Unfair Commercial Practices Directive, Chapter 2, Article 5, 2. Unfair Commercial Practices Directive, Chapter 2, Article 5, 4. Unfair Commercial Practices Directive, Chapter 2, Section 1, Article 7, 1. Unfair Commercial Practices Directive, Chapter 2, Section 1, Article 7, 4., (a)

Failing to provide consumers with all information that is required to allow them to properly assess all risks associated with a financial product, constitutes an unfair commercial practice. 

The Ombudsman received reports from consumers against the defendant (a well-known financial institution) asking for reimbursement of the money they had invested in titles of Lehman Brothers.

The plaintiffs received from the defendant investment papers that were issued by Lehman Brothers Treasury Co. B. V. and guaranteed by Lehman Brothers Holding Inc. The consumers wanted to directly use the money and did not want to risk the loss of any part of their capital.

The defendant argued that it acted merely as a distributor of the titles, receiving and sending the orders of the titles purchased to the issuer. In addition, the defendant claimed that it provided investment advice only in those cases where the client did not proceed to the purchase of the titles with his own liability and initiative. On September 2008, however, Lenhman Brothers Holding Inc was declared bankrupt and the titles of the plaintiffs lost their value.

The consumers argued that, based on the existing relationship of trust with the defendant, the employees of the defendant, using misleading methods, convinced them to sign unclear applications of titles purchase. In these applications, many other legal persons were mentioned too, whose role was not clear to the consumers. The applications also referred to different types of risks, without explaining these risks to the consumers. Finally, those applications were not handed over to the consumers so as to carefully study them.

According to the Ombudsman, it was proven that the defendant, although it was obliged to do so, did not provide the consumers with all necessary information regarding the estimation of the evolution of the product and of its possible risks. 

The defendant omitted to inform the consumers about the gradual degradation of the creditworthiness of Lehman Brothers. This way, the defendant did not allow the consumers to evaluate the risk associated with the titles. Although the defendant was obliged to act accordingly, it failed to inform the consumers regarding essential characteristics of their investment, which were necessary for them in order to accept or to reject the proposed investment. 

As a result, according to the Ombudsman, the consumers did not understand the risk of losing their capital. This way, the defendant had impaired the consumers' freedom of choice.

For these reasons, it was held that the defendant had committed unfair commercial practices.

The misleading actions and omissions were related to the damage of the consumers, since the investments took place because the defendant created the impression that there was no risk. If the consumers had been in any way aware of the risks, they would have refused the investment. 

Does the failure of a financial institution to inform consumers about the characteristics of financial titles and about the fluctuation of the creditworthiness of the issuer, constitute an unfair commercial practice?

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The Ombudsman of the Consumer recommended the defendant to compensate the consumers for the damage incurred.