88773 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES © 2014 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org ALL RIGHTS RESERVED This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the govern- ments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. RIGHTS AND PERMISSIONS The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. If you have any questions about this product, please contact: The Financial Inclusion and Infrastructure Global Practice The World Bank Group I9-905 1818 H Street NW Washington DC 20433 USA PHONE: +1 (202) 473-1000 FAX: +1 (202) 522-3199 EMAIL: financialinclusion@worldbank.org WEB: responsiblefinance.worldbank.org www.worldbank.org/financialinclusion ACKNOWLEDGMENTS This report presents the results of the Global Survey on Consumer Protection and Financial Literacy. The survey was made pos- sible by the generous contribution of time and expertise by central bank and financial regulatory authority officials in the 114 economies who responded to this year’s survey. The survey is a product of the World Bank Financial Inclusion & Infrastructure Global Practice. Gaiv Tata and Douglas Pearce provided overall guidance. The team led by Nataliya Mylenko comprised Adetola Adenuga, Roziah Baba, Elizabeth Davidson, Ros Grady, Johanna Jaeger and Valentina Saltane. Michael Fuchs, Samuel Maimbo, Cedric Mousset, Andrej Popovic, Rekha Reddy, and Siegfried Zottel provided substantive inputs in the Survey design and results analysis. The survey was designed with inputs from FinCoNet, as coordinated by John Rossi. i OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES ii GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: TABLE OF CONTENTS EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2 LEGAL FRAMEWORK. . . . . . . . . . . . . . . . . . . . . . . . 6 3 INSTITUTIONAL ARRANGEMENTS. . . . . . . . . . . . 9 4 FAIR TREATMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 18 5 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 6 RESPONSIBLE LENDING. . . . . . . . . . . . . . . . . . . . 24 7 DISPUTE RESOLUTION AND RECOURSE . . . . . 27 8 FINANCIAL EDUCATION. . . . . . . . . . . . . . . . . . . . 29 ANNEXES 1 LEGAL & REGULATORY FRAMEWORK. . . . . . . 32 2 INSTITUTIONAL ARRANGEMENTS. . . . . . . . . . . 36 3 DISCLOSURE PRACTICES. . . . . . . . . . . . . . . . . . . 44 4 BUSINESS PRACTICES. . . . . . . . . . . . . . . . . . . . . . 50 5 DISPUTE RESOLUTION MECHANISMS. . . . . . . . 54 6 FINANCIAL EDUCATION. . . . . . . . . . . . . . . . . . . . 60 iii OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES iv GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: EXECUTIVE SUMMARY Financial consumer protection laws, regulations, supervisory Regulators involved in financial consumer protection in 114 and oversight structures constitute an essential element of the jurisdictions from all regions responded to the survey. The modern financial system. As recent financial crisis demon- main results along the six consumer protection dimensions strated, adequate financial consumer protection is an impor- covered by the survey are summarized below. tant contributor to financial stability. Moreover, responsible behavior by financial service providers and ability for the us- Legal Framework. A broad legal framework for financial con- ers of financial services to protect their interests contribute to sumer protection is in place in most economies, but reforms economic empowerment of the population. Aggressive finan- are needed to clarify the roles of various stakeholders and cial inclusion targets adopted at national and international streamline implementation. Some form of legal framework levels1 and active policies to support broad based financial for financial consumer protection is in place in 112 out of inclusion need to be supported by effective implementation 114 economies. Legal framework is diffused through various of financial consumer protection and improvements in finan- laws and statutes often resulting in gaps and overlaps. The cial capabilities of consumers. reform to rationalize and streamline legislation is ongoing in many jurisdictions. The High-level Principles on Financial Consumer Protection were endorsed by the G20 Finance Ministers and Central Institutional Arrangements. More economies allocated Bank Governors in 2011.2 The World Bank published Good resources for financial consumer protection supervision, Practices for Financial Consumer Protection3 in 2012. but institutional arrangements remain complex and super- This report summarizes the results of the Global Survey on visory authority and compliance monitoring tools limited. Consumer Protection and Financial Literacy conducted by The number of financial regulators dedicating resources to the World Bank in 2013. The survey assessed the global status financial consumer protection increased from 68 percent to of financial consumer protection regulation and oversight 89 percent between 2010 and 2013. In over 90 percent of frameworks in line with the G20 Principles and World Bank economies agencies responsible for prudential supervision Good Practices. Using the data from an earlier survey com- also have a responsibility for financial consumer protection. pleted in 2010 the report evaluates progress in a number of In more than a half of these jurisdictions financial consumer areas. protection function is established in a unit separate from prudential supervision. The supervisors employed a broader range of compliance monitoring tools such as monitoring complaints statistics used by 49 agencies in 2013 compared 1 For World Bank targets of universal financial access for all working-age to 23 in 2010. A number of jurisdictions reform institutional adults by 2020, please see http://www.worldbank.org/en/news/press- arrangements to enhance and streamline supervision of fi- release/2013/10/11/universal-financial-access-vital-reducing-poverty- innovation-jim-yong-kim; for the Maya Declaration targets, see http:// nancial consumer protection. Further evaluation of effective www.afi-global.org/maya-declaration approaches for financial consumer protection supervision is 2 http://www.oecd.org/daf/fin/financial-markets/48892010.pdf. important. Progress report at http://www.oecd.org/finance/financial-education/ G20EffectiveApproachesFCP.pdf Fair Treatment. Legal framework in most countries provides 3 World Bank, 2012. “Good Practices for Financial Consumer broad provisions on fair treatment such as protections for cli- Protection,” http://responsiblefinance.worldbank.org/~/media/ ent confidentiality present in 80 percent of economies and GIAWB/FL/Documents/Misc/Good-practices-for-financial-consumer- restrictions on deceptive advertising present in 75 percent protection.pdf 1 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES of economies. Fewer economies have provisions specific to Financial Literacy. Financial supervisors in 71 percent financial industry such as restrictions on predatory lending of economies are involved in financial education activities. (59 percent), bundling and tying of services (49 percent) and Primary focus of supervisors is on improving public aware- abusive collections (45 percent). ness on financial issues and developing training materials (78 percent of economies). The role of financial supervisors Disclosure Requirements. Consumers have varying degree of in improving financial literacy and capability of the users protection for similar financial products depending on what of financial services is an evolving subject deserving future type of financial institution offers them. Only in 18 percent research. of economies are unregulated financial institutions subject to disclosure requirements at account opening, compared Overall the survey results show that financial consumer pro- to 67 percent of economies where such requirements exists tection is an area of much reform. The need for reform is for regulated institutions and 79 percent of economies where driven by the rapid expansion of retail financial markets in banks are subject to disclosure regulations. Further research emerging markets in recent years and by the fallout from the and consumer testing are needed to identify effective forms recent financial crisis in the developed markets. Survey results of disclosure and methods of monitoring compliance with show that while the basics of a financial consumer protection disclosure requirements. framework are in place in most countries, few have adequate systems in place. The survey provides a high level scoping of Responsible Lending. Going beyond disclosure a growing the issues and much more granular analysis of the specific number of countries are looking into regulatory restrictions issues is needed. to contain overindebtedness and ensure affordability of credit and investment products. In 77 percent of economies lenders The function of financial consumer protection supervision are required to assess borrower ability to repay and 35 percent is far behind prudential supervision in terms of available of economies have explicit limits restricting the amount of methodologies for compliance monitoring, range and nature loans or debt service in relation to income for certain prod- of enforcement actions, and supervisory skills. There is a need ucts such as credit cards and mortgages. Research is needed to assess experience of supervisors in implementing the new to evaluate the effectiveness of such limits and their impact and expanded set of rules and regulations and evaluate the ef- on access. fectiveness of the supervisory tools in place. There is also need for future research in the effectiveness of the key consumer Dispute resolution and recourse. Effective dispute resolu- protection measures used today: disclosure and affordability tion mechanisms, including at financial provider level are requirements. a crucial part of financial consumer protection framework. Financial service providers in 73 percent of economies are Endorsement of the High-level Principles on Financial required to implement procedures and processes for resolv- Consumer Protection was an important step in developing ing customer complaints. Alternative dispute resolution an internationally accepted framework for financial consumer mechanisms such as financial ombudsmen or similar institu- protection regulation and supervision. Further efforts at the tions exist in 75 percent of economies. In about one third of national and international levels can build on this first step jurisdictions, the dispute resolution function is performed by and develop more targeted guidance as the field of financial a supervisory agency. consumer protection evolves. 