Evaluators complain about "abusive clauses" in their contracts with banks

Whereas in the last few years there has been a lot of talk about clauses that are considered abusive, mostly in the case of loan agreements concluded between banks and debtors, and there are a number of lawsuits in court on that matter, there are also professionals complaining about the fact that they are forced to sign contracts which include clauses that they do not agree with, imposed by banks and other financial institutions.

Evaluators are complaining about a number of requirements that appear in the contracts which they have to sign with the banks in order to provide their services.

Adrian Vascu, the president of the National Association of Authorized Evaluators (ANEVAR), told us that, "over time (more in the past and less so today, but it still applies), the evaluators have informed the ANEVAR about various contractual clauses which have been imposed by banks and which should not have or could not be accepted". He said that they also include those by which banks required the valuation of the properties to be set at a certain amount or those which concerned discounts or compensations, depending on the situation.

Nicolae Cinteză, the head of the Oversight Division of the National Bank of Romania (NBR) confirmed the existence of this phenomenon, and stressed that the Central Bank has taken steps to put an end to these practices.

He told us: "The latest standards of the ANEVAR have been bolstered, so that banks will no longer be able to have any other forms of cooperation with evaluators outside of evaluations. We have talked to the management of the ANEVAR and we have taken steps to bolster standards precisely to avoid the unpleasant situations that have occurred in the past".

The head of the ANEVAR said that the NBR has introduced the mandatory database, which has been operational since the beginning of this month.

"There have also been banks that have eliminated some abusive clauses, in time, but we are still being faced with this kind of practices", said Mr. Vascu, who said that the relations between banks and evaluators have evolved in time, and that this progress has been seen both in the updating and the consolidation of the evaluation standards, as well as in the contracts concluded between banks and evaluators.

Adrian Vascu said: "Further more, with the direct support of the NBR, there have been common projects between the evaluator profession and the banks, with one recent and relevant example in that regard being the Database for Real Estate Collaterals (Baza de Date pentru Garanţii Imobiliare - BIG), which was launched on July 1st, 2015. This requires all the evaluators to insert into our database all the evaluation reports made for the guaranteeing of the loans, stripped of the confidential information, particularly as a measure of prevention, as well as auditing any potential slip-ups or noncompliance situations in the evaluation process.

• Adrian Vascu: "The idea that the result of the evaluation may be negotiated continues to underlie the actions of some of the evaluators' customers"

Adrian Vascu says that the evaluation for the guaranteeing of loans "is «responsible» for approximately 51% of the evaluators' turnover and for over 75% of the evaluation reports drawn up during a year.

"Once declared dependent, evaluators get a different fiscal treatment (when it comes to salaries) than Individual Certified Professionals (PFA) or Independent Individual Professionals (PFI)", he says, and he mentioned that "in the mind, and - going further - in the actions of some of the representatives of the evaluators' clients the idea persists that the result of the evaluation can be negotiated": "Hence, there are often demands concerning the amount of the estimated valuation, an amount which, the solicitants in question believe, represents «the truth» concerning the value of the good which is being evaluated. In fact, this expectation is significantly influenced by the intention to use the result of the evaluation rather than by the professional aspects which need to lead to the estimation of the value. An asset only has one value at a certain date and for a specific purpose of the evaluation, that value should be obtainable by any evaluator performing an evaluation of that asset, with a margin of +/- 10%. Why customers actually believe that the value can be negotiated, is hard to say in one sentence. I think that it is a combination of factors, of which one would be the fact that the evaluator profession is a new one in the Romanian economy and that the concerned public does not know its essence, just as it is a matter of mentality, namely the idea that because we have paid for a service, we have the right to make higher demands. The two aforementioned factors warn that the profession has not yet reached the necessary level of trust in the public perception".

Evaluators aren't fighting in favor of the inclusion of contract clauses that are unfavorable to the lenders, but what they want is for the contractual terms to be balanced and adapted to the specific characteristics of asset evaluation, the president of the ANEVAR says, who thinks that one of the aspects worth emphasizing is the one concerning "the independence of evaluators" and the fact that the independence has been induced and not declared.

The evaluators' independence means that they conduct their business based on their knowledge and professional abilities and issuing opinions based on their own convictions, without any kind of influence or constraint from any other individual, regardless of their commercial relationship that person may have with the evaluators, he says. "In practice, there are representatives of some lenders who have no training in evaluation, whom, in order to get their job done and to attract a new customer (in the case of some loan officers) actually ask the evaluator to modify the amount they wrote in the evaluation report. Without any professional arguments for that request, merely on the basis of a Google search! That situation, even though it is not widespread, represents a grave matter in itself and it is currently not being prevented through the existence of written documents".

Given the circumstances above, the ANEVAR is proposing for the definition of the evaluator's independence to be introduced in the contracts concluded between the evaluators and their clients, along with the obligations and rights of the parties in that regard.

Contracts should also include very clear clauses concerning the liabilities of each party when failing to honor their obligation to ensure independence.

There have to exist some clauses which protect the bank when evaluators show "excessive" independence, just like there have to be clauses that would penalize any kind of pressure of bank employees relating to the amount of the loan that was obtained, the president of the Association concludes, and he said that the mutual confidence between the two sides must increase.