redress through ordinary court procedures): direct negotiation (between consumer and the merchant); mediation and arbitration; small claim procedures; collective actions for damages; injunctive relief. The report has revealed that each analyzed country has an unique mix of ADR processes and techniques. Based on a thorough analysis of the practice of the 28 countries, the report ended that there is no ideal mix from a consumer perspective. In the EU, the most recent research in the field is the “Study on the use of alternative dispute resolution in the European Union” (Alleweldt, et al., 2009). The analysis referred to the characteristics, use, procedures and functioning of the ADR schemes, as well as to the conformity with the recommendations of the European Commission and the best practices. A major strength of the report consists in the detailed perspective of the schemes applied by each Member State. The study provides data about all the ADR bodies, by economic sector. 1. Methodological framework of the research The goal of this article is to explore the stage of implementation of mediation as method for the alternative resolution of disputes among consumers and providers of banking services, in Romania. To achieve this goal, a set of objectives has been specified and refer to the AE Alternative Dispute Resolution through Mediation in Romanian Retail Banking Amfiteatru Economic 506 study of: the regulatory framework relative to mediation at the European Union level; the mediation schemes focused on banking services, in the Member States; the present regulatory framework relative to mediation in Romania; the existing mediation schemes and their development level on the Romanian banking service market. These objectives reflect a specific feature of the research, respectively the fact that a preliminary investigation of the situation of mediation in banking services in the European Union was achieved, to better understand the stage existing in Romania. The research method applied has an exploratory character. Worldwide, the exploratory research is known as a distinct research design in social sciences. The goal of an exploratory research is to understand what happens in the field under study and to investigate social phenomena without “explicit expectations” (Schutt, 2009). An exploratory research is applied when the study of a phenomenon is necessary to know and understand its nature, in comparison to a descriptive design and a causal design which are carried out to test specific hypotheses, respectively to examine relationships among variables (Malhotra, 2009). While an exploratory design allows the understanding of a phenomenon, a descriptive or causal design facilitates the measurement of that phenomenon. The exploratory approach is recommended when a more precise definition of the research problem, the identification of alternative courses of actions and the gathering of additional information, are necessary, before the confirmation of results through a descriptive or causal research. Consequently, the exploratory research was selected to facilitate the understanding of the stage of implementation of mediation as method for the alternative resolution of disputes in banking services in Romania. This approach may contribute to setting priorities for further research and may identify potential courses of action. The option for an exploratory research was based on the hypothesis that Romania is only at the beginning of the path towards the ADR by mediators in the sector of banking services. The investigation of secondary data sources was selected from the range of data collection methods which are specific to the exploratory research design. Examples of secondary data sources that have been studied within the framework of this research, are the following: directives and recommendations issued at the European Union level and laws existing in Romania, in the field of alternative dispute resolution and mediation; codes of conduct relative to mediation; books and articles specialized in alternative dispute resolution and in mediation; reports prepared by consortia of specialists from the consultancy and university environments, relative to the alternative dispute resolution in the EU Member States; articles about mediation in the banking sector in Romania; articles focused on practical aspects of consumer protection in Romania; press releases of organizations that are preoccupied with the development of mediation on the Romanian market of banking services; study relative to the feasibility of the implementation of an ombudsman scheme in Romania. The conclusions of the exploratory research clarify the present stage of implementation of mediation of disputes related to the banking services in Romania – both from a regulatory and practice perspective – within the larger framework of the situation existing at the EU level. The final recommendations refer to the organization of further research studies based on a descriptive design, which may contribute to the substantiation of future decisions aiming to enhance the protection of the rights and interests of consumers. Protection of Consumers’ Rights and Interests AE Vol XII • No. 28 • June 2010 507 2. Mediation in the European Union: the regulatory framework ADR techniques differ in terms of the type of involvement of the third party. Basically, three major categories of ADR procedures can be identified: conciliation (the third party has a passive role, to allow the negotiation among the parties), mediation (the third party has an active role, to participate in negotiations and sometimes to suggest solutions) and arbitration (the third party specifies the solution that is binding on both parties). However, the practice reflects several specificities in terms of features and outcomes of these ADR procedures in each of the EU Member States. Mediation is an important category of ADR techniques. The European Commission had several initiatives on mediation. The first stride consisted in the adoption of the Commission Recommendation of 4 April 2001 on the principles for out-of-court bodies involved in the consensual resolution of consumer disputes (Commission of the European Communities, 2001). In 2004, the Commission expressed its support for a European Code of Conduct for Mediators and introduced a proposal for a directive on mediation. A group of stakeholders, assisted by European Commission, developed the code. The code was officially presented on 2 July 2004 at a conference organized in Brussels to discuss self-regulatory initiatives for mediation in general and to launch the code. The opinion of most of the 100 participants in the conference was that in the preliminary stage, the Code must have only the character of an informal document not being formally adopted by EU institutions. Individual mediators and organizations may voluntarily subscribe. The European Code of Conduct for Mediators established a set of principles to be applied in civil and commercial matters by the individuals and organizations that subscribe to it (European Commission, 2004). According to the code, mediation means “any structured process, however named or referred to, whereby two or more parties to a dispute attempt by themselves, on a voluntary basis, to reach an agreement on the settlement of their dispute with the assistance of a third person (mediator)”. The text of the code refers to: (i) competence, fees of mediators and promotion of their services; (ii) independence and impartiality; (iii) the mediation agreement, process and settlement; (iv) confidentiality. The independence of the mediator is an aspect of utmost importance underlined by the code. The mediator has the obligation to disclose any circumstances that may generate a conflict of interests. Among such circumstances range: any individual or business relationship with one or more of the parties; any financial or other interest, direct or indirect, in the outcome of the mediation; the mediator, or a member of his firm, having acted in any capacity other than mediator for one or more of the parties. On request from the parties and within the limits of his/her competence, the mediator must inform the parties relative to the manner in which they may formalize the agreement and to the possibilities for making the agreement enforceable. At the middle of the present decade, experts considered that Europe is a long way from establishing a legally binding set of standards for mediation. The initiatives developed show a soft approach to the regulation of mediation (Alexander, 2006). The reason of this trend is the consensus that diversity should be encouraged in the early stages of the mediation development. In this respect, experiments were promoted at national level. A strict regulation of mediation could lower the chances to identify procedures and AE Alternative Dispute Resolution through Mediation in Romanian Retail Banking Amfiteatru Economic 508 mechanisms that suit the needs of consumers for quick, effective, and affordable ways for dispute resolution, as an alternative to court system. In 2008, the Directive on certain aspects of mediation in civil and commercial matters was adopted (European Parliament & Council of the European Union, 2008). The main goal of the Directive 2008/52/EC was to facilitate the access to alternative dispute resolution and to promote the amicable settlement of disputes by encouraging the use of mediation and by ensuring a balanced relationship among mediation and judicial proceedings. The provisions of the Directive refer to the cross-border disputes. However, Member States may apply these provisions to the internal mediation processes. The definition that Directive gave to the concept of mediation is similar to that presented in the Code of Conduct for Mediators. The mediation process may take place due to one of the following reasons: the initiative of the parties; a suggestion or order of a court; the provisions of the law of an EU Member State. The Directive refers to aspects such as: ensuring the quality of mediation; recourse to mediation; enforceability of agreements resulting from mediation; confidentiality of mediation; mediation effect on limitation and prescription periods. According to this Directive, parties may render enforceable the agreement concluded following mediation, giving it a status similar to a court judgment. The access of parties to justice is preserved should mediation not succeed. The provisions relative to the periods of limitation and prescription ensure that parties are not prevented to go to court. An aspect that requires further debate is the independence of mediators. While the Code of Conduct for Mediators has dedicated a substantial paragraph to it, the directive did not address this issue. 