2 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: 1 BACKGROUND Access to basic financial services contributes to poverty reduc- on institutional arrangements and supervisory tools and for tion and is a fundamental element of an inclusive economic greater international coordination. system. About two billion adults worldwide have a deposit or a loan with a regulated financial institution. Customers As financial products and the related delivery channels be- not served by the formal system rely on informal providers come more complex, the need for effective consumer pro- for their savings, borrowing, payments and insurance needs.4 tection rises. Emerging-market economies in which a large When using financial products, consumers should know and number of people join the formal financial system for the understand associated risks and benefits to make the right first time face particular challenges. In Peru, the number decisions. Yet information asymmetries, power imbalances of depositors more than doubled between 2005 and 2011, and behavioral biases in financial markets may result in poor adding 5.2 million new clients as financial inclusion initia- outcomes for both consumers and for financial service pro- tives drew more customers to banks. Bangladesh doubled the viders. It is the role of financial consumer protection and fi- number of depositors in the same period, adding 16.9 million nancial education policies, in conjunction with the regulation new depositors.6 Until recently, in low- and middle-income of financial institutions and markets, to ensure safe access to economies, formal financial institutions focused only on financial services and support financial stability and financial high-income groups serving a small portion of the popula- inclusion objectives. tion. As retail financial services expand and more people gain access to deposit, payment and credit services, there is a new The global financial crisis has highlighted the importance category of clients who have no prior experience, including in of financial consumer protection for financial stability. The their family or among friends, of dealing with banks or any report of the Financial Stability Board (FSB) on Consumer other formal financial services providers. Finance Protection with Particular Focus on Credit5 endorsed by G20 notes that “[p]olicies that protect the interests of Consumer protection and financial literacy can contribute consumers of financial products and services contribute to to improved efficiency, transparency, competition and access enhanced risk management by households, more competitive to retail financial markets by reducing information asym- financial markets, and greater financial stability. This finan- metries and power imbalances among providers and users of cial crisis demonstrated the desirability of strengthening such financial services. Rapid progress toward widespread financial policies and ensuring that the use (or misuse) of individual inclusion must be appropriately complemented with “checks financial products do not become a source of financial in- and balances” that ensure a responsible provision of financial stability.” The report calls for further work on identifying services and products. Consumer protection and financial good practices in financial consumer protection, including literacy and capability can support financial inclusion by encouraging competition which leads to more cost-effective and higher quality products and by increasing consumer con- fidence and reducing risk when purchasing financial products and services, because they know remedies exist when things 4 Collins, Daryl, Jonathan Morduch, Stuart Rutherford, and Orlanda Rutheven, 2009. Portfolios of the Poor: How the World’s Poor Live on $2 a go wrong. Day, Princeton, NJ: Princeton University Press. 5 FSB, 2011. “Consumer Finance Protection with Particular Focus on Credit,” http://www.financialstabilityboard.org/publications/ 6 Data for Peru and Bangladesh from Financial Access Survey, http://fas. r_111026a.pdf imf.org 3 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES A number of international efforts are in place to improve dialogue and identify best practices in financial consumer BOX 1. HIGH-LEVEL PRINCIPLES ON FINANCIAL protection. The G20 Principles for Innovative Financial CONSUMER PROTECTION ENDORSED BY THE G20 Inclusion adopted in 2010 include consumer protection as 1. Legal, Regulatory and Supervisory Framework one of the nine principles urging countries to “encourage a comprehensive approach to consumer protection that recog- 2. Role of Oversight Bodies nizes the roles of government, providers and consumers.”7 The 3. Equitable and Fair Treatment of Consumers High-level Principles on Financial Consumer Protection were 4. Disclosure and Transparency endorsed by the G20 Finance Ministers and Central Bank Governors at their meeting in October 20118 (Box 1). The 5. Financial Education and Awareness G20/OECD Task Force on Financial Consumer Protection Responsible Business Conduct of Financial Services 6.  released the Report on Effective Approaches to Support Providers and Authorized Agents the Implementation of the G20 High Level Principles on Protection of Consumer Assets against Fraud and 7.  Financial Consumer Protection in September of 2013.9 Misuse The World Bank published Good Practices for Financial Consumer Protection10 in 2012, based on in-depth country- 8. Protection of Consumer Data and Privacy level reviews of consumer protection and financial literacy. 9. Complaints Handling and Redress The Good Practices are a compilation of the most frequently 10. Competition used practices that have been successfully carried out in the field. They represent a summary of useful approaches for the improvement of conduct of financial institutions when deal- ing with retail customers and aim to provide a reference for WORLD BANK GLOBAL SURVEY policymakers in designing their financial consumer protec- ON CONSUMER PROTECTION AND tion frameworks. FINANCIAL LITERACY To contribute to the international dialogue on financial The World Bank Global Survey builds on a body of work by consumer protection the World Bank in conjunction with the World Bank Group (World Bank, CGAP, IFC), including FinCoNet, an international cooperation platform for super- various surveys, individual country diagnostics and case stud- visory agencies in the area of financial consumer protection, ies.11 The results of the earlier surveys provided comprehensive conducted a Global Survey on Consumer Protection and information and benchmarking of the key financial consumer Financial Literacy to collect information from financial regu- protection regulations worldwide. This year, the World Bank latory agencies in 114 economies. This report summarizes the Global Survey updates this information and collects new results of the survey and draws on recent reports and stud- information on the financial education efforts by financial ies by G20, OECD, World Bank and others to provide an regulators and on issues related to responsible lending to help overview of the practices in financial consumer protection monitor progress in financial consumer protection reforms. regulation and supervision around the world. The World Bank Global Survey on Consumer Protection and Financial Literacy was conducted during the period of February to May 2013. The core set of questions is based on the earlier survey conducted by the World Bank Group in 7 http://www.g20.utoronto.ca/2010/to-principles.html 8 http://www.oecd.org/daf/fin/financial-markets/48892010.pdf Progress report at http://www.oecd.org/finance/financial-education/ G20EffectiveApproachesFCP.pdf 9 G20/OECD Task Force on Financial Consumer Protection. “Update Report on the Work to Support the Implementation of the G20 High- 11 Please see World Bank, 2012, “Good Practices for Financial Consumer Level Principles on Financial Consumer Protection.” http://www.oecd. Protection”; Ardic, Ibrahim, and Mylenko, 2011, Consumer Protection org/daf/fin/financial-education/G20EffectiveApproachesFCP.pdf Laws and Regulations in Deposit and Loan Services: A Cross-Country 10 World Bank, 2012. “Good Practices for Financial Consumer Analysis. World Bank Policy research Working Paper 5536; Rutledge, Protection,” http://responsiblefinance.worldbank.org/~/media/ S.L., 2010. “Consumer Protection and Financial Literacy: Lessons from GIAWB/FL/Documents/Misc/Good-practices-for-financial-consumer- Nine Country Studies,” World Bank Working Paper; and individual protection.pdf country diagnostics available at www.worldbank.org/financialinclusion. 