Financial Consumer Protection Initiatives in Eastern and Southern Africa

 
 
 
 
Financial Consumer Protection
 
 
Augustine Mwanje
 
Introduction
 
One key lesson learnt from the global financial
crisis is the urgent need to place financial
literacy and consumer protection on top of the
national, regional and global agendas.
Protecting customers and ensuring they are
treated fairly by financial institutions is the
essence of market conduct policy and law.
 
 
 
 
 
 
2
 
Overview of Financial Consumer Protection
 
Consumer protection is often discussed in terms
of the rights and responsibilities of 
both
financial service providers and clients.
Clients
 need to develop the capability to assess
product offerings; to do this, they have the right
to ask questions about products.
Providers
 have the responsibility to respond
respectfully.
 
 
 
 
 
 
3
 
Overview of Financial Consumer Protection
 
Financial consumer protection sets 
clear rules
of conduct for financial institutions when
dealing with their customers to ensure that
they:
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.
 
 
 
 
 
 
4
 
Overview of Financial Consumer Protection
 
 
Financial literacy, financial consumer protection
measures, prudential regulation and financial
inclusion initiatives are complementary to one
another, rather than alternatives.
To improve the effectiveness of disclosure for
financial products and services, it is important
to tackle both the 
supply side 
(financial
consumer protection measures) and the
demand side 
(financial literacy initiatives).
 
 
 
 
 
 
5
 
Overview of Financial Consumer Protection
 
Regulators are paying increased attention to
financial consumer protection, focusing on
three broad themes:
Transparency
Fair Treatment
Effective Recourse
While these three goals are basic to protecting
consumers, it may not be feasible or practical to
address them all at once.
 
 
 
 
 
 
6
 
Overview of Financial Consumer Protection
 
Efforts towards financial consumer protection
should be coordinated among other financial
sector regulators (Insurance, Pensions, Capital
Markets, etc.)
The regulator’s challenge is how to balance
financial access, financial stability, financial
integrity, and consumer protection
 
 
 
 
 
 
7
 
Financial Consumer Protection Framework
 
Promotes fair and equitable financial services practices
by setting minimum standards for financial services
providers in dealing with consumers.
Increases transparency in order to inform and
empower consumers of financial services.
Fosters confidence in the financial services sector.
Provides efficient and effective mechanisms for
handling consumer complaints relating to the provision
of financial products and services.
 
 
 
 
 
8
 
Financial Consumer Protection Framework
 
The legal mandate of the regulator with regard
to financial consumer protection should be clear
Regulators  should ensure financial services
operators put in place effective consumer risk
management framework that empower
consumers to make informed decisions while
promoting professionalism and ethics.
 
 
 
 
 
 
9
 
Financial Consumer Protection Framework
 
G 20 High–Level Principles
Legal, Regulatory and Supervisory Framework
Role of Oversight Bodies
Equitable and Fair Treatment To Customers
Disclosure and Transparency
Financial Education and Awareness
Responsible Business Conduct of Financial Services Providers
and Authorized Agents
Protection of Consumer Assets Against Fraud and Misuse
Protection of Consumer Data and Privacy
Complaints Handling and Redress
 
 
 
 
 
 
 
10
 
Financial Consumer Protection Framework
 
Potential Barriers To Effective consumer protection
Through Standards and Guidelines
Illiterate clients cannot read publications on consumer
protection principles and rights.
Fear of not getting a loan often drives client behaviour.
Clients do not know their rights or what constitutes a
violation. (e.g. abusive debt collection practices,
interest computation, etc.)
Overestimation of customer knowledge  (investment in
new product vs. investment in client education)
 
 
 
 
 
 
11
 
Financial Consumer Protection Framework
 
Potential Barriers To Effective consumer protection
Through Standards and Guidelines (Continued)
Potential conflict with profitability (product-specific
marketing vs. time spent on client education about
new products)
Implementing consumer protection principles can be
costly for financial institutions (revisions to HR systems,
customer feedback and complaints mechanisms,
monitoring and compliance).
 
 
 
 
 
 
 
12
 
Financial Consumer Protection Framework
 
Key Activities
Developing 
Key Facts Documents 
for savings and loans
products
Strengthening of 
complaints handling procedures
Development of a 
communications strategy 
for
regulated Financial Institutions, clients and the wider
public to raise awareness about their rights as
consumers
Strengthening supervision 
of compliance with the
financial consumer protection requirements
 
 
 
 
 
13
 
Conclusion
 
A comprehensive financial consumer protection
framework enhances consumer confidence in
the financial services industry, while promoting
financial stability, growth and innovation.
Financial consumer protection efforts should be
cost-effective and, the benefits should outweigh
the costs of implementation.
 
 
 
 
 
 
14
 
Thank You
Any Questions?
 
15
 
References and Bibliography
 
Bank Of Uganda Financial Consumer Protection Guidelines
(2011)
Consumer Protection Regulation in Low-Access Environments:
Opportunities to Promote Responsible Finance (Brix & Mckee
2010)
G20 High-Level Principles on Financial Consumer Protection
(OECD October 2011)
A Guide to Regulation and Supervision of Microfinance -
Consensus Guidelines (CGAP October 2012)
Towards an Effective Framework for Financial Literacy and
Financial Consumer Protection in Uganda (GIZ & Bank of
Uganda, March 2011)
 
 
 
16
 
References and Bibliography
 
Ledgerwood, Joanna, with Julie Earne and Candace Nelson, eds.
2013. 
The New Microfinance Handbook: A Financial Market
System Perspective
. Washington, DC: World Bank. doi:
10.1596/978-0-8213-8927-0.License: Creative Commons
Attribution CC BY 3.0
 
 
 
17
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Institute of Eastern and Southern Africa emphasizes the importance of financial literacy and consumer protection post the global financial crisis. Financial consumer protection ensures fair treatment, transparency, and effective recourse mechanisms for clients. It complements financial literacy and regulatory measures for better consumer outcomes.


