MANIPULATION OF FINANCIAL SERVICE USERS RIGHTS IN SERBIA AS A PARADIGM AND CONCEPT OF MODERN SOCIETY

Nina Arsi 1 , Sneana Miloevi 2 , Dragana Ikoni 3

Abstract: Modern society is characterized by the simultaneous production and consumption of risk, which is functioning due to inherent non-critical trust in institutions & system experts. Support to the economic growth is provided through financial services usage. We are witnessing a rising level of customer dissatisfaction with their relationship towards financial institutions, mostly with unresolved dilemmas and problems related to the cost of financial services and unexpected changes of terms. With the aim of preventing the problem related to the complaints, it is of great importance for clients to acquire information regarding their rights and duties on good business practices of financial institutions. Also, they have to know about the mechanisms of protection of their rights when dealing with financial institutions. Due to the present risk, an individual must be informed on the characteristics of the financial service of his interest. This paper aims to provide fragmentary insight into organized irresponsibility towards users of financial services which are consequently deprived of their rights in the Republic of Serbia.
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Keywords: financial service users, financial institutions, modern society, protection of rights.
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1. PRODUCTION AND CONSUMPTION OF RISK AS A CONCEPT OF MODERN SOCIETY Modern society could be described as a society of simultaneous production and consumption of risk. Modern state, as a political and territorial framework of modern society is characterized by somewhat passive attitude of consumers towards available goods & services. On the other side, modern society is affected by man's fatalist & cataclysmic views on future. In such modernity, the individual is concerned with the protection of self and goods that surround him. The mechanism of simultaneous production and consumption of risk functions thanks to inherent trust in institutions & system experts which guarantee safety and trust. 1.1. ELIMINATING THE INFORMATION ASYMETRY IN THE FINANCIAL MARKETS AND THE PRESERVATION OF FINANCIAL SERVICE USERS TRUST The notion of risk was present in the European thought a century ago, and it was related primarily to the insurance. Even though human society was always endangered, the risks we are facing today are in many ways different from those in the classical industrial society.
Visoka poslovna kola strukovnih studija, Vladimira Peria Valtera 4, Novi Sad, nina.arsic.vps@gmail.com 2 Ekonomsko trgovinska srednja kola, Glavni trg 12, Senta, Srbija, snezana.milosevic@fondmt.rs 3 Visoka poslovna kola strukovnih studija, Vladimira Peria Valtera 4, Novi Sad, dragana_ikonic@yahoo.com
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Srbija, Srbija,

These risks differ by quality and quantity, space-time concerns and unforeseen catastrophic consequences for humans and the whole ecosystem. Such risks are resulting from the threatening forces of modernization and globalization which transform the risk into global phenomenon. "Risk is defined as a systematic way of dealing with dangers and uncertainties created by the modernization. Risks, as such, cause systematic and irreversible damage, they are based on casual interpretations and thus initially only exist in the domain of (scientific or non-scientific) knowledge. This means that the risks are subject to change, growth or minimization, particular social definition and construction" (1). Since the social production of goods is systematically followed by the social production of risks, consumers demand goods which "reduce" these risks. Such goods can be marketed in the form of products or different types of services. In most of the times an average user cannot see the whole picture. Set of easily accessible, carefully selected and practical information could help the process of maintaining confidence in the public institutions. Rules of professional ethics, reinforced by legal sanctions and their enforcement additionally reinforce the existing system. In order to make a choice surrounded by potential risks, consumers must be well informed on the characteristics of the financial service of their interest. 2. FINANCIAL SECTOR AND FINANCIAL INSTITUTIONS IN THE REPUBLIC OF SERBIA Sustainable development of economy heavily relies on the development of the financial sector. Increased use of financial services supports the economic growth by improving the overall performance of the financial sector. These deterministic relationships are improving the quality of life of consumers which act as catalyst for development. In its very essence, the banking business is business of serving the public, and loss of reputation means loss of clients. Today we are witnessing a rising level of customer dissatisfaction with financial services (banks, leasing companies, insurance companies, exchange offices, pension funds). Frequent examples include unresolved dilemmas and problems associated with the cost of financial services or unexpected changes in terms and conditions. Such complaints and objections most commonly result from lack of information valid knowledge about the terms of financial institutions. With the aim of preventing the problem related to the complaints, it is of great importance for clients to acquire information regarding their rights and duties on good business practices of financial institutions. This is precisely where the problem coincides with the passive attitude of consumers towards numerous alternatives and their uncritical trust in institutions and system experts on the other hand. 2.1 THE REFORM OF THE FINANCIAL SECTOR

