Unfair Commercial Practices Directive, Chapter 2, Section 1, Article 7, 1.

Constitutes a misleading commercial practice, omitting to inform the consumer on the credit risks of a transaction and the role of the different actors in such transaction.

The Ombudsman of the Consumer received a complaint from the plaintiff against the defendant, a financial institution. The complaint related to misleading precontractual information at the time of purchase of some bonds issued by another financial institution, namely Nadra Bank.

According to the plaintiff’s allegations, the latter only realized the credit risk associated with the investment, when the issuing Bank (Nadra Bank) stopped paying the interest coupon during June 2009. The plaintiff  had already brought the matter before the Hellenic Capital Market Commission, which did not manage to settle the case between the two parties. As a result, the Ombudsman had sent the complaint to the defendant to reply to the accusations. The defendant answered that the information which the plaintiff had received, enabled the latter to fully understand the risks of the investment.

Prior to the purchase of the bond, the plaintiff asked by e-mail to be informed about the guarantor of the bond. The defendant informed the plaintiff that HSBC Bank PLC had undertaken on behalf of Nadra Bank the issuance of the bond. However, this information was ambiguous and unclear and therefore it misled the plaintiff. The Hellenic Capital Market Commission held that the specific question of the plaintiff was not explicitly and clearly answered by the defendant so as to avoid any ambiguity in relation to the guarantor's identity and this authority imposed a fine on the defendant. The Commission held that although the role of HSBC was not clear in the issuance of the specific bond, the plaintiff had nonetheless proceeded with the purchase because the plaintiff was misled by the defendant.

In addition, the questionnaire attached to the contract for the provision of investment services between the defendant and the plaintiff, was not filled out on the points regarding important issues such as the level of the plaintiff’s financial knowledge etc.  

The Ombudsman held that the defendant failed to explicitly and clearly inform the plaintiff about the role of the two banks who were involved in the transaction (HSBC PLC & Narda Bank). Consequently, so the Ombudsman held, the consumer had undertaken a credit risk bigger than the one which was presumably desired by the plaintiff. As a result, the plaintiff had suffered great loss from the initially invested capital.

Additionally, the defendant was not properly categorized, taking into account the risk plaintiff was willing to take, the time that plaintiff was willing to invest and the investment knowledge and targets of the plaintiff.  

Does it constitute a misleading commercial practice to omit to inform the consumer on the credit risks of a transaction and the role of the different actors in such transaction?

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The Ombudsman of the Consumer recommended to the defendant to repurchase the bond in question from the plaintiff.