Consumer watchdog fines bank and awards damages to savers

The Consumer and Competition Protection Office (UOKiK) has fined Idea Bank PLN 17.2 mln (EUR 4 mln ) for misselling investment products as a guaranteed return scheme to private savers who it ordered to be compensated for their losses.

Idea Bank is to pay savers PLN 38,000 each in compensation, which analysts estimate will amount to between PLN10-20 mln (EUR 2.2 - 4.4 mln), considering the number of people that were missold the savings scheme until it desisted from the sale at the end of 2017.

The assets the Idea Bank retail clients were convinced to buy were Lartiq (Formerly Trigon) XXII, XXIII, XXIV Unstandardised Securitised Closed Investment Funds, which according to the watchdog were “high-risk products”. The Bank “offered them to its clients, who were looking for a secure investment for their savings or who were able to accept the risk of making moderate losses. These were clients who were using normal deposit accounts, structured savings accounts or insurance,” according to the competition office.

As well as misselling the products, the bank “distributed untrue information about guarantees, which were supposedly giving certainty of earnings on the investments,” according to the head of the Consumer Office, Tomasz Chróstny.

The Bank may still appeal against the UOKiK decision.

The UOKiK officials made clear that it was not the first time that Idea Bank had been given a fine for misselling. Last year the bank was fined PLN 2 mln (EUR 450,000) for misselling the bonds issued by Getback, the debt collecting company. In addition the bank was ordered to pay PLN 9.5 mln to its loss-making account holders.

Once again the bank's clients thought they were getting a savings scheme, but ended up buying what amounted to packages of uncollectible debt bound up as bonds. Getback’s insolvency in 2018 lost tens of thousands of people their life savings, including private individuals, institutional shareholders and bondholders.

Under supervision

Under supervision When Idea Bank did its own internal investigation into the misselling, it sacked a number of senior staff and notified the authorities. The bank has been under the observation of the Polish Financial Supervisory Authority (KNF) since shortly after the authority’s current Chairman Jacek Jastrzębski took over in 2019.

Ownership

The bank is 74-percent owned by Polish billionaire Leszek Czarnecki directly and through Getin Holding and Getin Noble Bank. All three are listed on the Warsaw Stock Exchange.

In November 2018 a newspaper revealed that the bank’s main shareholder was allegedly offered security for the troubled financial institution in exchange for the payment of a bribe. The allegations and Mr Czarnecki’s undercover taping of the conversation led to the arrest of the former KNF chairman after the revelations were made.

After losses of PLN 1.9 bn (EUR 420 mln) in 2018, the bank returned to profits in the latter part of 2019. In the fourth quarter it lodged a net profit of over 30 mln (EUR 6.7 mln) and in the first quarter it earned a profit of net PLN 1.7 mln (EUR 380,000).

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