Council Of State Decision On The Bank Not Being Able To Charge Account Maintenance Fees To Consumers
COURT OF AUDITORS 15TH CHAMBER
Case No.: 2014/9570
Decision No.: 2018/1194
Plaintiff: Consumer Issues Association
Representative: Attorney…
Defendant: Banking Regulation and Supervision Agency
Representative: Attorney…
Summary of the Case: The first paragraph of Article 10 and the first paragraph of Article 13 of the Regulation on Procedures and Principles Regarding Fees Charged to Financial Consumers, which entered into force upon its publication in the Official Gazette dated 03.10.2014 and numbered 29138, and the fees listed in Appendix -1, namely “1.1 Allocation Fee, 2.1 Account Maintenance Fee, 4.4 Cash Advance Withdrawal Fee, 5.7 Payments Made to Public Institutions and Organizations.”
Summary of Defense: Article 4/3 of Law No. 6502 assigns the Authority the task of determining all types of fees, commissions, and expenses other than interest. In preparing the Regulation, the Authority adopted the method of determining interest rates for credit institutions separately from other expenses. If the Regulation is canceled, these expenses will be reflected in the interest rate, therefore a system was chosen in which interest does not include expense items. The selection of this system will be subject to judicial review, which will be a review of appropriateness. In our current legislation, expenses are not included when determining interest rates. Fees that could confuse consumers and By prohibiting fees that could be charged under different names at the time of the transaction, a regulation favorable to the consumer has been introduced, whereby all these fees are replaced by a single name such as “allocation fee” and limited to five per thousand of the principal amount of the loan. It is stipulated that the loan allocation fee will be charged for the purpose of operating the system that enables the consumer’s credit needs to be met and managing the operational process. consumers are given the opportunity to check whether this fee is unfair; account maintenance fees and money transfer transactions are qualitatively different transactions and require different costs, therefore there is no double charging; it is stipulated that account maintenance fees, which were previously charged separately for each account, can be charged on a customer basis regardless of the number of accounts; Within the framework of the provisions of the Regulation regarding information, a predictable account maintenance fee has been implemented by the financial consumer. In cash advance withdrawal transactions, the credit institution must keep a certain amount of money available at all times in many locations and ATMs, which incurs a certain cost. Since this cost is not included in the interest, this expense is included in the Regulation. Payments made to public institutions and organizations are included in the list so that consumers can clearly see them. Furthermore, no fee can be charged to the consumer, which is why it is referred to as a payment rather than a fee. For the reasons explained, it is argued that the regulations in question are in accordance with the Law, the public interest, the principle of administrative discretion, and service requirements, and therefore the lawsuit should be dismissed.
Opinion of the Council of State Investigating Judge: Article 4/3 of Law No. 6502 on the Protection of Consumers, which is the basis for the Regulation in question, states: “No additional fee may be charged for actions that the consumer reasonably expects to be performed within the scope of the goods or services offered to them and that are among the legal obligations of the party drafting the contract, or for expenses incurred by the party drafting the contract in their own interest…” It is understood from the Banking Law that the granting of cash and non-cash loans of any kind and form by banks that draw up credit agreements for financial consumers is among their legal obligations, and that the credit allocation fee of up to five per thousand of the principal amount of the credit requested from the consumer is in the interest of the party drawing up the agreement, i.e., the banks, to protect themselves against “early repayment risk ,” as stated in the defendant administration’s defense. Therefore, banks and financial institutions are provided with a guarantee similar to the early repayment compensation provided for in Article 37/2 of Law No. 6502. Although no additional fee may be charged, the collection of a fee under the name of a credit allocation fee is permitted. Furthermore, the defendant administration cannot document the credit allocation fee. According to the established case law of the Court of Cassation, mandatory, reasonable, and documentable expenses may be requested from the consumer; otherwise, a fixed amount determined by the court must be collected from the consumer. This is in accordance with the relevant provisions of the Law and Regulations. it was determined that there was no legal compliance with regard to the first paragraph of Article 10 of the Regulation, which allows the collection of a credit allocation fee from financial consumers in relation to consumer and housing finance loans, and the “1.1. Allocation Fee” in Annex 1, which classifies the products or services that can be charged by institutions, is deemed to be unlawful and should be repealed. The first paragraph of Article 13 of the Regulation, which concerns the “Account Maintenance Fee” requested to be repealed, and “2.1 Account Maintenance Fee” in the Annex-1 list and “4.4 Cash Advance Withdrawal Fee” in the Annex-1 list, exceed the legal basis within the scope of the aforementioned legislation. The defendant administration failed to provide legally valid, concrete, and objective information and documents to prove that the aforementioned fees are mandatory, reasonable, and verifiable. Therefore, it is considered that the aforementioned regulations, which are deemed to be contrary to the law and the legal basis, should be canceled. However, regarding the item “5.7 Payments Made to Public Institutions and Organizations” in the Annex-1 list, since there is no violation of the law and the legal basis, it is considered that the case should be dismissed.