4 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: 201012 to enable comparability across time. A number of ques- and 2013 allowing for comparison on most topics within the tions were edited to improve the accuracy of responses and a six areas covered by the consumer protection section of the set of new questions added in consultation with FinCoNet survey. While other financial services such as insurance, pay- members. The 2013 survey covered six areas in financial con- ments and investment services are essential elements of finan- sumer protection: cial systems and equally require clear and effective financial 1. Legal framework – applicable laws and regulations cover- consumer protection framework, this year, the World Bank ing consumer protection in financial services Global Survey did not cover these products. Future research and systematic analysis of consumer protection practices in 2. Institutional arrangements – institutional structure, func- insurance, investment and payment services is an important tions and powers of relevant authorities and modes of area for future research.13 cooperation among them 3. Fair Treatment – broader provisions including restrictions Institutional arrangements for financial consumer protection on deceptive advertising, bundling of financial services, vary greatly among countries and include multiple agen- abusive collection practices, etc. cies outside of the spectrum of financial supervisors such as competition authorities, data protection agencies and general 4. Disclosure Requirements – regulatory requirements at ac- consumer protection authorities. The focus and primary ob- count opening, periodic statements, and other jective of this survey is to review the role and responsibilities 5. Responsible Lending – existence of regulation aiming at of financial supervisors within a broader financial consumer ensuring affordability and suitability of financial services protection and bank supervision context and to understand and avoiding overindebtedness cooperation arrangements among multiple agencies oversee- 6. Dispute Resolution and Recourse – institutional arrange- ing various elements of financial consumer protection. While ments for dispute resolution, requirements on timeliness the surveys were sent to central bank and bank supervisors, and accessibility, experience in terms of the type and num- respondents were asked to consult with relevant agencies ber of complaints. where appropriate and submit a joint response. The questionnaire of the Global Survey was designed to follow The new section on financial literacy added in 2013 included High-level Principles on Financial Consumer Protection en- a set of questions aiming to understand the role financial dorsed by G20 and World Bank Good Practices for Financial regulators play in improving public awareness and supporting Consumer Protection. As a result the survey helps assess to efforts to improve financial literacy and capability of financial what extent existing financial consumer protection arrange- service users. ments align with these broad principles. This assessment provides a high-level view on the state of financial consumer The questionnaires were sent to central banks and bank su- protection regulation and supervision globally. In addition, pervisors in 145 economies and 114 responses were received. this paper draws on the recent reports prepared by the G20/ This year’s survey, similar to the survey conducted in 2010, OECD task force, the World Bank and other agencies to pro- focused on financial consumer protection only in relation to vide discussion and where available emerging consensus on deposit and credit services. The Global Survey assessed the effective approaches and good practices in financial consumer progress in a number of areas using the data from the 2010 protection supervision. survey. Of the 114 countries, 109 have data for both 2010 12 Ardic, Ibrahim, and Mylenko, 2011. Consumer Protection Laws and 13 World Bank Good Practices on Financial Consumer Protection cover a Regulations in Deposit and Loan Services: A Cross-Country Analysis. broad range of practices including securities, insurance and non-bank World Bank Policy research Working Paper 5536, Washington, DC. credit providers. 5 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES 2 LEGAL FRAMEWORK Principle 1 of the G20 High Level Principles on Financial consumer protection. The number of countries with laws and Consumer Protection states that financial consumer protec- regulations increased between 2010 and 2013 (Figure 1). tion should be an integral part of the legal, regulatory and supervisory framework and should reflect the diversity of Regulations under financial legislation are the most common national circumstances and global market and regulatory form of legal framework for financial consumer protection developments within the financial sector. World Bank Good used in 103 economies (94 percent), up from 96 (88 percent) Practices for Financial Consumer Protection14 recommend in 2010. The actual number of countries reforming legisla- that the law provides clear consumer protection rules regard- tion is higher because many countries that had regulations ing financial products and services. in 2010 revised and enhanced them over the past three years. General consumer protection laws that cover the rights of the Two broad sets of legislation govern financial consumer consumers in relation to a broad range of goods and services protection. On the one hand, various financial sector laws are present in 70 economies (64 percent). These laws put and regulations contain provisions on consumer protection in place a broad foundation for the protection of consumer covering the operations of financial service providers and the relationships between financial service providers and their clients. On the other hand, consumer protection and fair FIGURE 1. MOST ECONOMIES HAVE A LEGAL competition legislation defines the rights of consumers of FRAMEWORK IN PLACE, AND A NUMBER WERE various goods and services often including financial products REFORMED BETWEEN 2010 AND 2013 and services. More recently, a number of countries added new legal acts dealing specifically with consumer protection within financial services in a comprehensive manner. Regulations on financial 103 consumer protection within The survey asked the respondents to indicate which of the financial legislation framework 96 following elements of the legal framework were present within their economy: (1) general consumer protection law without explicit reference to financial services and covering 70 a broad range of products and services; (2) general consumer General consumer protection law protection law with an explicit reference to financial services, 70 offering specific provisions for consumers of financial prod- ucts and services; (3) separate financial consumer protection law; and (4) consumer protection regulations within the Consumer protection law 58 framework of financial sector legislation. In 112 out of 114 with a reference to financial services or a separate financial countries, there is some form of legal framework in place for consumer protection legislation 49 0 20 40 60 80 100 120 2013 2010 14 World Bank, 2012. “Good Practices for Financial Consumer Protection,” http://responsiblefinance.worldbank.org/~/media/ GIAWB/FL/Documents/Misc/Good-practices-for-financial-consumer- Note: Data on 109 countries responding to 2010 and 2013 surveys. protection.pdf 6 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: FIGURE 2. LEGAL FRAMEWORK IS DIFFUSED—IN financial services and regulations within a financial consumer MORE THAN A THIRD OF COUNTRIES, FINANCIAL protection framework. And about half had regulations within CONSUMER PROTECTION PROVISIONS ARE FOUND financial legal framework and either general or explicit con- IN CONSUMER PROTECTION, FINANCIAL AND OTHER sumer protection legislation. Complex legal structures with LAWS multiple laws and regulations can result in conflicting provi- 2% sions and gaps and overlaps. 6% The most dynamic region in terms of reforms on financial consumer protection in the past three years was Europe, in 14% part as a response to the financial crisis started in 2008, but 31% also as a part of a longer term effort to integrate European financial market. The Directive 2008/48/EC of the European Parliament on credit agreements for consumers16 puts in 27% place a framework to ensure a high and equivalent level of protection for financial consumers across all member States. 20% To enable consumers to better compare financial products from various providers including cross-border providers, the Directive includes comprehensive disclosure requirements. General law, explicit law or both (only) - 7 countries Among them is a standardized disclosure form (Standard European Consumer Credit Information), disclosure of the Regulations within financial framework (only) - 16 countries Annual Percentage Rate of Charge representing the full cost General law and regulations within financial framework - 31 countries of credit and computed using a harmonized methodology Explicit law and regulations within financial framework - 23 countries across all EU member states. The Directive provides for the right of the consumer to withdraw from the credit agreement General law, explicit law and regulations within financial framework - 35 countries without giving any reason within a period of 14 days after None - 2 countries the conclusion of the contract. The consumers also have the possibility to repay their credit early at any time, while the Note: Based on responses from 114 economies in 2013. creditor can ask for a fair and objectively justified compensa- tion. All member states have now implemented the Directive through issuance of appropriate national legislation.17 The inadequacy of the existing framework for financial con- rights but do not include any specific provisions for financial sumer protection was identified as one of the contributing services and products. To address the specific issues relating to factors for the onset of the 2008 financial crisis in the US. the consumption of financial products and services, countries The result was a sweeping reform of financial regulation generally follow two broad approaches. The first is to include with the passage of the Dodd-Frank Wall Street Reform specific provisions covering financial products and services and Consumer Financial Protection Act in 2010.18 Among into the general consumer protection law. The second is to a range of other actions, the Act consolidated the responsibil- issue a dedicated law to address financial consumer protection ity for financial consumer protection to a single agency, the issues.15 As countries focus on enhancing legal frameworks Bureau of Consumer Financial Protection (BCFP), to ensure for financial consumer protection, more countries issued laws that markets in financial products are fair, transparent and explicitly dealing with financial products and services in the competitive. Prior to the crisis seven different agencies had past two years. a responsibility for various aspects of financial consumer In most countries, provisions governing financial consumer protection under various legislative acts. The new act also protection are diffused throughout multiple laws (Figure introduced a broad range of changes enhancing consumer 2). A third of countries had all three types of laws, a general consumer protection law, a consumer protection law covering 16 Directive 2008/48/EC of the European Parliament on credit agreements for consumers at http://eur-lex.europa.eu/LexUriServ/ LexUriServ.do?uri=OJ:L:2008:133:0066:0092:EN:PDF 15 For the purposes of figures 1 and 2 these two types of laws are com- 17 http://ec.europa.eu/consumers/rights/fin_serv_en.htm bined in one group. 