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Three fines for the illegal offering of payday loans

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The Netherlands Authority for the Financial Markets (AFM) has imposed an administrative fine on BA Finance, a party offering payday loans, and its two directors. The fines are for offering short-term loans (known as ‘payday loans’) without having obtained a licence to do so.

The three separate publications of the fines and the associated decisions are given below.

AFM imposes fine on BA Finance for offering payday loans without a licence

The Netherlands Authority for the Financial Markets (AFM) has imposed an administrative fine of €150,000 on BA Finance B.V. The fine is imposed because BA Finance offered payday loans in the period from May 2011 to March 2013 without having obtained a licence from the AFM. This is a contravention of Section 2:60 (1) of the Financial Supervision Act (Wft).

Through its website www.cashbob.nl, BA Finance offered consumers the possibility of quick loans for a short time period and at high cost. BA Finance itself only charged consumers low service fees, but if the loan was not repaid within the agreed 7-day period, BA Finance would pass the loan to Credit Consulting B.V. for collection, who charged the consumer high costs for non-compliance, for example €135 on a loan of €500. Loans were passed to the collection agency in around 80 per cent of cases.

Originally, Credit Consulting was owned by the owner of BA Finance. The company was later sold, though its working methods remained the same. After this, BA Finance applied a different approach, under which a paid guarantee had to be obtained from Credit Consulting in order to get a loan.

The offering of this kind of short-term loan (or ‘payday loan’) without a licence from the AFM has been forbidden since 25 May 2011. An exemption from the mandatory licensing requirement only applies if the costs charged are not significant. The AFM takes the view that this exemption does not apply to BA Finance. Providers of payday loans may not impose charges that are higher than the maximum interest permitted by law (15 per cent) if they are subject to the licensing requirement.

This is a serious offence. Credit Consulting earned large amounts of money through the payday loans provided by BA Finance from financially vulnerable consumers who had to pay high fees for their payday loans. This increased the risk that these consumers would fall deeper into debt.

The base amount of the fine for this offence is €2,000,000. This base amount may be increased or reduced in accordance with the seriousness or the duration of the offence, or the degree of culpability. In this case, the AFM considers it appropriate to raise the base amount by 25% on the basis of the seriousness of the offence, and by 25% on the basis of the degree of culpability. When establishing the amount of the fine, the AFM also takes account of the financial position of the offender. In view of BA Finance’s financial position, the fine is reduced to €150,000.

A licence provides additional protection for consumers. Before the AFM grants a licence, it carries out tests to establish (among other things) whether a company meets the requirements of properness, fitness and integrity. Furthermore, a company with a licence must observe the so-called permanent rules of conduct, which include the exercise of due care in the provision of services to consumers.

The AFM’s judgment in this decision may be tested in the courts by the interested parties. For questions or complaints, please contact the AFM Financial Markets Contact Point (Meldpunt Financiële Markten) by telephone on 0800 - 5400 540 (free of charge).

Fine for Mr Bak for de facto management of illegal offering of payday loans

The Netherlands Authority for the Financial Markets (AFM) has imposed an administrative fine of €100,000 on Mr R.J. Bak of Rotterdam on 5 December 2013. The fine is imposed because in the period from May 2011 to March 2013 Mr Bak was the de facto manager during the committal of an offence by the payday loan provider BA Finance B.V. This company had not obtained a licence from the AFM as it was required to do so. This is a contravention of Section 2:60 (1) of the Financial Supervision Act (Wft).

Offence by BA Finance
Through its website www.cashbob.nl, BA Finance offered consumers the possibility of quick loans for a short time period and at high cost. BA Finance itself only charged consumers low service fees, but if the loan was not repaid within the agreed 7-day period, BA Finance would pass the loan for collection to Credit Consulting B.V., who would then charge the consumer high costs for non-compliance, for example €135 on a loan of €500. Loans were passed to the collection agency in around 80 per cent of cases.

Originally, Credit Consulting was owned by the owner of BA Finance. The company was later sold, though its working methods remained the same. After this, BA Finance applied a different approach, under which a paid guarantee had to be obtained from Credit Consulting in order to get a loan.

The offering of this kind of short-term loan (or ‘payday loan’) without a licence from the AFM has been forbidden since 25 May 2011. An exemption from the mandatory licensing requirement only applies if the costs charged are not significant. The AFM takes the view that this exemption does not apply to BA Finance. Providers of payday loans may not impose charges that are higher than the maximum interest permitted by law (15 per cent) if they are subject to the licensing requirement.