3. Mediation in the sector of banking services in the EU Member States In the EU Member States, there is a diversity of mediation schemes for the commercial disputes, in general, and for the banking service sector, in particular. To facilitate the access of consumers to ADR systems in financial services, the EU has established FIN-NET (Financial Services Complaints Network) that complements the EEJ-Net (Network for Extra-judicial Settlement of Consumer Disputes). In essence, FIN-NET is a communitywide network that links the national ADR schemes relative to financial services. This initiative may have a favorable impact on cross-border disputes. There is no single definition of mediation accepted in all the countries. In the EU Member States, the types of outcomes provided by the ADR schemes that include in their denomination the word “mediation” vary including not only the consensual agreement but also the non-binding recommendation. Sometimes, some of these schemes do not have as outcome a consensual agreement, but recommendations/decisions. In addition, as a distinct outcome among others, the consensual agreement may be specific not only to the schemes that include the word “mediation” in their denomination, but also to other schemes. In the sector of financial services, ADR schemes that include in their denomination the word “mediation” have been established in the following EU Member States: Belgium, France, Italy, Luxembourg, Portugal, Romania, and Slovenia. Few of these mediation schemes in financial services have been notified to the European Commission (EC). This Protection of Consumers’ Rights and Interests AE Vol XII • No. 28 • June 2010 509 situation is similar to the overall trend (irrespective of economic sector), in the EU Member States, because 750 ADR schemes relevant to business-to-consumer disputes were identified, out of which only about 60% are notified (Alleweldt, et al., 2009, p. 8). More precisely, in the sector of financial services, 18 mediation schemes were identified, out of which only seven (respectively 26%) are notified to the EC (Table no. 1). The reason may be the fact that many are in their initial stage of development or that there is no perceived benefit of the notification. Table no. 1: Mediation schemes focused on financial services and notified to the EC Outcome of the procedure Name of the mediation scheme Nature of the scheme Adherence by the industr y Funding Average cost for consumers (Euros) NbR DBoB DBoB&C CA Average duration in 2008 (days) BELGIUM Service de Médiation Banques- Crédit-Placements Pv V I - x - - - 91-180 FRANCE Médiateur de la Fédération Française des Sociétés d'Assurances Pv V I - x - - - 31-90 Médiateur du Ministère de l'Économie, des Finances et de l'Industrie Pb n/a n/a - x - - - 31-90 ITALY Conciliatore Bancario Finanziario Pv V I >500 - - - x 31-90 LUXEMBOURG ACA/ULC Médiateur en Assurances n/a n/a n/a - x - - x n/a PORTUGAL Centro de Informação, Mediação e Arbitragen de Seguros Automóvel (CIMASA) O (Pb & I) V I & Pb 51-100 - - x x 91-180 Investor and Mediation Office of the Securities Market Board (CMVM) Pb O O - - - - x n/a Source: Based on Alleweldt, et al., 2009. Note: NbR = non-binding recommendation; DBoB = decision binding on business only; DBoB&C = decision binding on business & consumer; CA = consensual agreement mediated by scheme; Pv = private; Pb = public; V = voluntary; I = industry; O = other; n/a = data not available. AE Alternative Dispute Resolution through Mediation in Romanian Retail Banking Amfiteatru Economic 510 The nature of the notified mediation schemes is private, public or mixed (as for CIMASA from Portugal). Generally, the members of the financial sector may voluntarily adhere to the schemes. In most cases, they finance the mediation schemes. Out of the seven notified schemes, only two (one from Italy and one from Portugal) entail costs for consumers. In Belgium and France, the outcome of the mediation by notified schemes consists only in non-binding recommendations. The consensual agreement mediated by scheme is an outcome that may be obtained in Italy, Luxembourg, and Portugal. There are notified schemes that generate two types of results (in Luxembourg and Portugal). In 2008, the duration of mediation by a notified scheme ranged between one and six months. Out of the seven notified schemes in financial services, only two refer to the banking sector (the schemes from Belgium and Italy). Mediation schemes focused on banking services that have not been notified to the EC exist in France (Médiateur de BNP Paribas; Médiateur de la Fédération Bancaire Française; Médiateur du Groupe Crédit Agricole; Médiateur de la Caisse des Dépôts; Médiateur de la Société Générale; Médiateur de la banque Le Crédit Lyonnais; Médiateur du Groupe Caisse d’Épargne), in Romania (the Union of Banking Mediators) and in Slovenia (Mediation Centre of the Bank Association of Slovenia). The mediation schemes existing in the EU Member States may be classified according to the outcome of the procedure (Alleweldt, et al., 2009). Stricto sensu, mediation refers to solutions based on the consensual agreement between the parties to the dispute. However, practice shows that mediation schemes may have as outcomes non-binding decisions (recommendations) and decisions binding on both parties. Many schemes provide a combination of possible outcomes. There are also schemes focused on both mediation and arbitration, such as the Financial Services Complaints Institute (Kifid) from