Opinion of the Council of State Prosecutor: Paragraph 3 of Article 4 of the Consumer Protection Law, published in the Official Gazette dated November 28, 2013, No. 28835, states: No additional fee may be charged to the consumer for actions that the consumer reasonably expects to be performed within the scope of the goods or services offered to them and that are among the legal obligations of the party drafting the contract, or for expenses incurred by the party drafting the contract in their own interest. For products or services offered to consumers by banks, financial institutions providing consumer credit, and card-issuing institutions, all types of fees, commissions, and expenses to be charged to the consumer other than interest, as well as the procedures and principles related thereto, shall be determined by the Banking Regulation and Supervision Agency in accordance with the spirit of this Law and in a manner that protects the consumer, after obtaining the opinion of the Ministry.”
Based on this regulation, the Banking Regulation and Supervision Agency issued the Regulation on Procedures and Principles Regarding Fees Charged to Financial Consumers, some articles of which are the subject of this case, and it was published in the Official Gazette dated October 3, 2014, numbered 29138.
Article 1 of the Regulation emphasizes that the purpose of this Regulation is to determine all types of fees, commissions, and expenses other than interest or profit shares to be charged by institutions for products or services offered to financial consumers, as well as the procedures and principles related thereto. Article 4 specifies that institutions refer to “banks, financial institutions providing consumer credit, and card-issuing institutions”; and that fees refer to “any monetary amount requested from financial consumers under the names of fees, commissions, expenses, and similar items, other than interest, profit shares, taxes, funds, and similar legal expenses.”
The Regulation on Procedures and Principles Regarding Fees Charged to Financial Consumers, Article 10, Paragraph 1, states: “No other fees may be charged to financial consumers for loans granted to them, except for the allocation fee collected for the operation of the system enabling the fulfillment of credit needs and the management of operational processes…” Article 13, paragraph 1 of the Regulation states: “…Account maintenance fees may be accrued and collected by the relevant institution on a customer basis during the periods determined by the institution, regardless of the number of accounts held by the financial consumer…”
On the other hand, Article 6 of the Regulation, which is not the subject of the lawsuit, emphasizes that no fees may be charged for any products or services other than those specified in this Regulation and its annexes. Annex 1 lists the fees that may be charged, including “1.1. Allocation Fee,” “2.1. Account Maintenance Fee,” “4.4. Cash Advance Fee,” and “5.7. Payments Made to Public Institutions and Organizations,” thus allowing lending institutions to charge the listed fees.
It is undisputed that credit agreements freely entered into between lending institutions, each of which is a private legal entity, and real and legal persons receiving credit are private law agreements. Within this framework, the parties may establish a relationship within the general framework of contract law by stipulating this in the agreement. Therefore, administrative regulations that interfere with the parties’ freedom of contract are unlawful.
On the other hand, lending institutions, which are private legal entities established for profit, generally incur costs when collecting credit interest from their customers, i.e., when carrying out credit transactions. Accordingly, it is natural that these costs and expenses generally incurred by lending institutions are passed on to the consumer.
However, the decisions of the Court of Cassation regarding credit agreements, taking consumer law into account, have become established case law, stipulating that the lending institution may only request mandatory, reasonable, and documented expenses from consumers. Moreover, the Law clearly emphasizes that lending institutions cannot make additional claims for expenses incurred in their own interest.
The Regulation on Procedural Principles Regarding Fees Charged to Financial Consumers does not regulate the circumstances under which the payments and fees referred to in the articles subject to the lawsuit may be charged, the extent to which they may be charged, their nature, their clear reason, or their scope.
Accordingly, the regulations subject to the lawsuit are contrary to the third paragraph of Article 4 of Law No. 6502, which is the basis of the Regulation, as well as to the established case law of the Court of Cassation on this matter.
For the reasons explained, it is considered that the lawsuit should be accepted and the provisions of the regulation subject to the lawsuit should be annulled.