This is a serious offence. Credit Consulting earned large amounts of money through the payday loans provided by BA Finance from financially vulnerable consumers who had to pay high fees for their payday loans. This increased the risk that these consumers would fall deeper into debt.

De facto management by Mr Bak
Mr Bak was one of the two directors of BA Finance and was directly involved in the committal of the offence. He was aware of the offence, he was in a position to stop the offence being committed, and he failed to do so. According to the criteria developed by case law, he was therefore a de facto manager at the time of the offence.

The base amount of the fine for this offence is €2,000,000. This base amount may be increased or reduced in accordance with the seriousness or the duration of the offence, or the degree of culpability. In this case, the AFM considers it appropriate to raise the base amount by 25% on the basis of the seriousness of the offence, and by 25% on the basis of the degree of culpability. When establishing the amount of the fine, the AFM also takes account of the financial position of the offender. In view of Mr Bak’s financial position, the fine has been set at €100,000.

Licensing in general
A licence provides additional protection for consumers. Before the AFM grants a licence, it carries out tests to establish (among other things) whether a company meets the requirements of properness, fitness and integrity. Furthermore, a company with a licence must observe the so-called permanent rules of conduct, which include the exercise of due care in the provision of services to consumers.

The AFM’s judgment in this decision may be tested in the courts by the interested parties. For questions or complaints, please contact the AFM Financial Markets Contact Point (Meldpunt Financiële Markten) by telephone on 0800 - 5400 540 (free of charge).

Penalty for Mr Batenburg for de facto management of illegal offering of payday loans

The Netherlands Authority for the Financial Markets (AFM) has imposed an administrative fine of €50,000 on Mr M. Batenburg of Rotterdam on 5 December 2013. The fine is imposed because in the period from May 2011 to March 2013 Mr Batenburg was the de facto manager during the committal of an offence by the payday loan provider BA Finance B.V. This is a contravention of Section 2:60 (1) of the Financial Supervision Act (Wft).

Offence by BA Finance
Through its website www.cashbob.nl, BA Finance offered consumers the possibility of quick loans for a short time period and at high cost. BA Finance itself only charged consumers low service fees, but if the loan was not repaid within the agreed 7-day period, BA Finance would pass the loan for collection to Credit Consulting B.V., who would then charge the consumer high costs for non-compliance, for example €135 on a loan of €500. Loans were passed to the collection agency in around 80 per cent of cases.

Originally, Credit Consulting was owned by the owner of BA Finance. The company was later sold, though its working methods remained the same. After this, BA Finance applied a different approach, under which a paid guarantee had to be obtained from Credit Consulting in order to get a loan.

The offering of this kind of short-term loan (or ‘payday loan’) without a licence from the AFM has been forbidden since 25 May 2011. An exemption from the mandatory licensing requirement only applies if the costs charged are not significant. The AFM takes the view that this exemption does not apply to BA Finance. Providers of payday loans may not impose charges that are higher than the maximum interest permitted by law (15 per cent) if they are subject to the licensing requirement.

This is a serious offence. Credit Consulting earned large amounts of money through the payday loans provided by BA Finance from financially vulnerable consumers who had to pay high fees for their payday loans. This increased the risk that these consumers would fall deeper into debt.

De facto management by Mr Batenburg
Mr Batenburg was one of the two directors of BA Finance and was directly involved in the committal of the offence. He was aware of the offence, he was in a position to stop the offence being committed, and he failed to do so. According to the criteria developed by case law, he was therefore a de facto manager at the time of the offence.

The base amount of the fine for this offence is €2,000,000. This base amount may be increased or reduced in accordance with the seriousness or the duration of the offence, or the degree of culpability. In this case, the AFM considers it appropriate to raise the base amount by 25% on the basis of the seriousness of the offence, and by 25% on the basis of the degree of culpability. When establishing the amount of the fine, the AFM also takes account of the financial position of the offender. In view of Mr Batenburg’s financial position, the fine has been set at €50,000.

Licensing in general
A licence provides additional protection for consumers. Before the AFM grants a licence, it carries out tests to establish (among other things) whether a company meets the requirements of properness, fitness and integrity. Furthermore, a company with a licence must observe the so-called permanent rules of conduct, which include the exercise of due care in the provision of services to consumers.

The AFM’s judgment in this decision may be tested in the courts by the interested parties. For questions or complaints, please contact the AFM Financial Markets Contact Point (Meldpunt Financiële Markten) by telephone on 0800 - 5400 540 (free of charge).

The AFM is committed to promoting fair and transparent financial markets.

As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.

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