Netherlands, with the outcome consisting in consensual agreement between the parties to the dispute and decisions binding on both parties. In addition, there are schemes that do not include in their denomination the word “mediation” and generate a mediated consensual agreement. The activities of the ombudsman in the financial service sector lead not only to binding or non-binding solution, but also to consensual agreement mediated by the scheme. Such examples are the ABSL Service Insurance Ombudsman (in Belgium), Financial Sector Supervisory Committee (in Luxembourg), Insurance Ombudsman and Banking Ombudsman (in Poland), Financial Service Ombudsman (in the United Kingdom). At present, the ADR schemes that lead to consensual agreement by mediation are in an early development stage. Most of the times, there is no strict frontier among mediation and other types of ADR schemes. Mediation may be provided by both schemes specialized in mediation and schemes focused on other ADR procedures applied generally to the financial field and specifically to the banking sector. 4. Mediation in Romania: the regulatory framework The analysis of mediation as system for the alternative resolution of the consumer disputes must start from the regulatory environment that creates the framework for this specific practice. In Romania, the first law on mediation was adopted in 2006, respectively Law no. 192 relative to mediation and the organization of the mediator profession. In 2009, this law Protection of Consumers’ Rights and Interests AE Vol XII • No. 28 • June 2010 511 was modified and completed by Law no. 370. In 2008, the Council of Mediation has modified the Standard relative to the training of mediators, which was approved in 2007 (Council of Mediation, 2008). In addition, the Council of Mediation has adopted the Code of Ethics and Professional Deontology of Mediators (Council of Mediation, 2007). The provisions of the Law no. 192/2006 modified and completed by the Law no. 370/2009 refer to the profession of mediator, the organization of the activity of mediators, the rights and responsibilities of mediators, the mediation procedure, the mediation of family conflicts and of criminal causes. According to the Article 1 of the Law no. 192/2006 modified and completed by the Law no. 370/2009, mediation is defined as a way to solve the conflicts on a conciliatory base, with the support of a specialized third party as mediator, within a framework of neutrality, impartiality, and confidentiality and with the free consent of the parties. This approach is in line with the content of the Directive 2008/52/EC. However, the definition provided by the Romanian law states the condition of neutrality of the third party that provides assistance to those in dispute. This condition is not formally mentioned in the Directive 2008/52/EC. Nevertheless, the European Code of Conduct for Mediators (that has an informal value) states as requirement the independence of mediators. Romanian law defines the mediator as a person trusted by the parties and that is able to facilitate the negotiations among them and support them to solve the conflict through the identification of a mutually convenient, efficient, and sustainable solution. The mediation process is based on the cooperation of the parties to the dispute. The mediator cannot impose a solution relative to the dispute among parties. The relevance of the Law no. 192/2006 modified and completed by the Law no. 370/2009, to the commercial disputes, is based on Article 2. According to this article, the provisions are also applicable to conflicts in consumer protection, when the consumer claims a damage following the purchase of defective goods or services; the non-observance of contractual clauses or warranties provided; the existence of abusive clauses within the contracts concluded between consumers and economic operators; the infringement of other rights stipulated by the national or EU legislation in the area of consumer protection. According to Law no. 370/2009, only the person that has obtained the quality of authorized mediator may practice the profession of mediator. In principle, the profession of mediator is compatible with the practice of other activities or professions. Article 12 of the Law no. 192/2006 modified and completed by the Law no. 370/2009 stipulates that authorized mediators are registered in the Table of Mediators, drawn up by the Council of Mediation, and published in the Official Journal of Romania, Part I. In Romania, Council of Mediation organizes the mediation activity. This body is an autonomous legal person of public interest. Among the main responsibilities of the council range the following promotion of the mediation activity and representation of the interests of the authorized mediators; development of training standards relative to mediation based on the international best practices; authorization of the initial and continuous professional training, as well as of the specialization training; authorization of mediators; supervision of the compliance with the training standards in the field of mediation; development of the Code of Ethics and Professional Deontology; making proposals to improve regulation of mediation. AE Alternative Dispute Resolution through Mediation in Romanian Retail Banking Amfiteatru Economic 518 NewsIn, 2008. Mediatorul bancar, aprobat de BNR. 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