18 http://www.sec.gov/about/laws/wallstreetreform-cpa.pdf 7 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES protection in mortgage markets including standardizing data in advanced stages of drafting its Consumer Credit Bill and collection for underwriting purposes and provisions on ob- Zambia has amended its Banking and Finance Services Act to ligation for mortgage originators to only lend to borrowers include specific provisions on consumer protection, market who are likely to repay their loans. conduct and competition in the financial sector. A number of countries are reviewing their consumer protec- Reforms to rationalize and streamline financial consumer tion framework to create a more robust regulatory system protection are ongoing in a number of countries. There is with less overlaps. For example, in Malawi at least three some degree of consensus reflected in the laws across the different agencies are involved in consumer protection in world on a broad set of consumer rights, such as rights to be relation to financial services. The Competition and Fair informed about the products offered, to obtain advice about Trading Act includes consumer protection provisions related the suitability of products on offer for the consumer’s needs to unfair trading practices and advertising applicable to the and objectives and for financial institutions to engage in re- financial sector. The Consumer Protection Act applies to a sponsible lending practices, to seek recourse in case of wrong broad range of goods and services, including financial prod- doing by the provider of financial services, and restrictions on ucts and services. Both laws create individual commissions/ unfair and misleading practices by providers of financial ser- councils charged with the responsibility of enforcing the vices. At the same time there is much debate on the specifics respective Acts. In addition, Reserve Bank of Malawi under of disclosure and its effectiveness, a need for further analysis the Financial Services Act has a responsibility to oversee of the implementation arrangements for financial consumer market conduct and protect consumers of financial services. protection, such as institutional setup of agencies responsible New legislation aims to streamline the supervisory structure and coordination mechanisms among various agencies in- and enhance financial consumer protection framework. In volved and enhancement of compliance monitoring tools and Jamaica, an “omnibus” deposit taking legislation is currently enforcement actions. The following sections discuss in more being drafted to merge three different pieces of legislation and detail some of these dimensions. introduce new laws in keeping with recent market require- ments and international supervisory standards. Swaziland is 8 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: 3 INSTITUTIONAL ARRANGEMENTS The importance of adequate institutional structure for the (1) Integrated Single Agency Model. Financial consumer oversight and enforcement of the financial consumer pro- protection supervision responsibilities fall under a single tection laws and regulation is highlighted in a number of agency that is responsible for all aspects of supervision international guidelines and principles. The United Nations including prudential, market conduct and financial Guidelines for Consumer Protection require that govern- consumer protection, of all supervised financial service ments provide or maintain adequate infrastructure to devel- providers operating within the jurisdiction. op, implement and monitor consumer protection policies.19 (2) Sectoral Agency Model. Financial consumer protection Principle 2 of the G20 High Level Principles on Financial supervision responsibilities fall under multiple agencies Consumer Protection states that there should be oversight that hold responsibility for all aspects of supervision bodies (dedicated or not) explicitly responsible for financial including prudential, market conduct and financial consumer protection, with the necessary authority to fulfill consumer protection, of financial service providers most their mandates. They require clear and objectively defined often separating regulatory authority over banking, in- responsibilities and appropriate governance; operational surance and capital markets. independence; accountability for their activities; adequate powers; resources and capabilities; defined and transparent (3) Dedicated Market Conduct Agency Model (Twin Peaks). enforcement framework; and clear and consistent regulatory Financial consumer protection supervision responsibili- processes. ties fall under a single agency dedicated to broad financial market conduct supervision, separated from a single inte- grated prudential supervision authority. The World Bank Good Practices for Financial Consumer Protection20 suggest that the necessary institutional arrange- (4) Specialized Financial Consumer Protection Agency ments are in place to ensure thorough, objective, timely Model. Financial consumer protection supervision and fair implementation (and enforcement) of the rules. responsibilities fall under a single specialized finan- Prudential supervision and consumer protection supervision cial consumer protection agency that does not have may be placed in separate agencies or lodged in a single in- broader financial sector market conduct supervisory stitution. However, regardless of the institutional structure, responsibilities. the allocation of resources between prudential supervision (5) General Consumer Protection Agency Model. Financial and consumer protection is adequate to enable the effective consumer protection responsibilities fall under an agency implementation of consumer protection rules. or agencies responsible for broader consumer protection The survey asked respondents to identify which of the fol- supervision within the jurisdiction, including other non- lowing agency structures are involved in financial consumer financial areas of activities. protection in their jurisdiction: Institutional structures for financial consumer protection oversight and enforcement are a product of interaction be- tween the consumer protection and financial supervision 19 http://www.un.org/esa/sustdev/publications/consumption_en.pdf oversight structures and vary greatly among countries (Figure 20 World Bank, 2012. “Good Practices for Financial Consumer Protection,” http://responsiblefinance.worldbank.org/~/media/ 3). From the point of view of consumer protection the ques- GIAWB/FL/Documents/Misc/Good-practices-for-financial-consumer- tion is whether financial services are sufficiently different to protection.pdf 9 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES FIGURE 3. INSTITUTIONAL ARRANGEMENTS FOR FIGURE 4. SUPERVISORY STRUCTURE DIFFERS FINANCIAL CONSUMER PROTECTION REFLECT ACROSS COUNTRIES REFLECTING EXISTING CHOICES ON REGULATION OF PRODUCTS AND INSTITUTIONAL ARRANGEMENTS FOR CONSUMER SERVICES VERSUS INSTITUTIONS PROTECTION AND FINANCIAL SECTOR SUPERVISION Consumer General consumer Twin Peaks protection protection agency + (6 countries) supervision prudential bank 5% separate from supervision agency prudential (4 countries) 27% INSTITUTIONS Prudential Integrated single or Integrated single or and consumer sectoral supervisor + sectoral agency only protection General consumer (71 countries) 4% supervision protection agency together (30 countries) 64% All products and Financial services services, including SEPARATE from PRODUCTS other products and financial services Twin peaks - 6 countries Prudential and business conduct combined (single or sectoral), Note: Data for 111 countries that provided information on financial only - 71 countries consumer protection institutional arrangements General Consumer Protection agency, only - 4 countries require a separate structure for financial consumer protection Financial supervisor (single or sectoral) and general CP - 30 countries from that existing for other goods and services. In terms of the institutional arrangements this translates into a decision Note: Data for 111 countries that provided information on financial consumer protection institutional arrangements. to either place the responsibility for consumer protection in financial services within a general consumer protection agency or in a dedicated entity. On the side of financial supervision, structures adopted by the countries to organize their work the question is whether ensuring adequate consumer protec- on financial consumer protection reflecting existing overall tion is a distinct function from that of ensuring the sound- framework for supervision, capacity and the nature of the ness of a financial institution through prudential supervision. challenges countries face. Institutionally this means placing responsibility for financial consumer protection within financial supervisory agency The debate on the institutional structure for financial super- which also has a prudential supervision authority, or creating vision is not new. This report does not attempt to address a separate entity. the topic in a comprehensive manner, but rather draws on broader existing arguments to contextualize the findings of Based on the survey results, only six economies had a twin the Survey. The term “twin peaks” was coined in the mid- peaks model separating prudential and consumer protection nineties and referred to a model of objectives based super- functions in two separate agencies discussed in detail below. vision where prudential and business conduct supervision In four economies consumer protection for financial services was done by two independent agencies providing integrated is a remit of a general protection agency with no material in- oversight for the entire financial sector within their respective volvement by prudential supervisor (Mongolia, Nepal, Sudan area of responsibility.21 This framework, as part of the broader and Russia). In over 90 percent of economies agencies respon- discussion on integrated supervision, offered a model for fi- sible for prudential supervision also have a responsibility for nancial supervision institutional arrangements in the context financial consumer protection. In 64 percent of economies of the rapidly liberalizing financial markets with blurring the responsibility for financial consumer protection is solely lines between credit, insurance and investment products and with the financial supervisors also responsible for prudential consolidation and conglomeration in financial markets. This supervision (single or multiple) and in another 27 percent of countries the responsibility is shared between financial supervisors and general consumer protection agencies (Figure 21 Taylor, Michael W., 1995. “Twin Peaks”: A Regulatory Structure for the 4). Within these broad categories, there is a multiplicity of New Century.” Centre for the Study of Financial Innovation. 