• UOKiK made its first decision about the sale of GetBack corporate bonds: Polish Brokerage House (Polski Dom Maklerski) is to pay PLN 2 million fine.
• PBH used an abusive clause. It will be easier for consumers to pursue claims now.
• The Office also initiated proceedings against GetBack.

The Office of Competition and Consumer Protection is taking strong actions on irregularities related to the sale of GetBack corporate bonds. It has just made its first decision on that matter. It pertains to Polish Brokerage House (PBH) for putting an abusive clause in contracts. UOKiK imposed a considerable fine on PBH. It has also initiated proceedings against GetBack (to be restructured). The company is accused of misleading consumers when selling its corporate bonds. What is more, there has been proceedings pending against Idea Bank since October. In this case, UOKiK accuses the bank of disseminating false information and mis-selling, i.e. offering products unsuitable for customers’ needs.

GetBack bondholders are mostly ordinary consumers, often the elderly, not professional investors. Many of them lost their life savings because they were told that the company’s bonds are safe. We do not approve of such unfair practices of covering up risks from customers. Completing the proceeding against GetBack is our priority, says Marek Niechciał, the President of UOKiK.

Decision on Polish Brokerage House

Polish Brokerage House provided GetBack with brokerage services, i.e. it drafted documentation related to the issue of GetBack bonds, handled them, and submitted offers for sale of such bonds to customers. PBH cooperated mainly with Idea Bank that made the offer to its customers. They could sign up for bonds by electronic means. The only thing to do was to fill in (usually a bank employee, not a consumer, did it) and send the form with customer’s basic data. The form also included a provision saying that bond buyers did not receive any information that would be contrary to what is provided in the Bond Purchase Proposal or the Terms of Bond Issue. Consumers had no other option but to send such a document, thereby automatically accepting this provision, even if they did not mean to.

UOKiK considered such a provision to be an abusive clause. Such a clause could make it difficult for consumers to pursue claims and discourage them from doing so. Its purpose was to secure PBH and Idea Bank against liability for misleading customers before they concluded a bond purchase agreement, says Marek Niechciał, the President of UOKiK.

UOKiK imposed over PLN 2 million (PLN 2,074,483) fine on PBH for using an abusive clause. When this decision becomes final and valid, the fine will go towards the Financial Education Fund, which was established earlier this year. Its purpose is to increase financial awareness of Poles and conduct educational campaigns that will help consumers learn about their rights and allows them to better assess investment risk.

What does the UOKiK decision mean to consumers who already purchased GetBack bonds? An abusive clause is not binding. Therefore, if an employee of Idea Bank misled customers when offering them bonds for sale, they may file a complaint and demand reimbursement of all the payments already made. Entities that participated in the sale of bonds cannot either invoke the contested clause or claim that what was stated in official documents is more important than what they said before the conclusion of bond purchase agreement. If filing a complaint is futile, customers may vindicate their rights through courts or resolve disputes amicably.

PBH must notify all customers who purchased GetBack bonds of the decision of the President of UOKiK by registered mail. The decision is not final and PBH may appeal against it within one month of its delivery.

In November 2018, the Polish Financial Supervision Authority revoked a licence allowing PBH to conduct brokerage business for the following reason: PBH offered bonds for sale in cooperation with Idea Bank, even though it did not have the right to do so.

GetBack – proceedings

UOKiK has just initiated proceedings against GetBack. The Office accuses the company of using unfair market practices. Consumer complaints show that GetBack employees misled them. During telephone conversations and meetings, they were to convince customers that:

• GetBack bonds are safe,
• the company’s financial position is strong,
• the offer is exclusive and limited in time.

All this information was untrue. Corporate bonds are not protected by the Bank Guarantee Fund, and their only form of protection is the issuer’s financial condition and its assets. The issuer, i.e. GetBack, is liable for the bonds up to the value of all its assets, but if it is insolvent, customers may lose the money they invested. According to the injured, the company’s employees did not inform them about such a risk. In addition, GetBack governing bodies knew that at the end of 2017 the company incurred heavy losses, but customers were still told that “its financial standing was very good”. Furthermore, GetBack  salespeople were supposed to claim that bond sale offer was exclusive and made only to selected customers. This “exclusivity” is based on the fact that according to the law, an offer to purchase bonds under one issue as part of a private placement can be made up to 149 people. The company, however, concealed from customers the fact that bonds were issued frequently, sometimes even every day. GetBack employees also pressed consumers to decide quickly because “such a once-in-a-lifetime chance cannot be missed”, although the company kept issuing bonds on the same terms (the only difference was the series number).

If these allegations are confirmed, GetBack will be fined up to 10% its turnover for each violation.

Other actions taken by UOKiK

In total, UOKiK is currently conducting eight proceedings on possible irregularities occurring when GetBack-related financial products were offered for sale. The proceedings are as follows:

• two proceedings on infringement of consumers’ collective interests against companies offering bonds for sale, including GetBack, as described above, and Idea Bank. Proceedings against the latter were instituted in October 2018. The bank is accused of misleading consumers as to the safety of GetBack bonds and their exclusive nature. Furthermore, the bank may have deliberately misrepresented its product (mis-selling): its representatives persuaded potential customers to buy bonds even though they knew these people do not accept risky investments;
• five explanatory proceedings on GetBack bonds. Their purpose is to determine whether customers were provided with reliable, true and complete information, and whether mis-selling occurred. The proceedings concern five entities, namely: GetBack, Idea Bank and PBH, Mercurius Financial Advisors, Getin Noble Bank and Noble Securities;
• one explanatory proceedings indirectly related to GetBack. It involves Idea Bank and concerns offering life insurance as part of unit-linked insurance funds. It is possible that customers’ money could have been invested in investment funds related to GetBack. The Office pre-checks whether customers were informed about the risks involved.

Consumer support:

Phone: +48 801 440 220 or +48 22 290 89 16 – consumer helpline
E-mail: porady@dlakonsumentow.pl
Consumer ombudsmen – in your town or district
Financial Ombudsman - when a complaint has been rejected by a financial institution

Additional information for the media:

UOKiK Press Office 
Pl. Powstańców Warszawy 1, 00-950 Warszawa, Poland
Phone: +48 695 902 088, +48 22 55 60 314
Email: biuroprasowe@uokik.gov.pl
Twitter: @UOKiKgovPL