Solutions to problems with financial institutions

There is a great number of regulations that affect all financial market participants. It is difficult, even for experts, to fully understand what applies where and when. That is why sometimes mistakes happen in financial transactions, even when customers have correctly provided all the required data. These mistakes are mostly unintentional, sometimes there may be misunderstandings as to the applicability of regulations. However, that does not protect financial institutions from any legal consequences if they have caused damage to their customers.

Damage means any disadvantage to a person, their assets or their rights.

If you have suffered damage and you have engaged in business with the bank only for a short time, you should check first if the financial company is licensed in Austria. You can find this information in the company database on the website of the Financial Market Authority (FMA). There you can search for financial service providers to find out whether they are licensed in Austria and supervised by the FMA. If you need this information for a financial adviser, you may want to search the Austrian business license information system GISA. These searches are free of charge. For more information on GISA, see the website of the Austrian Ministry of Labour and Economy (BMAW). If you cannot find the name of the financial company that has caused the damage, the information we provide in the section on protection against financial fraud might be helpful. Read more to find out what you can do if a licensed financial company has caused you damage.

Documenting the damage

In general, consumers enjoy good legal protection in their relations with banks and other financial institutions.

In order to make full use of your consumer rights in such a situation, it is important to have and make available all relevant information. This will help you provide proof of the damage caused. You should always carefully and completely read all the documents that are discussed and signed during a consultation or a product purchase and keep copies of them. Important communication should be in writing so that it can also be used as proof.

That concerns in particular:

• consultation protocols
• investor profiles
• contracts (including any later amendments)
• written communication with (service) providers (especially if there have been problems)

In addition, it is helpful to write down the most important information before filing a complaint: type and amount of damage, who advised you on the product or sold it to you, and how the product is different from the product description obtained.

Obligations of financial institutions in the event of damage

By entering into a contract, customers and financial institutions agree on mutual rights and obligations, thereby creating their own “law.” All contracting parties have to comply with these rights and obligations.

The rights and obligations created through a contract between customers and financial institutions are limited by legislation. There are different laws in Austria that regulate what financial institutions are allowed to do when engaging in business with customers. The most important legal requirements affect the provisions and costs of loan contracts, information for customers who borrow or invest and information obligations and costs relating to account maintenance and payments.

There are also rules that determine how financial institutions must deal with customer complaints. When customers make a complaint, financial institutions have to fulfill the following legal obligations:

• The financial institution has to collect and check any proof or information related to the complaint.
• The financial institution has to communicate with the customer in a clear, explicit and understandable way.
• The financial institution has to reply to any inquiries without undue delay.
• If the financial institution needs more time to process an inquiry, it must inform the customer of the reasons why the answer will be delayed and when he or she  can expect it.
• If the financial institution rejects a customer claim, it must explain the reason for the rejection and name a contact person for the customer to pursue the complaint further. Such contact persons would be from other organizations and authorities.

These obligations apply until a final decision has been made or the complaint has been resolved.

Advice and support in the event of damage

Laws can be confusing and hard to understand. Similarly, in contracts, customers may come across words they actually do not understand. That is why it is important to ask questions and address open issues before signing a contract. The contracting party – a financial institution like, for example, a bank – has the legal obligation to provide extensive information and explanations to the customer.

Receiving professional support is a good idea if you have a complaint about a financial institution, especially if legal proceedings seem likely. You may file legal proceedings to assert your claim in court. In this case, you hire a lawyer to advise you and initiate legal proceedings, if necessary. Usually, this involves costs.

When it comes to the enforcement of the general rights and interests of consumers, there is the option of collective redress. For this type of legal action and corresponding consultations, consumers do not incur any costs. Usually, consumer protection organizations file such collective claims. These organizations take action when financial market developments indicate that a financial company is acting unlawfully or when they receive justified complaints concerning the activities of a financial company. In Austria, the Consumer Protection Association (VKI) or the Federal Chamber of Labour typically seek injunctions or bring representative actions to court. This occurs, for example, when a company regularly includes unlawful clauses in its terms and conditions. Additionally, the VKI and the Chamber of Labour can conduct model lawsuits to achieve generally accepted settlements of legal issues. Finally, there is also the possibility of an Austrian-style class action. For this class action, an authorized association (like the VKI or the Chamber of Labour) takes over similar claims of many consumers and brings them to court.

