Standard Chartered Bank Co., Ltd., Taipei Branch

Case:

Key Words:

bank, housing loan prepayment penalty

Reference:

Fair Trade Commission Decision of September 28, 2006 (the 777th Commissioners' Meeting)

Industry:

Banks (6412)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. Background: Standard Chartered Bank Co., Ltd., Taipei Branch (hereinafter called "Standard Chartered Bank"), provided an "Anytime Payoff" plan with no prepayment restrictions but charged the complainant an amount of service fees higher than that of the penalty set forth in the original housing loan contract which technically impeded the borrower from choosing this "Anytime Payoff" plan. Standard Chartered Bank constituted a conspicuously unfair act sufficient to affect trading order and violated Article 24 of the Fair Trade Law by exploiting its advantageous position and rejecting to adjust agreed provisions pertaining to the housing loan prepayment penalty. Based on these facts, the FTC came to a resolution during its 594th Commissioners' Meeting on March 27, 2003 and imposed relevant disposition on Standard Chartered Bank in accordance with the fore part of Article 41 of the Fair Trade Law with Disposition (92) Kung Ch'u Tzu No. 092047 issued on April 8, 2003. Standard Chartered Bank was dissatisfied with the resolution and filed an administrative appeal to the Executive Yuan. The Executive Yuan decided to dismiss the original disposition with Decision Yuan-Tai-Su-Tzu No. 0930084154 on April 15, 2004. The FTC later on still found Standard Chartered Bank in violation of Article 24 of the Fair Trade Law during its 672nd Commissioners' Meeting on September 23, 2004 and disposed with Disposition (93) Kung Ch'u Tzu No. 093092 issued on September 30, 2004. Such disposition was dismissed by the Executive Yuan with Decision Yuan-Tai-Su-Tzu No. 0940089058 on August 19, 2005. The FTC shall hereby clarify the proper handling method regarding this type of housing loan case.
2. One of the reasons of the Executive Yuan for the abovementioned cancellation of the FTC's decisions was that the FTC was not supposed to encompass existing cases with contracts signed before the promulgation of the "Fair Trade Commission Guidelines on the Charge of Penalty Fees for Prepayment of Housing Loans by the Financial Enterprises" (hereinafter called the "Guidelines on Prepayment of Housing Loans") into governance to avoid possible retrospective damage. However, according to the Judicial Yuan's Interpretation Shih-Tzu No. 548, the "Fair Trade Commission Guidelines on the Reviewing of Cases Involving Enterprises Issuing Warning Letters for Infringement on Copyright, Trademark, and Patent Rights" promulgated by the FTC was an explanatory administrative rule enacted pursuant to Article 45 of the Fair Trade Law to handle acts of enterprises to issue warning letter to another person for infringement on the intelligent property rights. Based upon the same principle, the FTC's Guidelines on Prepayment of Housing Loans should also be an explanatory administrative rule for Article 24 of the Fair Trade Law and should come into effect as of the enforcement day of the Fair Trade Law.
3. Findings of FTC after investigation upon the instructions of the Executive Yuan's decision: The complainant of this case requested Standard Chartered Bank to adjust the prepayment penalty on September 11, 2002. Standard Chartered Bank therefore submitted an adjusted plan for the complainant's reference on the 24th of the same month. However, before the three-month adjustment period expired, the complainant filed a complaint with the FTC in November, 2002. Additionally, after Standard Chartered Bank submitted the adjusted plan on September 24, 2002, the complainant did not continue the negotiation or revise the contract with Standard Chartered Bank. When the complainant repaid the housing loan, it was the original housing loan contract that applied. Since the three-year clause of prepayment penalty already expired when the complainant prepaid the loan, the complainant did not have to pay for the prepayment penalty. Thus, since the loan contract was signed before the promulgation of the FTC's Guideline on Prepayment of Housing loans, the complainant was supposed to negotiate with Standard Chartered Bank but failed to do so and filed a complaint with the FTC before the adjustment term expired. It is difficult to find Standard Chartered Bank in violation based upon the evidence obtained before the said expiration. Furthermore, based upon the evidence found from the FTC's new investigation, the complainant did not request Standard Chartered Bank for adjustments after filing the complaint with the FTC. Instead, the complainant continued to fulfill the contractual obligations in accordance with the original loan contract. The complainant did not suffer from any infringement of rights and interests. Based on current evidence, it is hard to find Standard Chartered Bank in violation of Article 24 of the Fair Trade Law.
   

Appendix:
None

Summarized by Yen, Chia-Lin; Supervised by Tai, Pei-Yi