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  1. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Financial Consumer Protection Augustine Mwanje

  2. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Introduction One key lesson learnt from the global financial crisis is the urgent need to place financial literacy and consumer protection on top of the national, regional and global agendas. Protecting customers and ensuring they are treated fairly by financial institutions is the essence of market conduct policy and law. 2

  3. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Overview of Financial Consumer Protection Consumer protection is often discussed in terms of the rights and responsibilities of both financial service providers and clients. Clients need to develop the capability to assess product offerings; to do this, they have the right to ask questions about products. Providers have the responsibility to respond respectfully. 3

  4. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Overview of Financial Consumer Protection Financial consumer protection sets clear rules of conduct for financial institutions when dealing with their customers to ensure that they: 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. 4

  5. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Overview of Financial Consumer Protection Financial literacy, financial consumer protection measures, prudential regulation and financial inclusion initiatives are complementary to one another, rather than alternatives. To improve the effectiveness of disclosure for financial products and services, it is important to tackle both the supply side (financial consumer protection measures) and the demand side (financial literacy initiatives). 5

  6. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Overview of Financial Consumer Protection Regulators are paying increased attention to financial consumer protection, focusing on three broad themes: Transparency Fair Treatment Effective Recourse While these three goals are basic to protecting consumers, it may not be feasible or practical to address them all at once. 6

  7. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Overview of Financial Consumer Protection Efforts towards financial consumer protection should be coordinated among other financial sector regulators (Insurance, Pensions, Capital Markets, etc.) The regulator s challenge is how to balance financial access, financial stability, financial integrity, and consumer protection 7

  8. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Financial Consumer Protection Framework Promotes fair and equitable financial services practices by setting minimum standards for financial services providers in dealing with consumers. Increases transparency in order to inform and empower consumers of financial services. Fosters confidence in the financial services sector. Provides efficient and effective mechanisms for handling consumer complaints relating to the provision of financial products and services. 8

  9. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Financial Consumer Protection Framework The legal mandate of the regulator with regard to financial consumer protection should be clear Regulators should ensure financial services operators put in place effective consumer risk management framework that empower consumers to make informed decisions while promoting professionalism and ethics. 9

  10. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Financial Consumer Protection Framework G 20 High Level Principles Legal, Regulatory and Supervisory Framework Role of Oversight Bodies Equitable and Fair Treatment To Customers Disclosure and Transparency Financial Education and Awareness Responsible Business Conduct of Financial Services Providers and Authorized Agents Protection of Consumer Assets Against Fraud and Misuse Protection of Consumer Data and Privacy Complaints Handling and Redress 10

  11. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Financial Consumer Protection Framework Potential Barriers To Effective consumer protection Through Standards and Guidelines Illiterate clients cannot read publications on consumer protection principles and rights. Fear of not getting a loan often drives client behaviour. Clients do not know their rights or what constitutes a violation. (e.g. abusive debt collection practices, interest computation, etc.) Overestimation of customer knowledge (investment in new product vs. investment in client education) 11

  12. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Financial Consumer Protection Framework Potential Barriers To Effective consumer protection Through Standards and Guidelines (Continued) Potential conflict with profitability (product-specific marketing vs. time spent on client education about new products) Implementing consumer protection principles can be costly for financial institutions (revisions to HR systems, customer feedback and complaints mechanisms, monitoring and compliance). 12

  13. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Financial Consumer Protection Framework Key Activities Developing Key Facts Documents for savings and loans products Strengthening of complaints handling procedures Development of a communications strategy for regulated Financial Institutions, clients and the wider public to raise awareness about their rights as consumers Strengthening supervision of compliance with the financial consumer protection requirements 13

  14. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Conclusion A comprehensive financial consumer protection framework enhances consumer confidence in the financial services industry, while promoting financial stability, growth and innovation. Financial consumer protection efforts should be cost-effective and, the benefits should outweigh the costs of implementation. 14

  15. Macroeconomic and Financial Management Institute of Eastern and Southern Africa Thank You Any Questions? 15

  16. Macroeconomic and Financial Management Institute of Eastern and Southern Africa References and Bibliography Bank Of Uganda Financial Consumer Protection Guidelines (2011) Consumer Protection Regulation in Low-Access Environments: Opportunities to Promote Responsible Finance (Brix & Mckee 2010) G20 High-Level Principles on Financial Consumer Protection (OECD October 2011) A Guide to Regulation and Supervision of Microfinance - Consensus Guidelines (CGAP October 2012) Towards an Effective Framework for Financial Literacy and Financial Consumer Protection in Uganda (GIZ & Bank of Uganda, March 2011) 16

  17. Macroeconomic and Financial Management Institute of Eastern and Southern Africa References and Bibliography Ledgerwood, Joanna, with Julie Earne and Candace Nelson, eds. 2013. The New Microfinance Handbook: A Financial Market System Perspective. Washington, DC: World Bank. doi: 10.1596/978-0-8213-8927-0.License: Creative Commons Attribution CC BY 3.0 17

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