good practices for financial consumer protection...
TRANSCRIPT
Seminar for Senior Bank Supervisors
GOOD PRACTICES FOR FINANCIAL
CONSUMER PROTECTION
Aurora Ferrari
Manager
Financial Inclusion Practice
Financial Inclusion and Consumer Protection (1)
2 www.worldbank.org/consumerprotection
Consumer protection and financial literacy (CPFL) are key to increasing responsible access to financial services while ensuring that expanded access benefits the economy and consumers
A strong CPFL framework protects consumers from possible market abuse and stipulates competition
CPFL help build public confidence and can raise demand for financial services
Financial literacy enables consumers to benefit from financial decisions
Financial Inclusion and Consumer Protection (2)
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GROWTH OF LENDING TO HOUSEHOLDS: but potential for mis-selling, NPLs...
BASIC BANK ACCOUNTS: low income household’s
able to open a basic bank account, accessed through a mobile phone or ATMs, to save receive
remittances, make payments
MOBILE MONEY INTRODUCED: but usage remains constrained
REGULATORY REFORMS:
Regulators introduce reforms to promote innovation by financial institutions to serve low
income clients
GROWTH OF LENDING TO HOUSEHOLDS:
lower default risk, greater benefit for borrowers
BASIC BANK ACCOUNTS: low income households able to select bank account that meets their needs and enables them to lower financial transactions
costs, and avoid hidden charges
MOBILE MONEY INTRODUCED: usage and viability increases
REGULATORY REFORMS:
Regulators better understand and accommodate the level of understanding of consumers, ensuring that reforms have a maximum impact on the intended
consumers
INCREASED ACCESS TO FINANCE
Opportunities but also Risks, Limited uptake
ACCESS TO FINANCE COMBINED WITH FINANCIAL LITERACY, CONSUMER PROTECTION
Risks managed, greater uptake of financial services
• Originally developed for Europe and Central Asia
• Launch of revised Good Practices in June 2012
• Set of Good Practices developed using international benchmarks, such as
• principles and recommendations released by the Basel Committee, IOSCO and IAIS, and the OECD
• laws, regulations and codes of business practices from developed countries and the experiences of reforming emerging economies
• 23 Diagnostic Reviews in 4 continents
Good Practices for Financial Consumer
Protection
4 www.worldbank.org/consumerprotection
World Bank Strategy for Country
CPFL Programs
Baseline Household Survey
of Financial Capability Action Plan to
Implement Recommendations
Diagnostic
Review of Legal & Regulatory Framework
Implementation Program
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Follow-up Household
Survey
Feedback Loop
Input
www.worldbank.org/consumerprotection
Engagement of All Stakeholders is Needed
GOVERNMENT • Ministries (e.g. Finance, Economy, Education) • Public agencies (e.g. consumer protection, data protection, competition) • Councils (e.g. consumer protection, education)
FINANCIAL SUPERVISORS
• Financial supervisory agencies • Central bank • Financial consumer protection agency • Compensation schemes
INTERNATIONAL COMMUNITY
• Donors • Regional organizations • Standard setters • International associations
REDRESS MECHANISMS
• Ombudsman • Arbitration • Mediation, conciliation • Courts
CIVIL SOCIETY
• Consumer associations • Debt counseling • Foundations • Academia • Media
FINANCIAL INDUSTRY • Industry associations • Training centers • Financial institutions (incl. distributors) • Financial infrastructure (e.g. credit bureaus)
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www.worldbank.org/consumerprotection
Ins
Good Practices for Financial Consumer
Protection
Banking
Insurance
Pensions
Securities
Non-Bank Credit
Good Practices for each segment covering:
Legal, regulatory and institutional framework
Consumer disclosure
Business practices
Dispute resolution mechanisms
Financial education
Credit Reporting
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Institutional framework (1)
• Institutional arrangements for financial consumer protection
vary across countries
Single agency approach
Specialized financial consumer protection agency
General consumer protection body
•No “best practice“
•Country-specific characteristics such as size and structure of
the financial system and specific regulatory and supervisory
activities need to be taken into account
www.worldbank.org/consumerprotection
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Legal and regulatory framework (2)
• Strong legal and regulatory framework for financial consumer
protection is crucial to
Protect financial consumers
Proactively prevent market abuses
• Market conduct regulation should at a minimum ensure that
consumers
Receive information to allow them to make informed
decisions,
Are not subject to unfair or deceptive practices, and
Have access to recourse mechanisms to resolve disputes
www.worldbank.org/consumerprotection
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Consumer Disclosure
Consumer Disclosure
Business Practices
Consumer Redress
Financial Literacy
•Simple •Easy to understand •Accessible •Comparable Tools? • Key Fact Statements • Price Comparison Websites How do you know if it is working? • Consumer testing
www.worldbank.org/consumerprotection
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Helping Consumers Shop Around
Makes a BIG Difference
Credit Card Loans Average Interest Rates in Peru
Source: Superintendence of Banking, Insurance and Private Pension Funds of Peru
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Business Practices
Consumer Disclosure
Business Practices
Consumer Redress
Financial Literacy
• Prohibition of unfair, abusive, misleading practices • Cooling-off periods • Prohibition of tying and bundling of financial services • Retail sales officers trained and qualified
www.worldbank.org/consumerprotection
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Dispute Resolution Mechanisms
Consumer Disclosure
Business Practices
Dispute Resolution
Financial Literacy
• Complaints department in every financial institution
• Financial ombudsman Established by industry
associations Statutory independent
ombudsman Ombudsman structure
within financial and regulatory authority
www.worldbank.org/consumerprotection
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Financial Education
Consumer Disclosure
Business Practices
Dispute Resolution
Financial Education
• Coordination mechanism • National financial education strategy • Financial education targeted on:
Risks/rewards Rights/obligations
• Focus on ‘teachable moments’ • Financial education of youth • Household Capability Surveys
Help design financial education Provide baseline for impact assessments
www.worldbank.org/consumerprotection
Going forward…
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• Consumer Protection and Financial Literacy Diagnostic Reviews
• Tailored tools for implementation
• Impact evaluations
• Global Survey on Financial Consumer Protection