In Austria, there are various contact points that can support you if you have a complaint. They are shown in the following illustration.

Free advice and support

The Consumer Protection Association (VKI) is an independent Austrian association that consumers can contact for advice and support. For further information, visit the website of the VKI. The contact people there are experts in consumer law and can help you, starting from formulating a complaint to a financial institution.

The Chamber of Labour’s consumer protection function is another body offering support and advice for consumers. You can get in touch online through the website of the Chamber of Labour, where you are first asked to click on the province where you live. You will then be redirected to your regional Chamber of Labour. In addition, the Chamber of Labour offers a wide range of brochures and information material on financial products and potential associated difficulties.

If you have problems with financial institutions because of (over-)indebtedness, you may want to contact debt counseling services (Schuldenberatung). Go to their website to get in touch with experts who give advice on debt-related emergencies.

The information pages (“Finance ABC”) on the website of the Financial Market Authority (FMA) are an additional helpful source of information (but do not provide individual consultation). In its role as a supervisory authority, the FMA is also responsible for complaints.

The Austrian bar association provides free initial consultations as part of their citizens' service. This gives you the opportunity to make one free appointment with a lawyer to discuss your specific legal situation and possible courses of action. For detailed information and contact details, visit the website of the Austrian bar association.

If a damage has already occurred, you can find help at a number of counseling centers specialized in consumer support. If there are frequent reports of the same damage caused by the same financial institution, the VKI, the FMA and the complaints office of the Austrian Ministry of Social Affairs, Health, Care and Consumer Protection can also initiate legal investigations. You can contact them via the following links:

The Austrian Ministry of Social Affairs, Health, Care and Consumer Protection can instruct the VKI to file a lawsuit on behalf of consumers or bring representative actions against companies in court if they suspect any breaches of the law. If a financial institution is found guilty by the court, customers may invoke the judgment and approach counselors to claim, on their behalf, damages from the financial institution that has caused damage.

Paid advice and support

Hiring a lawyer to advise and represent you beyond a free initial consultation is usually very costly. For small savers and investors, this may be an option only if they have taken out legal expenses insurance. This type of insurance covers the costs of proceedings and legal fees (depending on its specific terms and conditions). Detailed information on insurance can be found on this page.  

How to file a complaint about a financial institution

If you think you have suffered financial damage, always be sure to know what your situation is and get advice.

If neither your financial adviser nor the product provider can help resolve the issue, it is recommended to contact an internal ombudsperson. This is a contact point in a company specifically responsible for customer complaints. They are also called ombudswoman or ombudsman. Ombudspersons act as mediators between customers and companies without any outside party. Ombudswomen or ombudsmen are usually specially trained to resolve disputes. They offer the final possibility to find a solution directly with the firm that provided advice or sold a product. Especially big financial institutions have an ombudsperson. You can usually find their contact details on the institutions’ website.

If an internal solution fails, you can contact an external ombudsperson or an arbitration board. They are experts with industry knowledge who act as neutral mediators between companies and customers and are also specially trained to resolve disputes. In most cases, these external ombudspersons offer the last chance to resolve disputes outside court. Below you can find a list of the most important arbitration boards. Note that there are different ombudspersons for different financial services providers. All linked ombudspersons and arbitration boards are either government bodies or officially recognized by the companies of the corresponding industry.

Turning to the supervisory authority and filing legal action are the last options to seek redress if all other options have been exhausted. Filing a claim in a civil court is necessary in order to assert your rights. The supervisory authority investigates whether the company that has caused damage has violated its legal obligations toward their customers.

In Austria, the Financial Market Authority (FMA) is the supervisory authority for essentially all financial institutions. It is an independent supervisory authority not bound by any instructions from companies, parties or government institutions. This means that politicians or companies must not tell the FMA what to do. You can directly submit complaints about financial institutions on the FMA’s website. The FMA takes over from here if all previous attempts to resolve the dispute have failed and the company that has caused damage falls under the jurisdiction of the FMA. For further information, visit the FMA’s website.