IN THE NAME OF THE TURKISH NATION
The Fifteenth Chamber of the Council of State, having heard the explanations of the examining judge and examined the documents in the file, deliberated as follows:
The case concerns the provision in Article 10(1) of the Regulation on Procedures and Principles Regarding Fees Charged to Financial Consumers, published in the Official Gazette dated October 3, 2014, No. 29138, which states: “Except for the allocation fee charged for the operation of the system enabling the fulfillment of credit needs and the management of operational processes for credits to be extended to financial consumers, no other fees may be charged under any name, such as intelligence fee, credit transaction slip fee, payment plan change fee, or variable installment payment plan fee. The credit allocation fee may not exceed five per thousand of the principal amount of the credit extended. The Board is authorized to increase or decrease this limit when deemed necessary.“ Article 13, Paragraph 1 ”The account maintenance fee may be accrued and collected by the relevant institution on a customer basis during the periods it determines, regardless of the number of accounts held by the financial consumer. If the account is closed during the year, the fee corresponding to the period during which the account was open may be charged. No fee may be charged for account opening and closing transactions or for printing account statements.” The lawsuit was filed with the request to cancel the fees listed in Appendix 1 of the aforementioned Regulation under the headings “1.1 Allocation Fee, 2.1 Account Maintenance Fee, 4.4 Cash Advance Withdrawal Fee, 5.7 Payments Made to Public Institutions and Organizations.”
Article 1 of Law No. 6502 on the Protection of Consumers, titled “Purpose”; “The purpose of this Law is to take measures that protect the health and safety and economic interests of consumers in accordance with the public interest, compensate for damages, protect consumers from environmental hazards, inform and raise awareness among consumers, encourage consumers to take protective measures, and regulate matters related to encouraging voluntary organizations in the formulation of policies on these issues.” The third paragraph of Article 4, titled “Basic Principles,” states: “No additional fee may be charged to the consumer for actions that the consumer reasonably expects to be performed within the scope of the goods or services offered to them and that are among the legal obligations of the party drafting the contract, or for expenses incurred by the party drafting the contract in their own interest. For products or services offered to consumers by banks, financial institutions providing consumer credit, and card-issuing institutions, all types of fees, commissions, and expenses other than interest to be charged to the consumer, as well as the procedures and principles related thereto, shall be determined by the Banking Regulation and Supervision Agency in accordance with the spirit of this Law and in a manner that protects the consumer, after obtaining the opinion of the Ministry.”
The Regulation on Procedures and Principles Regarding Fees Charged to Financial Consumers, prepared by the Banking Regulation and Supervision Agency (BRSA) and published in the Official Gazette dated 03.10.2014 and numbered 29138 , sets out the types of fees, commissions, and expenses other than interest or profit shares that may be charged by institutions for products or services offered to financial consumers, as well as the procedures and principles related to them. With the aforementioned Regulation, after the products and services that can be charged by banks, financial institutions providing consumer credit, and card-issuing institutions were specified in Annex 1, Article 6 of the said Regulation stipulates that no fees may be charged for any product or service other than those specified in this Regulation and its Annex.
In the regulation made in Law No. 6502, when determining the fees, expenses, and commissions that can be charged to consumers, it is important to determine whether these expenses determined by the BDDK meet the criteria of being fair, reasonable, and documented, which have become established in the Supreme Court case law, in terms of monitoring whether they are in line with the spirit of the Law and the purpose of consumer protection.
Upon examination of the dispute, the first paragraph of Article 10 of the Regulation, which is the subject of the lawsuit, and the related sections in Annex 1, namely “1.1 Allocation Fee,” “4.4 Cash Advance Withdrawal Fee,” and “5.7 Payments Made to Public Institutions and Organizations,” it is seen that
The first paragraph of Article 10 of the Regulation on Procedures and Principles Regarding Fees Charged to Financial Consumers states: “No fees other than the allocation fee charged for the operation of the system enabling the fulfillment of credit needs and the management of operational processes for credits to be extended to financial consumers may be charged. The credit allocation fee may not exceed five per thousand of the principal amount of the credit extended. The Board is authorized to increase or decrease this limit when deemed necessary.”
