Chinfon Commercial Bank Co. Ltd.

Case:

Key Words:

interest rate, housing loan, general clause of law, standard contract

Reference:

Fair Trade Commission Decision of September 6, 2007 (the 826th Commissioners' Meeting); Disposition Kung Ch’u Tzu No. 096143

Industry:

Banks (6412)

Relevant Laws:

Article 24 and 41 of the Fair Trade Law

Summary:

1. This case was originated from the fact that Chinfon Commercial Bank Co. Ltd. (hereinafter called "Chinfon") was complained for stipulating many items in the contractual documents which were to be concluded at the time of applying and handling the said documents relating to corporate loan and these items were in violation of the provisions of the Fair Trade Law. The FTC, during its 663rd Commissioners' Meeting on July 22, 2004, resolved that Chinfon refused to provide the written agreement documents to the trading counterpart and required him to conform to the equivocal general clause of law provided in the standard contract, when Chinfon and the complainant concluded the loan contract. Chinfon’s act constituted a violation of Article 24 of the Fair Trade Law and it was on the record that Chinfon was imposed with an administrative fine of NT$ 400,000. Furthermore, as Chinfon was dissatisfied with the aforesaid penalty, it filed a petition to the Executive Yuan. The petition was however dismissed. It continued to file an administrative action in the Taipei Supreme Administrative Court. As the court found that the Commission could not provide concrete evidence to prove the detrimental fact that Chinfon refused to provide the agreement for the trading counterpart, it would be difficult to believe that there were reasons that the findings in the original Disposition corresponded to the fact. Therefore, the court held that, "the decision of the petition and the original Disposition are all revoked." Accordingly, the FTC was directed to handle this case based upon the appropriate law.

2. With regard to the part that Chinfon had refused to provide the written agreement to the complainant at the time of concluding the contract, the findings of FTC after investigation showed that both parties stuck to their arguments and the complainant could not provide enough evidence to support his claim that Chinfon did refuse to provide the contract at the time of concluding it. Based upon the existing evidence, it would be difficult to find that Chinfon did refuse to provide the written agreement documents to the borrower and hence a violation of the provisions of the Fair Trade Law.

3. Furthermore, with respect to the part that Chinfon required the borrower to conform to the equivocal general clause of law during the contractual period, it was found that Chinfon stipulated Clause 3 under "3. Miscellaneous Clauses" in the "Short-term Credit Agreement"– Clause 3 provides that "each operation, responsibility and obligation related to crediting under the provisions of this Agreement, the parties shall not only conform to this Agreement or special terms stipulated in another concluded agreement, but they shall also conform to the ‘Uniform Customs and Practice for. Documentary Credit,’ ‘Uniform Rules for Collections,’ ‘Foreign Exchange Control Act’ and the current regulations of and regulations which will be stipulated by the Bankers Association of the Republic of China …" and Chinfon admitted the existence of such a clause. Although Chinfon claimed that "the regulations of the Bankers Association of the Republic of China were stipulated in accordance with related laws and administrative rules; the rights and obligations provided by the regulations do not affect the rights and benefits of the parties," the probability of various interpretations of the equivocal general clause of law does exist so that the obligations the trading counterpart bear were very uncertain and the content of the clause was in fact the unilateral constraint imposed on the borrower by the financial enterprise. After considering the principle of good faith, it is apparent that the implementation of the clause would be obviously unfair. In addition, for financial enterprises and general consumers, the information contained in the regulation stipulated by the Bankers Association of the Republic of China is asymmetric. According to the abovementioned, it was found that Chinfon improperly required the borrower to conform to the equivocal general clause of law in the standard contract and improperly pressured the trading counterpart on the basis of its relative dominant position. Chinfon’s act was hence obviously unfair and sufficient to affect the trade order, and such an act fell under the act set forth in Article 24 of the Fair Trade Law.

4. After taking into account the factors, the motive and purpose of the unlawful acts of Chinfon, the degree of its unlawful acts’ harm to the trading order, the duration of its acts, scale of business, operation condition, types and number of and intervals between past violations, remorse shown for the act and attitude of cooperation in the investigation, the FTC ordered Chinfon to immediately cease the aforesaid unlawful acts and imposed an administrative fine of NT$ 200,000 in accordance with the fore part of Article 41 of the Fair Trade Law.

Appendix:
Chinfon Commercial Bank Co. Ltd.'s Uniform Invoice Number: 03373221

Summarized by Tsao, Hui-wen; supervised by Chen, Yuhn-shan