New administrative fines for inappropriate advertising of financial services by credit institutions
Legal update No 523
Goltsblat BLP advises that Federal Law No. 175-FZ of 29 June 2016 "On Amending Article 14.3 of the Russian Code of Administrative Offences” will take effect on 11 July 2015.
The new amendments step up credit institutions' administrative liability in certain cases when they advertise financial services inappropriately.
Here is some basic information relating to enactment of these amendments:
1.Federal Law No. 175-FZ supplements Article 14.3 of the Russian Code of Administrative Offences with new chapter 6 stipulating administrative fines on credit institutions for violating part 3, article 28 of Federal Law No. 38- FZ dated 13 March 2006 "On Advertising", i.e., for advertising services relating to provision, use or repayment of credits or loanswithout specifying all the conditions affecting the full cost of the credit (loan) for borrowers (if at least one such condition is mentioned in the advertisement).
For this violation, company officials and legal entities will now have to pay an administrative fine of from RUB 20 000 to 50 000 and from RUB 300 000 to 800 000, respectively. As you might recall, according to the general rules of part 1, article 14.3 of the Code of Administrative Offences, the administrative fine companies pay for advertisement-related violations is from RUB 100 000 to 500 000.
2.In its letter "On Increased Liability for Violations in Financial Services Advertising" dated 2 July 2015, the Federal Antimonopoly Service points out that the increased liability provided for by new chapter 6, article 14.3 of the Code of Administrative Offences applies only to credit institutions, not all advertisers. After 11 July 2015, any other entities falling outside the concept of “credit institution" as defined by the Federal Law "On Banks and Banking", including micro-finance institutions, will remain liable for advertising financial services inappropriately as per part 1, article 14.3 of the Russian Code of Administrative Offences, i.e., according to the general rules regulating liability for advertising law breaches.
The above letter from the Russian FAS states that the new provisions of the Russian Code of Administrative Offences cover legal breaches in advertising financial services after 11 July 2015, including when distribution of materials forming part of an earlier advertising campaign continues after this date.
3.Credit Institutions must be aware that, as per the Russian FAS letter "On Advertising Financial Services" of 31 July 2014, the conditions determining the full cost of the credit include the consumer credit sum, term, repayment date, currency, annual interest rate and rate determination procedure (if a variable rate is to be applied).
To identify the conditions influencing determination of the full cost of a consumer credit, the relevant calculation rules as specified in chapter 6, Federal Law No. 353-FZ dated 21 December 2013 "On Consumer Credits (Loans") will also need to be taken into account.
4.In addition, please note that, from 1 October 2015, part 14, article 28 of the Federal Law "On Advertising" will prohibit advertising of financial services by anyone other than those licensed to provide this type of service. Consequently, starting from this date, credit institutions breaching this ban will have to pay bigger administrative fines under part 6, article 14.3 of the Code of Administrative Offences (taking effect on 11 July 2015).
Goltsblat BLP will supply more detail about the amendments to the Federal Law "On Advertising" taking effect from 1 October 2015 and their key legal implications in its next legal update.
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