10 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: new model was proposed to replace the existing fragmented agency responsible for strengthening the oversight of con- supervisory structure where multiple agencies were respon- sumer protection measures in the federally regulated financial sible for prudential supervision of various financial institu- sector. At the same time securities markets are regulated at tions and business conduct supervision was often a remit of provincial level with a delegation of a number of functions to self-regulatory organizations. The proponents of the model self-regulatory organizations. argued that prudential supervision and business conduct supervision are sufficiently different objectives necessitating The Netherlands and Belgium established a twin peaks struc- a separation of authority to ensure that each objective obtains tures in 2004 and 2011 respectively but, unlike Australia, sufficient resources and attention.22 placed prudential supervision authorities within their central banks. The Netherlands Authority for the Financial Markets Over the years a number of countries moved towards in- (AFM) responsible for the conduct-of-business supervision tegrated supervision, predominantly in Europe and Latin in the Dutch financial markets replaced and expanded the America,23 though business conduct regulation and supervi- functions of the Securities Board. In Belgium Financial sion often received less attention than prudential supervision Services and Markets Authority is an integrated supervisor in this process. In fact only six countries adopted a twin peaks for business conduct and consumer protection replacing the model. The topic of business conduct and consumer protec- Banking, Finance and Insurance Commission. tion came back in force in the aftermath of the financial crisis reviving the debate on the optimal structure for the supervi- The debate on the financial supervision structure following sion of financial services and markets. the onset of the global financial crisis in 2008 attributed at least in part the resilience of financial systems in Australia The first country to put in place a twin peaks supervisory struc- and Canada to the existing twin peaks supervisory structure.25 ture was Australia in late nineties.24 The Australian Prudential A recent study of the performance of the Dutch twin peaks Regulation Authority (APRA) is responsible for prudential system also concluded that the separation of business con- supervision of authorized deposit taking institutions (banks, duct and prudential supervision functions generally worked building societies, credit unions), insurers, and most of the well, including in time of distress.26 As a result a number superannuation industry. The Australian Securities and of countries have moved to restructure their supervisory Investments Commission (ASIC), an expanded version of the structures along the lines of the twin peaks model. The U.S. old Australian Securities Commission is responsible for mar- Department of the Treasury Blueprint for a Modernized ket conduct relative to financial services and general corporate Financial Regulatory Structure suggested that “the United and business legal standards. The Reserve Bank of Australia States could move to an objectives-based regulatory approach has the responsibility for financial stability, monetary policy, (often associated with a “twinpeaks” approach) as in Australia and payment systems. and elsewhere.”27 The establishment of the BCFP as a single agency responsible for consumer protection in the financial Similarly, Canada put in place a twin peaks financial super- services moved the U.S. towards twin peaks structure on vision structure with independent prudential and business the business conduct and consumer protection side, though conduct agencies outside of the central bank at a federal prudential supervisory functions are split among a number level in 2001. The Office of the Superintendent of Financial of agencies. In the U.K. the proposals for the creation of a Institutions is a single regulatory agency responsible for the twin peaks structure were rejected in 1997 in favor of the regulation and supervision of all federally chartered, licensed, creation of a single integrated regulator for prudential and or registered banks, insurance companies, trust and loan com- business conduct supervision outside of the Bank of England panies, cooperative credit associations, and fraternal benefit societies. The Financial Consumer Agency of Canada is an 22 Another dimension of the debate relates to micro and macro pruden- tial issues and the extent to which it is practical to separate prudential supervision from lender of last resort function. These topics are beyond 25 https://www.financialstabilityboard.org/publications/r_111026a.pdf the scope of this report. 26 Kremers, Jeroen and Dirk Schoenmaker, 2010. “Twin Peaks: 23 BIS, 2007. “Institutional arrangements for financial sector supervision.” Experiences in the Netherlands.” LSE Financial Markets Group Financial Stability Institute Occational Paper #7 at http://www.bis.org/ Papers, Special Paper 196 at http://www.lse.ac.uk/fmg/workingPapers/ fsi/fsipapers07.pdf specialPapers/PDF/SP196.pdf 24 http://www.group30.org/images/PDF/The%20Structure%20of%20 27 http://www.treasury.gov/press-center/press-releases/Documents/ Financial%20Supervision.pdf Blueprint.pdf 11 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES in the form of Financial Services Authority (FSA).28 But in In Peru29 consumer protection and financial literacy are the aftermath of the global financial crisis it was decided to recognized as important elements of the Superintendence adopt a twin peaks model. Integrated prudential supervision of Banking, Insurance and Private Pension Funds (SBS), an functions were moved to the Bank of England and the new integrated prudential supervisor. In 2006 the SBS created the Financial Conduct Authority (FCA) was created as a single Products and User Services Office, charged with consumer supervisor for market conduct and consumer protection in protection including regulation, market conduct supervision 2012. and disclosure, user orientation, and financial education and inclusion functions. In addition, the SBS resolves certain in- Comments provided by the respondents indicate that many dividual complaints regarding private pension products. The jurisdictions are in the process of reforming the institutional consumer protection and competition agency INDECOPI, structure for financial consumer protection. Lessons learned has a responsibility for consumer protection with respect to from the recent crisis are very important in this process. At a broad range of products and services, including financial the same time the structure adopted by a given economy services. In 2010 INDECOPI created a specialized executive needs to take into account the specific challenges in the space dispute resolution unit for financial services and a special- of financial consumer protection within the economy, and the ized consumer protection commission to deal with financial nature of the existing arrangements for consumer protection services including banking, microfinance, insurance, pensions and supervision of financial service providers. and securities. Powers of the SBS and INDECOPI as regards Some examples help demonstrate the range and complexity of to consumer protection of financial institutions overlap and existing institutional arrangements. In Mexico prudential and the division of responsibilities between agencies remains business conduct functions are divided among five key agen- unclear. The SBS oversees prudential regulations and many cies. Three government agencies are in charge of regulation of the consumer protection aspects of the financial sector and supervision of financial entities: the National Banking under the sector specific regulatory framework. INDECOPI, and Securities Commission (CNBV), National Insurance and on the other hand, oversees the financial sector pursuant to Sureties Commission (CNSF), and the National Commission the Consumer Protection Code. The SBS and INDECOPI for Retirement Savings (CONSAR). There is no consolidated coordinate and collaborate and signed a memorandum of supervision and no lead supervisor of financial groups. The understanding (MOU). The MOU contains comprehensive National Commission for the Protection of Financial Services provisions about information-sharing and a monthly liaison Users (CONDUSEF) is in charge of consumer protection in meeting. The National Consumer Protection Council headed financial services. The existing system is similar to the twin by INDECOPI, and created under the Consumer Protection peaks approach in that prudential and consumer protec- Code, is aiming to propose and harmonize national consumer tion supervision functions are separated, though prudential protection policies as well as develop the National Plan of services are provided by sectoral agencies. At the same time Consumer Protection. Banco de Mexico, Mexican central bank, has the responsi- In the Philippines three sectoral supervisory agencies com- bility to maintain the currency’s purchasing power, and to bine prudential supervision and business conduct and con- promote the sound development of the financial system and sumer protection functions with respect to the institutions the integrity of the payment system. In the context of its role they supervise: Bangko Sentral ng Pilipinas (BSP), Insurance in payment system oversight, Banco de Mexico regulates the Commission and Securities and Exchange Commission. operation