The majority of financial transactions currently take place in cashless form, by payment cards or transfers using internet or mobile banking. Even having regard to the technical complexity of these operations, various problems occur in practice (a bank makes a payment without the client’s authorisation, a bank incorrectly executes a direct debit payment, a dispute arises between a merchant and a bank concerning the misuse of a stolen payment card, etc.). The expansion of cashless transactions and banking operations was the reason why, following the example of other European Union countries, the institution of the so-called financial arbiter (finanční arbitr) was also established in the Czech Republic, whose task is to resolve disputes connected therewith. The aim of this circular is thus to outline the function and powers of the financial arbiter, whilst also mentioning what problems one may turn to the financial arbiter with, how to proceed in the event that a client of a monetary institution wishes to submit a proposal for the commencement of proceedings and how the proceedings themselves take place.

The Financial Arbiter is a relatively new state institution whose task is to decide disputes between financial institutions (banks and cooperative credit unions) and their clients cheaply and quickly. At the end of 2010, the Government approved an amendment to the Act on the Financial Arbiter, which significantly increases its powers. The Financial Arbiter, if the amendment to the Act is approved in the legislative process, will from July 2011 also decide disputes arising from consumer credit and collective investment.

At present, the financial arbiter has jurisdiction primarily to resolve disputes which arise in the transfer of funds, in corrective settlement and in the use of the direct debit form of payment on the territory of the Czech Republic not exceeding the value of €50,000. The Financial Arbiter also decides disputes between persons issuing electronic means of payment and holders of these means of payment. The Financial Arbiter may decide only disputes in respect of which a Czech court would have territorial jurisdiction. The Financial Arbiter, conversely, does not decide disputes concerning building savings, mortgages, leasing and insurance.

Proceedings before the financial arbiter may be commenced only upon a proposal. The proposer may be only a client of a financial institution, never the financial institution itself. Before submitting a proposal, it is necessary for the client to attempt to resolve his dispute with the financial institution first himself. In the event that he does not succeed, he may submit a proposal to the financial arbiter. The proposal must contain certain prescribed requirements. These must be obligatorily: identification of the parties to the proceedings (his name, residence, date of birth and identification of the institution), proof that the institution was unsuccessfully called upon to remedy the matter, a statement of the decisive facts, identification of evidence, identification of what the proposer seeks, a declaration that the proposer has not brought an action in the same matter to a court or to an arbitral tribunal or arbitrator and that he has not concluded a settlement agreement with the institution and is aware of the binding nature of the finding, the date and signature of the proposer. The proposal may also be submitted on a form which may be found on the financial arbiter’s website. One may also turn to the financial arbiter with an enquiry, either by telephone or via his website.

After the commencement of proceedings, the financial arbiter reviews whether all statutory requirements are satisfied; in the event that they are, he begins with the taking of evidence. Once the financial arbiter has taken all evidence, he gives all parties the opportunity to comment on the entire matter and thereafter decides by way of a finding. Objections may be lodged against the finding within 15 days of service, which the financial arbiter shall decide upon anew. If the proposer is nevertheless not satisfied with the result of the resolution of his dispute with the institution before the financial arbiter, he may assert his rights before a court. Proceedings before the financial arbiter are relatively quick; the average time for resolving one case is around 60 days. The costs of proceedings are borne by each of the parties himself regardless of success in the matter.

The Financial Arbiter should thus theoretically function as a quick, less formal and efficient means of resolving a dispute between a client and his financial institution. It may be expected that in the future his powers in resolving financial disputes will increase further.

This text was translated from Czech to English using an AI translator.