It is clear that banks and financial institutions, which are considered merchants within the meaning of Article 116 of the Turkish Commercial Code, have the right to charge fees from their customers and consumers for the transactions they carry out or the services they provide, in accordance with Article 20 of the Turkish Commercial Code. Pursuant to the authority granted by the Council of Ministers, the Central Bank’s 2006/1 numbered Deposit and Credit Interest Rates and Participation Accounts Profit Distribution Regulation, updated by the 2014/6 numbered Circular published in the Official Gazette dated 15.11.2014 and numbered 29176 updated the Central Bank’s Circular No. 2006/1 on Deposit and Credit Interest Rates and Participation Account Profit and Loss Sharing Rates and Other Benefits to be Provided in Credit Transactions Other Than Interest, published in the Official Gazette dated 15.11.2014 and numbered 29176. Article 4 of this Circular states that “(1) Banks shall freely determine the interest rates to be applied to loans other than discount-based loans, as well as the nature and limits of other benefits to be provided in addition to interest and the fees to be collected. (2) With regard to other benefits to be provided by banks other than interest and fees to be collected in consumer loans, the provisions of the Regulation on Procedures and Principles Regarding Fees to be Collected from Financial Consumers, published in the Official Gazette dated 3/10/2014 and numbered 29138, and enacted by the Banking Regulation and Supervision Agency shall remain in force. published in the Official Gazette dated 3/10/2014 and numbered 29138. (3) The maximum contractual and default interest rates applicable to credit deposit accounts may not exceed the maximum rates determined by the Central Bank of the Republic of Turkey in accordance with Article 26 of the Bank Cards and Credit Cards Law No. 5464.” This regulation allows banks and financial institutions to demand benefits and fees other than interest from their customers and consumers.
It is an undeniable fact that banks and financial institutions, which hold an important place in today’s modern society and economic life, finance economic growth and form the basis of sustainable, healthy economies. Therefore, it is deemed appropriate by law that banks and financial institutions under public supervision and control may charge consumers certain expenses and fees, provided that they meet the conditions of being reasonable, justified, and documented within the limits specified in the Regulation, and that these expenses cannot be expected to be reflected solely within the interest component. Therefore, no legal violation has been found in determining the “1.1 Allocation Fee” among the fees that may be charged to consumers for the purpose of operating the system that enables the fulfillment of credit needs and managing operational processes.
Within the existing structures of banks and financial institutions, since they are required to bear expenses such as rent, technical service, and maintenance, etc., in addition to financing costs, due to providing consumers with various banking and cash credit services 24 hours a day, every day of the week, in different locations through machines that enable automatic cash withdrawal, no violation of the law has been found in determining the “4.4. Cash Advance Withdrawal Fee” as one of the items that financial institutions may charge.
If the mandatory expenses incurred by banks and financial institutions originate from the law and other legislation, the consumer is obliged to pay these expenses. This is because these expenses collected by the bank are paid by the bank to the relevant public institution or organization, and banks do not gain any profit from this situation. (For example; Bank Insurance Transactions Tax-BSMV%5, Natural Disaster Insurance-DASK). Therefore, no legal violation was found in determining “5.7. Payments Made to Public Institutions and Organizations” among the fees that can be requested from consumers.
Upon examination of the dispute, Article 13, paragraph 1 of the Regulation, which is the subject of the lawsuit, and the section on “2.1 Account Maintenance Fee” in Appendix 1 attached thereto;
Article 13(1) of the Regulation on Procedures and Principles Regarding Fees Charged to Financial Consumers states: “… The account maintenance fee may be accrued and collected by the relevant institution on a customer basis during the periods it determines, regardless of the number of accounts held by the financial consumer…”
Although the Regulation in question does not provide a clear definition of the account maintenance fee, the defendant authority defined the account maintenance fee in its defense petition as “… a fee arising from the operation of the account, as can be understood from its name, and the expenses arising from the preparation, control, and maintenance of the accounting records related to the account.”
On the other hand, Article 13(1) of the Regulation emphasizes that the account maintenance fee shall be accrued and collected “on a customer basis, regardless of the number of accounts” held by the financial consumer. Therefore, since the account maintenance fee is charged solely on a customer basis, without considering factors such as the number of accounts, the amount in the account, the number of transactions in the account, etc., the points mentioned in the defendant administration’s defense cannot be accepted as the basis for the account maintenance fee.
Accordingly, the regulation in question, which clearly states the reason but does not specify the nature of the “account operating fee,” is contrary to the criteria set forth in Article 4/3 of Law No. 6502, which is the basis of the Regulation, and established court decisions on this matter, which require fees, commissions, and expenses to be justified, reasonable, and documented.