of credit cards and various elements of the pay- Philippines Deposit Insurance Corporation also conducts ments system, such as ATM network, including consumer awareness campaigns for depositors in the Philippines. The protection dimensions. CONDUSEF and Banco de Mexico four agencies have established a coordination mechanism coordinate their activities in relation to consumer protection through the Financial Sector Forum which serves as a plat- issues. form for sharing experience and coordinating policy actions. In addition to financial legislation and regulation, Consumer Law has specific provisions in relation to credit products as well as general provisions for all goods and services. The law 29 For the full text of the World Bank Diagnostic Review of Consumer 28 Taylor, Michael W., 2010. “The Road from “Twin Peaks” and the Way Protection and Financial Literacy in Peru please see http:// Back.” Connecticut Insurance Law Journal, Volume 16 Issue 1, http:// responsiblefinance.worldbank.org/~/media/GIAWB/FL/Documents/ insurancejournal.org/wp-content/uploads/2011/07/Abstract-21.pdf Diagnostic-Reviews/Peru-CPFL-DiagReview-ENG-FINAL.pdf 12 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: assigns the responsibility for consumer protection depending institutional types. Some gaps do exist, such as smaller finan- on a product type to a number of agencies, including assigning cial cooperatives and NGO microfinance providers, but evi- the responsibility for consumer protection in credit services dence exists that BNM will act in the event of fraud or abuse to the Department of Trade and Industry. In practice how- by unregulated providers, if such irregularities fall within the ever, agencies agreed that BSP will handle issues relating to purview of BNM.30 credit products, the agreement enhanced by the Department of Justice legal opinion. As financial products develop and Regardless of the specific structure adopted, there is a growing financial service providers offer an increasingly complex set of recognition that consumer protection supervision requires a products regulators recognize a need for greater coordination. different set of tools and methods, including active monitoring of consumer financial markets and interaction with consum- In Brazil the National Consumer Protection Secretary ers, from the methods used in prudential supervision focused (Senacon)—housed at the Ministry of Justice—has oversight on the analysis of financial institution performance. There is over consumer protection in general, including financial also a concern that without a separation of the two functions, consumer protection issues. Senacon is supported at the lo- consumer protection would not get sufficient attention from cal level by consumer protection bureaus known as “procons” supervisors. Another concern is a potential conflict between which provide service directly to citizens across all product consumer protection and prudential supervision mandates, and service categories. Their duties include advising and though in the review by FSB most regulators viewed these informing consumers about their rights and obligations and functions as complimentary.31 At the same time, financial trying to solve conflicts between consumers and firms prior to consumer protection has implications for financial stability as court procedures. In addition, four financial supervisory agen- recent crisis has clearly demonstrated. cies play a role in market conduct and consumer protection regulation and supervision of financial services: Central Bank There is no one-size-fits-all model. But there are common of Brazil, Superintendence of Private Insurance, Securities considerations that need to be taken into account in the de- and Exchange Commission, National Superintendency of sign of the institutional structure for financial consumer pro- Pension Funds. tection supervision. General consumer protection agencies are more likely to have systems, processes and infrastructure Bank Negara Malaysia as the Central Bank is the prudential for handling complains used for a broad range of products and market conduct regulator and supervisor for banking in- and services. But these agencies also generally do not have stitutions, insurance companies and takaful operators, devel- expertise in financial sector issues. Financial regulators, in opment financial institutions and payment systems players. turn, have expertise in financial sectors but often lack systems As for capital markets, market conduct of market institutions and processes for adequately overseeing financial consumer and persons licensed under the Capital Markets and Services protection. Some countries, such as Russia, made a deci- Act 2007 is regulated by the Securities Commission Malaysia. sion to place financial consumer protection within a general The Co-operatives Commission of Malaysia regulates and consumer protection agency and develop capacity within this supervises the conduct of co-operatives to ensure that the entity to oversee financial consumer protection. Others have interests of co-operative members are safeguarded. Market followed the route of enhancing financial consumer protec- conduct regulation and supervision was dispersed across tion function within financial regulators while coordinating various departments within BNM until 2006, when BNM with the general consumer protection regulators, as in some established the Consumer and Market Conduct Department examples above. And in a small but growing number of high- (CMCD) to increase attention to fair and equitable market income countries, a dedicated agency for financial consumer practices and financial literacy of consumers. It formulates protection and market conduct has been put in place to and implements consumer-oriented policies, supervises and centralize the responsibility for financial consumer protection enforces compliance with market conduct requirements, across all financial services within one entity. and promotes financial capability of consumers.11 Bringing market conduct for multiple financial service provider types under the CMCD umbrella was a milestone for the central bank, designed to level the playing field, enhance surveillance 30 CGAP Consumer Protection Policy Diagnostic Report: Malaysia, and enforcement capability, and improve financial literacy http://www.cgap.org/publications/cgap-consumer-protection-policy- diagnostic-report-malaysia across the board. BNM’s market conduct framework allows 31 FSB, 2011. “Consumer Finance Protection with Particular Focus for tailored oversight and fewer gaps in coverage that could on Credit,” http://www.financialstabilityboard.org/publications/ occur with different market conduct regulators for different r_111026a.pdf 13 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES The G20 High Level Principles and World Bank Good FIGURE 5. MORE THAN HALF OF THE ECONOMIES Practices do not advocate for any specific institutional struc- WITH A DEDICATED TEAM FOR FINANCIAL ture but instead focus on the key principles and functions for CONSUMER PROTECTION HAVE IT SEPARATELY consumer protection regulation and supervision. The survey FROM PRUDENTIAL SUPERVISION explored the following questions: (1) existence of a dedicated team and whether this function is part of prudential supervi- sion or separate; (2) supervisory tools available; (3) enforce- ment powers and use of enforcement actions. 26% 28% FUNCTIONS OF PRUDENTIAL AND BUSINESS CONDUCT SUPERVISION 7% World Bank Good Practices for Financial Consumer 39% Protection32 state that: “Prudential supervision and consumer protection supervision may be placed in separate agencies or lodged in a single institution. However regardless of the institutional structure, the allocation of resources between As part of prudential supervision (only) - 26 countries prudential supervision and consumer protection is adequate Separate from prudential supervision - 39 countries to enable the effective implementation of consumer protec- tion rules.” Both within and separately from prudential supervision - 7 countries FSB in their review of financial consumer protection found No unit - 28 countries that “most FSB jurisdictions view consumer protection and prudential supervision as complementary rather than com- Note: Data for 100 countries that have a responsibility for peting objectives. It is clear that both consumer protection some aspect of financial consumer protection in 2013. and prudential supervision have a shared interest in minimiz- ing the risks to financial stability.”33 function is performed as part of the regular bank supervision Figure 4 shows that in most jurisdictions prudential and activities. financial consumer protection functions are housed in the Some examples demonstrate approaches countries are taking same agency. The survey asked whether financial supervisors in establishing consumer protection functions. in countries in which they have a responsibility for financial consumer protection have a dedicated team or unit in place In Portugal and Hong Kong business conduct supervision is and if this team or unit is part of prudential supervision func- organizationally separated from prudential supervision. In tion or a separate function. Among the agencies that have Portugal, Banking Conduct Supervision Unit was created established a dedicated team or unit, such unit is more likely within the Supervision Department of the Central Bank in to be separate from prudential supervision (Figure 5). Out 2008. In 2011 the Supervision Department was split in two, of 72 economies with dedicated teams or units for financial creating Banking Conduct Supervision and the Prudential consumer protection, 39 (54 percent) are separate from pru- Supervision Departments, clearly separating prudential dential supervision, 26 (36 percent) are part of prudential and business conduct supervision functions. Hong Kong supervision, and in 7 (10 percent) economies such teams Monetary Authority (HKMA) expanded its efforts to protect were created in both prudential and non-prudential supervi- and educate consumers creating in April 2010 a Banking sion sections. At the same time, most agencies that do not Conduct Department to supervise the business conduct of have a dedicated team or unit noted that consumer protection authorized institutions including the conduct of banking, investment and insurance business. 