A recent consumer protection report released by the National Bank of Hungary (MNB) revealed several irregularities in credit lending to private customers in Hungary. It advises customers to be more careful when signing agreements and contracts for financial services.
Among the most frequent irregularities, cited by weekly current affairs magazine HVG, the report mentioned that:
- banks or insurance companies do not offer full information to customers before contracting a loan;
- large retail chains do not offer proper information to customers that the shopping cards they offer are in fact credit cards;
- sales agents offer credit during product presentation events, despite laws specifically prohibiting this;
- more than 80% of customers younger than 35 have never received financial education.
The MNB has conducted controls at 11 banks and has identified problems mainly in home loans. The general contract terms of all banks contained elements which, in the case of a lawsuit, can qualify as unfair. Also, in many cases, before contracting a mortgage, customers are not sufficiently informed about the extra costs charged by the bank.
Last year customers filed 365,700 complaints to banks, insurance companies and other financial institutions. This means that on average, customers filed eight complaints per 1,000 contracts, most of them connected to credit cards, the report says.
Following controls based on customer complaints, the central bank found irregularities with shopping cards at store chains Tesco and Auchan. The controls revealed that cards marketed as shopping cards were in fact credit cards, but the companies did not indicate this clearly.
A study conducted for the MNB revealed that 27.4% of households contracting a loan are financially vulnerable either because of their financial situation or because they lack the necessary financial information. A further 15% would perceive it as a shock if one of their family members lost their job or unexpected expenses arose. About 3-8% of households which have already contracted credit have significant problems paying off their loans.
Financial education is of paramount importance, the MNB says. If interest rates grow by as little as 1-3%, this can significantly increase monthly payments, by 10-30%. Therefore, banks need to explain in full detail the risks entailed in loans, the central bank concludes.