For the reasons explained above, the court unanimously decided to CANCEL the first paragraph of Article 13 of the Regulation on Procedures and Principles Regarding Fees Charged to Financial Consumers and the section on “2.1 Account Maintenance Fee” in Appendix-1. The court dismissed the lawsuit regarding the provisions in the first paragraph of Article 10 of the Regulation and the section on “1.1 Allocation Fee, 4.4 Cash Advance Withdrawal Fee, 5.7 Payments Made to Public Institutions and Organizations” in Appendix-1. -1, namely “1.1 Allocation Fee, 4.4 Cash Advance Withdrawal Fee, 5.7 Payments Made to Public Institutions and Organizations,” was REJECTED by majority vote for the “allocation fee” and unanimously for the other parts, resulting in the case being partially annulled and and partially dismissed. Therefore, half of the court costs of 360.60 TL, as detailed below, shall be borne by the plaintiff, and the remaining half shall be collected from the defendant administration and paid to the plaintiff. The attorney’s fee of 1,980 TL, determined in accordance with the Minimum Attorney’s Fee Schedule, shall be collected from the defendant administration and paid to the plaintiff. The attorney’s fee of 1,980 -TL attorney’s fee shall be collected from the plaintiff and paid to the defendant administration. The parties shall be notified that an appeal may be filed with the Administrative Courts Council within 30 (thirty) days following the notification of this decision. The decision was rendered on 06/02/2018.
DISSENTING OPINION (X):
The case concerns the legality of the first paragraph of Article 10, the first paragraph of Article 13, and the following items listed in Appendix -1, namely “1.1 Allocation Fee, 2.1 Account Maintenance Fee, 4.4 Cash Advance Fee, 5.7 Payments Made to Public Institutions and Organizations.”
Article 4, Paragraph 3 of Law No. 6502 on the Protection of Consumers states: “No additional fee may be charged to the consumer for actions that the consumer reasonably expects to be performed within the scope of the goods or services offered to them and that are among the legal obligations of the party drafting the contract, or for expenses incurred by the party drafting the contract in their own interest. For products or services offered to consumers by banks, financial institutions providing consumer credit, and card-issuing institutions, all types of fees, commissions, and expenses to be charged to the consumer other than interest, as well as the procedures and principles related thereto, shall be determined by the Banking Regulation and Supervision Agency in accordance with the spirit of this Law and in a manner that protects the consumer, after obtaining the opinion of the Ministry.”
As clearly understood from this regulation in the Consumer Protection Law No. 6502, when determining the expenses, commissions, and other fees that can be charged to consumers in the Regulation issued by the BDDK, it is mandatory to make a regulation in accordance with the conditions stipulated in the Law. Accordingly, when determining the fees that may be charged to consumers by the BDDK, regulations must be made in accordance with the spirit of the Consumer Protection Law and in a manner that protects consumers. In order for the list determined by the BDDK regarding the fees requested from consumers to be in line with the spirit of the law and the principle of consumer protection, these fees and charges must be reasonable, justified, and documented, and must not be in exchange for actions that the consumer would reasonably expect to be performed within the scope of the goods or services offered to them and that are among the legal obligations of the party drafting the contract, nor must they be in exchange for expenses incurred by the party drafting the contract in their own interest, within the framework of established Supreme Court case law.
Although the Regulation does not provide a clear definition of the allocation fee, even though Article 10/1 of the Regulation, which is the subject of the lawsuit, states that the allocation fee is charged “… for the purpose of operating the system that enables the credit need to be met and managing the operational processes…”, the defense petition submitted to the file by the defendant administration states that the “allocation fee” is used as a tool to protect against the risk arising from the maturity mismatch between the assets and liabilities of banks and financial institutions, referred to in the literature as “early repayment risk.” Paragraph 2 of Article 37 of Law No. 6502, titled “Early Payment,” states: “If the interest rate is fixed, the housing finance institution may request early payment compensation from the consumer in the event of one or more payments being made before their due date, provided that this is specified in the contract. The early payment compensation shall be calculated by applying the necessary interest rate reduction and shall not exceed one percent for loans with a remaining maturity of up to thirty-six months and two percent for loans with a remaining maturity of more than thirty-six months. Where the rates are determined on a variable basis, no early repayment compensation may be demanded from the consumer.“ Considering that banks and financial institutions are protected against the aforementioned early repayment risk by this provision, the ”allocation fee” practice seeks to provide a second guarantee against the risks that banks and financial institutions are required to bear. Considering all these points together, it has not been established that the allocation fee charged by lending institutions to consumers is a legitimate, reasonable, and documentable fee in terms of its nature and elements.
In this case, in light of the explanations provided above, the first paragraph of Article 13 of the Regulation regarding the collection of “allocation fees” and the section on “allocation fees” in Appendix-1 List are not in compliance with the law and the legal regulation on which it is based.
For the reasons explained above, we disagree with the majority’s decision, as we believe that the first paragraph of Article 13 of the Regulation on Procedures and Principles Regarding Fees Charged to Financial Consumers and the regulation on “1.1 Allocation Fee” in Annex-1 should be repealed.