Czech banks face class actions over loan and mortgage fees
Czech banks are facing a major confrontation with dozens of thousands of their clients that could cost them hundreds of millions of crowns. Over 40,000 people have now signed up to class actions to reclaim the fees banks charge for loan and mortgage accounts. The clients say the practice is illegal, and want their money back. The banks, meanwhile, remain defiant, saying all their charges are in line with the law.
Mr Němec, who had taken out a loan with one of the largest Czech banks, Komerční banka, thought he could try to get his money back as well.
“When I first heard of the German ruling that loan administration fees were against European law, I decided to ask my bank, Komerční banka, to stop charging me this fee and return the money I paid in the past. But the bank rejected – but before the court could rule, the bank returned the money.”
What made you think that a ruling of the German Supreme Court could also apply here in the Czech Republic?
“It’s not about using the German verdict at Czech courts but about using the same logic and the same interpretation of European law as the German court did.”
Mr Němec received some 400 crowns, or around 20 US dollars, including interest. After his victory over Komerční banka, Petr Němec launched a website advising other clients who want their money back as well. He also works with two other groups of clients who are preparing their own class actions.
“This month, we started cooperating with the website bankovnipoplatky.com in preparation for a class action against the banks. We also work with a new group, poplatkyzpet.cz, and we now represent more than 40,000 people.”
“It depends on how many people will join in. From what we know, if we only get, say, 20 or 25 percent of the bank’s clients, it’s better for the bank to go to court because it will cheaper to return the fees to these clients. But even that could amount up to one billion crowns.”
Mr Němec says they want to gather many more people than the 40,000 or so that have singed up.
“There are some 1.5 million loans in the Czech Republic, and my aspiration is to get together some 500,000 people. We are now collecting powers of attorney which should last another three to five weeks. After that, we will select a bank and ask it to stop charging the fees and return the fees paid in the past. After that, we will see.”
Some smaller Czech banks, including mBank, Fio, Air Bank and Poštovní banka do not charge these fees. Others, such as Komerční banka, Raiffeisenbank and UniCredit Bank, have stopped charging people for credits accounts. But some, including the country’s largest bank Česká spořitelna, maintain their policy. Jan Holinka is a spokesman for Česká spořitelna.
“Several hundred of our clients have approached us requesting the return of the fees. But we are not considering such a move for the time being. The fees are charged in line with the law, and are part of the contracts concluded with our clients. We have not been in touch with any of the groups, and we will choose a course of action depending on what the situation will be, and whether the initiatives will approach us.”
“Our clients can choose between two options: they can get a standard mortgage with monthly fees payments, or they a mortgage without any monthly fees where all the costs associated with loan services are reflected in the interest rate.”
Which of these do your customers prefer?
“Approximately 10 percent of our clients prefer mortgages without fees, the rest take out standard mortgages with regular fees.”
When it comes to the requests by clients who want back the fees, what is your approach?
“Based on the choice we offer to our clients, we approach all requests individually.”
Does that mean that in some cases at least you do return the fees?
“No, we don’t return fees.”
For their part, the LBBW bank says that while they continue to charge the fees, they are considering several scenarios in case a class action is brought against them. Martina Lambert is the bank’s spokeswoman.
“We do charge our clients in case of mortgages and consumer loans this administration fee. With mortgages, it’s 150 crowns a month, and with loans it’s 50 crowns.
But this was also the case in Germany, the home country of your mother bank. But the court there abolished the fees. Have you received such requests as well?
“In individual cases, we have been approached by our clients and I have to say we handle all these cases individually.”
Are you preparing for possible class actions that seem to be underway in the Czech Republic?
“If we are approached by our clients or their representatives, we will handle their requests. At the moment, we are internally discussing several different scenarios related to this fee and the whole situation on the market but a final decision has not been taken.
“We are now running a new campaign and as part of it, one of the benefits is that we don’t charge these fees for new mortgages.”
Other banks have refused comment on the issue but most follow the line of argument that administration fees linked to loans and mortgage accounts are in line with the law, and part of the contracts with their clients. But Petr Němec believes that even if people sign contracts with something in them that is against the law, it doesn’t mean it automatically becomes legal.
“This is an argument that loan sharks would use. It’s the same because if sign a contract with a 50 percent annual interest, it’s illegal, and the signature under the contract does not change that.
“I build my arguments on the position of the German Supreme Court; for instance, that the fees in the contracts are not specific.”
In the coming weeks, class actions might be filed against a selected bank. Depending on the bank’s reaction, and on whether the lawsuit will actually be heard at court, the disgruntled clients will take action against other banks which have refused to return fees. If they succeed, Czech banks could eventually lose hundreds of millions of crowns, and people taking out loans and mortgages in the future will be spared the hassle of having to pay for something they don’t really need.