32 World Bank, 2012. “Good Practices for Financial Consumer In Macedonia consumer protection functions are performed Protection,” http://responsiblefinance.worldbank.org/~/media/ by a separate unit within the On-site Supervision Department. GIAWB/FL/Documents/Misc/Good-practices-for-financial-consumer- protection.pdf And in Slovakia there is a separate Consumer Protection 33 http://www.financialstabilityboard.org/publications/r_111026a.pdf Section responsible for handling of financial consumer 14 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: complaints. If there is any suspicion of breaking law by any FIGURE 6. MORE COUNTRIES ASSIGNED A LEGAL financial institution, Consumer Protection Section informs RESPONSIBILITY FOR FINANCIAL CONSUMER Supervision Department, which have responsibility to impose PROTECTION TO FINANCIAL SUPERVISORS AND sanctions or other measures if any. CREATED DEDICATED TEAMS OR UNITS BETWEEN 2010 AND 2013 In Mozambique financial consumer protection is in early stag- es of development. The Banco de Moçambique (BdM) is the regulatory and supervisory authority for credit institutions, 97 financial companies and the microfinance industry. BdM also Agency is responsible for undertook to implement financial consumer protection for financial consumer protection the institutions it supervises. The Department for Strategic 74 Planning, Communication and Image was created with the responsibility for consumer complaint handling and financial education. At the same time bank supervision department in addition to prudential supervision functions is responsible for 70 oversight of misleading advertisements and unwarranted fees Agency has a dedicated and charges. unit for consumer protection 46 In Pakistan Central Bank a dedicated Consumer Protection Department was established with the responsibility to create and promote a culture of social responsibility in commercial 0 20 40 60 80 100 Number of Countries banks, development finance institutions, Islamic banks, and microfinance banks for resolving disputes, thereby protecting 2013 2010 the rights of the consumers. Earlier, the functions of consum- er protection and complaint resolution was the mandate of Note: Data for 109 countries with data for 2010 and 2013. Banking Policy and Regulations Department within Pakistan Central Bank. supervision relies on detailed assessment of performance of individual financial institutions through off-site monitor- SUPERVISORY TOOLS, AUTHORITY AND ing and on-site inspections. Monitoring compliance with RESOURCES consumer protection rules requires analyses of the feedback from consumers and assessments of performance of financial More countries moved to enhance supervision of financial institutions conduct including disclosure and complaints consumer protection and dedicated resources to this task over handling. Between 2010 and 2013, more countries started the past three years (Figure 6). The number of agencies that using a broader range of supervisory tools such as monitoring responded that they have a responsibility for financial con- financial institutions websites (50 compared to 48), collecting sumer protection increased from 74 in 2010 to 97 in 2013.34 and monitoring complaints (49 compared to 23), operating The number of economies that have agencies with dedicated hotlines (47 compared to 36), conducting focus groups (28 resources and staff in this area of work increased also from compared to 16) and mystery shopping in 26 economies in 46 in 2010 to 70 in 2013. As a result, in 2013 72 percent 2013 compared to 14 in 2010 (Figure 7). of agencies with the responsibility for financial consumer protection had a dedicated team or unit in place to perform Not surprisingly, agencies with a dedicated team for financial this function compared to 62 percent of economies in 2010. consumer protection and hence more resources were more likely to use a broad range of compliance monitoring tools Monitoring of compliance with financial consumer pro- (Figure 8). For example, 64 percent of agencies with a financial tection regulations requires a different set of tools and ap- consumer protection team collected statistics on complaints proaches from that used in prudential supervision. Prudential compared to only 11 percent among those without a clear fi- nancial consumer protection function. Among agencies with a dedicated unit, 61 percent operated hotlines for complaints 34 Data for countries with information for 2010 and 2013. Overall 100 and inquiries compared to 11 percent of those without dedi- economies in 2013 stated that they have a responsibility for financial cated consumer protection function. Another useful tool for consumer protection. 15 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES FIGURE 7. RESPONSIBLE AGENCIES BROADENED FIGURE 8. AGENCIES WITH DEDICATED UNITS OR THE RANGE OF COMPLIANCE MONITORING TOOLS TEAMS USE A BROADER RANGE COMPLIANCE BETWEEN 2010 AND 2013, ESPECIALLY IN TERMS TOOLS BEYOND ONSITE INSPECTIONS OF COLLECTING STATISTICS ON THE NUMBER OF COMPLAINTS 85% Onsite inspections 75% 81 Onsite inspections 75% 74 O site 32% 50 64% Monitor FI advertising, Collect complaints websites 48 statistics from FIs 11% 61% 49 Monitor FI advertising, 21% Collect complaints websites statistics from FIs 23 61% Operate a hotline 11% 47 Operate a hotline 43% 36 Price comparison website 21% 28 36% Conduct interviews Conduct interviews 7% 16 33% 26 Mystery shopping 11% Mystery shopping 14 0 20 40 60 80 100 0 20 40 60 80 100 Consumer Protection unit exists Number of countries No unit 2013 2010 Note: For 97 agencies with responsibility fo financial consumer Note: For 100 agencies with responsibility for financial protection and data in 2010 and 2013. consumer protection in 2013. improving transparency and monitoring compliance is price between prudential supervision staff and those responsible for comparison websites publishing rates and fees reported by fi- financial consumer protection. nancial service providers. Among the agencies with dedicated teams or units, 43 percent operated such websites compared Survey responses also suggest that regulatory powers and the to 21 percent among those without dedicated financial con- range of enforcement actions regulatory agencies can take have sumer protection function. Such websites provide consumers expanded in the past three years (Figure 9). Issuing warnings with the means to compare the costs (or returns) and terms and imposing fines and penalties are the most common forms of similar financial products. In addition, they also have a of action, though often derived from the authorities exist- positive impact on financial services providers to compete by ing under prudential regulations. Public notices of violation offering better products and services rather than by taking are found to be an effective deterrent, but despite a marked advantage of poorly informed consumers. increase, relatively few countries practice this approach, 41 according to 2013 data. The majority of supervisory agen- To make supervision effective, dedicated resources are nec- cies collect complaints and have a responsibility to respond essary regardless of the institutional model chosen by the to complains (81) and register complaints (79). At the same country. There is also a need to identify effective approaches time, a much smaller number of agencies have the authority and models for compliance monitoring in financial consumer for assisting directly in resolving complaints or making bind- protection as well as the effective coordination mechanisms ing decisions in case of disputes (Figure 10). 16 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: FIGURE 9. ENFORCEMENT POWERS WERE FIGURE 10. MOST SUPERVISORS COLLECT AND EXPANDED IN A NUMBER OF COUNTRIES MONITOR COMPLAINTS THOUGH FEW HAVE AN AUTHORITY FOR DIRECTLY RESOLVING COMPLAINTS OR MAKING BINDNG DECISIONS 83 Warning 59 Respond to complaints 81 70 Fines and penalties 47 58 Register complaints 79 Withdraw advertisements 39 58 Require refund Assist indirectly in 62 27 resolving complaints 42 Withdraw license 27 Analyze/publish 57 complaints statistics 41 Public notice 27 Assist directly in 46 resolving complaints 24 Other 17 Make binding decisions 27 0 10 20 30 40 50 60 70 80 90 Number of countries 0 20 40 60 80 100 2013 2010 Number of Countries Note: Based on 97 economies with a responsibility for Note: For 100 agencies with responsibility for financial financial consumer protection and data in 2010 and 2013. consumer protection in 2013. 17 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES 4 FAIR TREATMENT Principle 3 of the G20 High Level Principles on Financial The provisions to protect client confidentiality are the most Consumer Protection states that “all financial consumers common and are present in 91 economies (80 percent). should be treated equitably, honestly and fairly at all stages of Confidentiality provisions are often covered by bank secrecy their relationship with financial service providers.” provisions in financial legislation or by data protection legis- lation where it exists. These provisions usually require that the The survey asked whether the following legal provisions banking transactions of any bank customer are kept confiden- within a broader category of fair treatment are present in a tial by his or her bank and that a bank protects the confidenti- given jurisdiction: restrictions on deceptive advertising, pred- ality and security of the personal data of its customers against atory lending, bundling and tying of products and services, any anticipated threats or hazards to the security or integrity existence of prepayment fees, restrictions on abusive collec- of such information, as well as against unauthorized access.35 tion practices and protections for client data confidentiality Several international guidelines and directives cover issues re- (Figure 11). lating to the confidentiality of identifiable personal informa- tion. These include the OECD Guidelines on the Protection of Privacy and Transborder Flows of Personal Data (Article FIGURE 11. PROVISIONS ENSURING DATA 2 Scope of Guidelines), the EU Directive on the Protection CONFIDENTIALITY AND RESTRICTING DECEPTIVE of Individuals with regard to the Processing of Personal Data