Financial sanction on Isracard due to credit marketing advertisements
On June 1, 2017, the amendment to the Banking (Service to Customer) Law, 5741-1981, went into effect. The amendment requires banking corporations to attach to their advertisements and various means of marketing that encourage customers to take out loans, a warning in the following formulation: “Failure to repay the loan is liable to lead to interest on arrears being charged and Execution Office proceedings”. A similar directive was imposed on nonbank credit providers as well in legislation relevant to them. The Law was intended to lead customers—not all of whom have financial knowledge or understanding—to consider their ability to repay the loan, and to enhance the awareness of the economic ramifications that could occur as a result of failure to repay the loan. The Law is all the more important in view of recent years’ rapid increase in consumer credit from banks and nonbank institutions, which raises the risk to households in this area.
Consumer credit has been a focus of the Banking Supervision Department’s work in recent years. The Banking Supervision Department sees great importance in fair marketing of consumer credit, and works to prevent aggressive and pushy marketing of credit to customers.
The sanction in the amount of NIS 675,000 was imposed on Isracard in relation to its “Minus Turns into Plus+” advertisement that was presented on the company’s marketing website, which could be entered via mobile device without the requisite warning. In accordance with the Law, the maximum amount of the financial sanction that can be imposed for such a violation is NIS 750,000.
As the company had not a sanction imposed on it in the preceding 5 years and due to the importance that the Banking Supervision Department attaches to that, as it indicates general compliance with the law, it was decided to reduce the amount of the financial sanction by 10 percent, in accordance with the Banking (Service to Customer) Rules, 5771-2011.
An examination also found that the advertisements were part of a broader campaign by the company, in which messages for irresponsible consumer behavior, beyond the customer’s financial abilities, were integrated, and therefore the Banking Supervision Department required that it be removed.
The current sanction is part of extensive compliance that the Banking Supervision Department carries out with regard to consumer credit marketing to banking system customers. In December 2018, financial sanctions were imposed for the same issue on Discount Bank Ltd. and on Leumi Card Ltd., due to a compliance check carried out on this issue.
Dr. Hedva Ber, the Supervisor of Banks, said, “The Banking Supervision Department attaches great importance to warnings in consumer credit advertising, which are intended to cause customers, not all of whom have financial knowledge or understanding, to consider their ability to meet the terms of the loan, and to increase the awareness of the possible economic ramifications resulting from taking out a loan. The Banking Supervision Department supported the legislation of the law and sees great importance in the issue in view of the growth in availability of consumer credit and the enticement that such availability can create, particularly for economically weakened customers.”