Borrowing money from the bank and being forced to buy insurance: Banks can be fined up to half a billion dong
The new draft decree adds a provision for heavy penalties for attaching non-compulsory insurance to banking products, with fines ranging from VND400-500 million, to strengthen the protection of customer rights and tighten financial market discipline.
Regulations on strict penalties for forcing insurance purchases
A notable new point in the draft decree replacing Decree 88/2019/ND-CP on administrative sanctions for violations in the monetary and banking sector is the provision on severe sanctions for acts of forcing customers to purchase non-compulsory insurance when using banking services.
Accordingly, commercial banks or credit institutions that attach non-mandatory insurance products to banking products or services in any form may be fined from VND400 million to VND500 million. This fine is designed to comply with the Law on Credit Institutions, which officially took effect from July 2024.
Currently, the law does not stipulate what type of insurance is mandatory for bank borrowers. Attaching non-mandatory insurance as a condition for approving a loan or providing other services is a violation and will be strictly handled.
In addition, a fine of VND400-500 million is also applied to other serious violations such as operating a bank without a license, illegally interfering with a credit institution, or performing acts of competition restriction that affect the safety of the banking system and national monetary policy.
Details of interest and service fee penalties
The draft also clearly states the penalties for violations in listing and applying capital mobilization interest rates and service provision fees with three specific penalty levels:
Fines from 10 to 20 million VND if interest rates and service fees are not publicly posted or posted unclearly, causing confusion for customers.
Fines from 20 to 40 million VND for applying interest rates and service fees that are not in accordance with the published rates.
Fines from 50 to 100 million VND for violations of regulations on capital mobilization interest rates, trading and providing derivative products related to interest rates, currencies, commodity prices or other financial assets.
Another notable point is that a fine of VND150 million to VND200 million will be applied to credit institutions that do not develop a risk management process, do not classify customers according to risk level or violate regulations in classification.
This regulation aims to enhance the effectiveness of the work of preventing money laundering, terrorist financing and financing the proliferation of weapons of mass destruction.
The addition of clear and strict sanctions in the new draft aims to tighten discipline in the financial and banking market, protect the legitimate rights of customers, and improve the quality of service provision in the banking sector./.