National Bank of Serbia, in accordance with its authorization and obligations, acts as a supervisor in the operations of financial institutions and protection of clients in the process. The National Bank completed the reform of the banking sector by the end of 2000. and insurance sector in the 2004. This showed its determination to regain the confidence of financial institution clients by following successful examples of other countries which didn't rely on solving consequences but rather on preventive actions in all segments of financial sector. National Bank of Serbia provided citizens with the equal position regarding the commercial banks, it contributed to the establishment of Centre for Financial Services Consumer Protection. Also, some market control measures were undertaken in the financial service sector as a separate organizational unit. 2.2 VIOLATION OF RIGHTS AND PROTECTION OF FINANCIAL SERVICES USER RIGHTS IN THE SERBIAN FINANCIAL MARKET Thorough analysis of the law of financial services consumer protection shows that the protection of users was conducted at two levels. Namely, the provider of financial services must inform their clients about the facts relevant to the conclusion and execution of the contract and the client must be aware of their obligations and conditions defined by the contract. However, as stated in the objections to the Law on the protection of Financial Services Users(2), protection is not achieved because contracts on financial services are made at the entry level. This means that the client, as the weaker party, cannot negotiate with the service provider. Therefore, only one option exists where client either conclude or doesn't conclude the contract. If the client agrees on the conclusion of the contract, he directly accepts all mentioned protective clauses and rights of service providers which are not in accordance with the general rules of law of obligations.(3) The majority of complaints by financial services users are directed towards the banking sector with the 86% of total complaints. Most of them are related to changes in interest rates during repayment, the method of calculating interest on credit card debt. Complaint structure during the January-September period, grouped by financial services providers:

Service users complained mostly on the amount of offered compensation, untimely payment, even refusal of payments regarding the non-disputable amounts. Complaint structure regarding the work of insurance companies in the January-September period, 2010.

It is undisputable that only financial education of citizens can work in the direction of reduction of such complaints. The National Bank of Serbia provides all necessary information to financial services users through its regional offices for financial education. Mediation contributed to the peaceful settlement of disputes between financial institutions and their users which proved to be quite successful, not only quicker and cheaper solution. The new law introduced new rules which partially limited bank commissions and provided citizens with much more transparent and higher quality of banking services. One of the many examples of common manipulation of financial services users is the effective interest rate. By adopting the new law, a financial institution is required to highlight the level of effective interest among the other elements of the loan contract. This regulation prevents the former practice where the effective interest rate didn't have to be specified on flyers, footnotes, where financial institution could promote credit offers with 0% interest etc. However, the new law now obligates financial institutions to put forward other conditions of use. Financial institutions have transferred the costs of using credit products with 0% interest on fees and charges for the use of other products which were, again, condition for approval of credit products which are intentionally hidden from financial services users.

Many economists share the idea that the new legal solution which allows clients to withdraw from the credit (except mortgage loans) paid in 14 days, is unacceptable to financial institutions. The user of this financial service is obliged to pay only the interest valued within the period of the loan. User has no extra costs or further consequences. By the end of the 30-day period the user can refund loan principal with regular interest, without any extra payment. Banks can protect themselves by increasing fees for credit processing which eliminates this kind of risk.

CONCLUSION National Bank of Serbia has made a proposal and the proposed Law is approved, starting from 5th of December. The banks protested to certain aspects because it directly reduces banking profits. The Law is in accordance with the EU law and no discrepancies were introduced which is the positive aspect. The negative aspect is that the bank makes the decision whether to execute the service which is legally defined as a free one or one with the more affordable price. Commercial bank is allowed to simply cancel the service or transfer its costs to some other services. Therefore, the banks have ways to compensate secure income through smaller items. The new Law introduced a lot of changes, positive and negative, for financial institutions or their users. It will solve most of these inequalities: the clients will be better informed and will enjoy greater rights in relation to commercial banks, but it also means higher fees for interests not regulated by the Law (interest rates on credits, loan processing fees, expensive maintenance of accounts). Not even set of well-defined laws, which are applied consistently, could produce a society without any risk or society where human rights would not be manipulated in any way. Financial service institutions will find their ways to maximize their earnings and the users must pay greater attention in order to grasp the whole picture and context of the financial sector. The state can regulate the status and protection of consumers by different norms, but it is now beyond dispute that the term "consumer" is reserved for someone we could characterize as "reasonably careful consumer" (definition of consumer by the European Court - reasonably circumspect consumer). However, with such protection and definition the very domain of protection remains elusive and reserved only for narrow circle of subjects, or addressees of the legal norms.(4)