Arion Bank's violation of the ban on prepayment fees on loans to small businesses that carry variable interest rates

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• Case number: 4/2023
• Date: 4/4/2023
• Company:
  • Arion banki hf.
• Sectors:
  • Financial services
• Policy Area:
  • Other
• Summary

  Following an investigation into Arion Banki's compliance with the provisions of Article 2 of settlement the bank agreed to with the Icelandic Competition Authority (ICA) in 2017, Arion Banki has admitted that it violated the prohibition of Artocle 2 on prepayment fees in a limited number of cases in the case of loans to small businesses that carry variable interest rates. The bank has also agreed to pay a fine for these violations and has taken appropriate measures to minimize the impact of its breaches and ensure more robust compliance with the provision in the future. The bank also concedes that its implementation in terms of notifying customers, in accordance with the provisions of Article 2 of the settlement, was not ideal in the case of customers who had interests in that regard.

  The prohibition provision that the bank violated is set out in the settlement that Decision No.- 24/2017, Measures to stimulate competition in the market for retail banking services to individuals and small companies, - is based on. According to Article 2 of the settlement, prepayment fees on loans to individuals and small businesses that carry variable interest rates are prohibited.

  In 2017 Landsbankinn and Íslandsbanki (the two other lagre Icelandic banks) agreed to comparable settlements as Arion banki did with the ICA in 2017. The investigation that has now resulted in the aforementioned fine involved Arion Banki only and focused solely on the bank's compliance with Article 2 of the settlement, that stipulates that it is prohibited to impose prepayment fees on loans to individuals and small businesses that carry variable interest rates.