On 21 September 2009, the Netherlands Authority for the Financial Markets (AFM) imposed an administrative fine of € 12,000 on World of Credit B.V. (World of Credit).
This fine was imposed because World of Credit advised consumers to conclude certain consumer loans and to take out a certain equity-linked insurance, while they had failed to obtain sufficient information from the customers on which this advice should have been based in part. World of Credit furthermore failed to base the advice in part on information it did obtain. The AFM at this times assumes, based on World of Credit's position concerning the intention to issue an instruction and the adjusted client profile, that World of Credit currently complies with the statutory requirements as set out in Article 4:23, paragraph 1 of the Financial Supervision Act (Wft). The AFM emphasises that this opinion is based on the aforementioned data and not on a new file investigation at World of Credit.
The AFM's investigation was aimed at the advised equity-linked insurance, whether or not in combination with a consumer loan. In the period of 1 January 2008 to 1 July 2008, World of Credit advised on equity-linked insurance in 76 cases, all of which in combination with a consumer loan.
The AFM made a random selection of 20 files out of the 76 cases and thereafter a further selection of 10 files. The AFM investigated these 10 instances in which World of Credit issued advice.
World of Credit advised the consumers in all 10 files to conclude an equity-linked insurance, without having obtained sufficient information for assessing alternatives such as redemption of the loan in instalments or concluding a type of capital accumulation product other than equity-linked insurance.
World of Credit advised in all 10 files on the target capital of the equity-linked insurance and on the term of the equity-linked insurance, while it failed to obtain sufficient information from the consumers concerning their objectives with respect to the equity-linked insurance. The equity-linked insurance will pay out, with respect to five consumers, at an age that ranges from 76 to 79 years.
World of Credit advised five consumers, who had indicated their wish to invest a small part in shares, a fund that invests in shares from 25 to 55%. World of Credit advised three other consumers, who had indicated their wish to invest a small part in shares, a fund that invests in shares from 60 to 80%. World of Credit advised a fund to one consumer, while it failed to obtain any information at all for establishing the investor profile.
World of Credit failed to obtain sufficient information from two consumers, who at the time of conclusion of the equity-linked insurance were aged 50 or over, concerning their future financial position in order to able to assess any drop in income after they reach the age of 65. No information at all was obtained from one consumer aged fifty or over concerning the future financial position. The term of the equity-linked insurance stretched beyond the pensionable age.
World of Credit failed to obtain information concerning the type of mortgage loan, the amount of the loan, the interest rate and any fixed-interest period from four consumers who had taken out a mortgage loan. World of Credit should have used this information to establish whether there would be a change in the mortgage payments in the (near) future.
This means that World of Credit violated Article 4:23, first paragraph, of the Financial Supervision Act. This Act obliges financial undertakings that advise consumers to, inter alia, obtain information on the consumer's financial position, knowledge, experience, objectives and willingness to accept risk in the interest of that consumer and to the extent reasonably relevant to the advice. The financial undertaking must ensure that the advice, to the extent reasonably possible, is also based on the information to be obtained.
Interested parties can submit the AFM's decision to the competent court for review.
If you have any questions or comments you can contact the Financial Markets Information Line on: 0900-5400 540 (5 eurocents per minute).
The AFM promotes fairness and transparency within financial markets. We are the independent supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes the conscientious provision of financial services to consumers and supervises the honest and efficient operation of the capital markets. Our aim is to improve consumers’ and the business sector’s confidence in the financial markets, both in the Netherlands and abroad. In performing this task the AFM contributes to the prosperity and economic reputation of the Netherlands.
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