ADVERTISING ARE MORE COMMON THAN 1995/46/EC, and the APEC Privacy Framework (Part ii, FINANCIAL INDUSTRY SPECIFIC PROVISIONS SUCH AS COLLECTION PRACTICES OR BUNDLING Scope). OF PRODUCTS Restrictions on deceptive advertisement are also common and present in 86 economies (75 percent). Deceptive advertising Unauthorized use of rules are often part of the broader legislation of consumer client data or breach 91 of client confidentiality protection and fair competition applying to all products and services. These provisions usually require that advertising and Deceptive advertising 86 sales materials and procedures do not mislead customers, all advertising and sales materials are easily readable and under- Predatory lending 67 standable by the general public, and that banks should be legally responsible for all statements made in their advertising Bundling and tying 56 Abusive collection practices 52 Prepayment fees 46 0 20 40 60 80 100 Number of Countries 35 World Bank, 2012. “Good Practices for Financial Consumer Protection,” http://responsiblefinance.worldbank.org/~/media/ GIAWB/FL/Documents/Misc/Good-practices-for-financial-consumer- protection.pdf 18 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: and sales materials (i.e., be subject to the penalties under the same bank, tying is likely to discourage the entry of new law for making any false or misleading statements).36 players and growth of smaller players. Third, by introducing additional products into the transaction, tying reduces price Restrictions on predatory lending aiming and high pressure transparency and comparability among providers. selling practices are reported by 67 economies (59 percent). One of the measures within this category is introduction of Bundling occurs when two or more products are sold together cooling off periods. World Bank Good Practices on Financial in a package, although each of the products can also be pur- Consumer Protection recommend that a bank should provide chased separately on the market. Firms bundle for several the consumer a cooling-off period of a reasonable number of reasons including economies of scope, price discrimination, days (at least 3-5 business days) immediately following the demand management or leverage of market power into other signing of any agreement between the bank and the consumer market segments. Bundling is not per se anti-competitive for financial products or services with a long-term savings and it can even have positive effects on the consumer if the component, or those subject to high-pressure sales contracts price of bundled services is lower than for unbundled ones, (unless explicitly waived in advance by a consumer in writ- and if convenience is increased. However, bundling also has ing). Within this cooling off period the consumer should be the potential to render price comparisons impossible, thus permitted to cancel or treat the agreement as null and void hindering competition. Also customers might be forced to without penalty to the consumer of any kind. This important accept services and products that they do not need and thus safeguard enables an individual to withdraw from an arrange- they would have to incur fees and other costs associated with ment with impunity. This is particularly important for finan- maintaining the bundled product or service. cial products or services with a long-term savings component. Borrowers tend to rush into financial arrangements with their World Bank Good Practices on Financial Consumer banks that provide seemingly attractive terms or returns with- Protection38 recommend that providers of financial services out the benefit of shopping around. This is especially serious should avoid bundling services and products and the use of in countries where the terms of services and products are not tying clauses in contracts that restrict the choice of consum- readily available or cannot be compared. Thus, the cooling-off ers. In particular, whenever a borrower is obliged by a bank to period provides relief similar to a “no-questions-asked” return purchase any product, including an insurance policy, as a pre- policy for goods. However, for banking products and services condition for receiving a loan from the bank, the borrower that involve market risk, a consumer who cancels his or her should be free to choose the provider of the product and this contract during the cooling-off period should be required to information should be made known to the borrower. compensate the bank for any processing fees.37 Restrictions on abusive collections practices are reported by less The restrictions on bundling and tying of financial services than half of respondents—52 economies (45 percent). World are present in 56 economies (49 percent). Tying refers to the Bank Good Practices on Financial Consumer Protection39 practice of selling two or more products together in a pack- recommend that a bank, agent of a bank and any third party age and at least one of these products is not sold separately. should be prohibited from employing any abusive debt col- For example, a bank may choose to tie a current account to lection practice against any customer of the bank, including mortgages, personal loans or SME loans. Product tying in re- the use of any false statement, any unfair practice or the giv- tail banking may weaken competition. First, tying raises costs ing of false credit information to others. The type of debt and therefore is likely to reduce customer mobility. Second, that can be collected on behalf of a bank, the person who can by binding customers into buying several products from the collect any such debt and the manner in which that debt can be collected should be indicated to the customer of the bank when the credit agreement giving rise to the debt is entered 36 World Bank, 2012. “Good Practices for Financial Consumer Protec- into between the bank and the customer. A debt collector tion,” http://responsiblefinance.worldbank.org/~/media/GIAWB/FL/ Documents/Misc/Good-practices-for-financial-consumer-protection. pdf; G20/OECD Task Force on Financial Consumer Protection. “Up- 38 World Bank, 2012. “Good Practices for Financial Consumer Protec- date Report on the Work to Support the Implementation of the G20 tion,” http://responsiblefinance.worldbank.org/~/media/GIAWB/FL/ High-Level Principles on Financial Consumer Protection,” http://www. Documents/Misc/Good-practices-for-financial-consumer-protection. oecd.org/daf/fin/financial-education/G20EffectiveApproachesFCP.pdf pdf 37 World Bank, 2012. “Good Practices for Financial Consumer Protec- 39 World Bank, 2012. “Good Practices for Financial Consumer Protec- tion,” http://responsiblefinance.worldbank.org/~/media/GIAWB/FL/ tion,” http://responsiblefinance.worldbank.org/~/media/GIAWB/FL/ Documents/Misc/Good-practices-for-financial-consumer-protection. Documents/Misc/Good-practices-for-financial-consumer-protection. pdf pdf 19 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES should not contact any third party about a bank customer’s consumer’s ability to switch banks as a result reducing compe- debt without informing that party of the debt collector’s right tition in the market. At the same time it is reasonable to allow to do so; and the type of information that the debt collector for reasonable administrative costs relating to the prepayment is seeking. Where sale or transfer of debt without borrower and, for fixed rate facilities, a charge that takes into account consent is allowed by law, the borrower should be notified differences between the interest rate payable under the facility of the sale or transfer within a reasonable number of days, and that prevailing at the time of the prepayment. informed that the borrower remains obligated on the debt, and provided with information as to where to make payment, Overall, survey results indicate that the legal framework in as well as the purchaser’s or transferee’s contact information. most countries provides broad provisions on fair treatment, but less than half of economies have financial industry spe- Only 46 countries (40 percent) had provisions restricting cific provisions. prepayment fees. Prepayment fees are charged for early repay- ment of a loan. Such fees, if unreasonably high can restrict 20 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: 5 DISCLOSURE Principle 4 of the G20 High Level Principles on Financial disclosure standards across various groups of regulated and Consumer Protection states that financial services providers unregulated providers of similar financial services are an and authorized agents should provide consumers with key important part of reform agendas in many countries. For ex- information that informs the consumer of the fundamental ample, in the Philippines, disclosure requirements originally benefits, risks and terms of the product. Appropriate informa- developed for the financial service providers regulated by the tion should be provided at all stages of the relationship with Central Bank were subsequently adapted for insurance and the customer. Standardized pre-contractual disclosure prac- capital markets participants. The focus on a product rather tices (e.g., forms) should be adopted where applicable and than the institution providing it is one approach. Consumer possible to allow comparisons between products and services credit legislation implemented in a number of European of the same nature. countries aims to level the playing field and put in place a common standard of disclosure across different groups of pro- Disclosure is the key element of the modern approach to viders of financial services. This approach also allows for more financial consumer protection. The consumer has a right to know the details of a financial transaction entered into and details of the account over time to make informed decisions FIGURE 12. DISCLOSURE REQUIREMENTS AT and demand recourse in a case of wrongdoing. OPENING ARE MORE COMMON THAN PERIODIC DISCLOSURE. FEW COUNTRIES HAVE REQUIREMENTS The World Bank Global Survey asked a set of questions on FOR DISCLOSURE BY UNREGULATED INSTITUTIONS the contents of mandatory disclosure on deposit and credit services at opening and on a periodic basis. The results show that the requirements for mandatory disclosure at account 90 opening are present in the majority of jurisdictions (Figure Banks 12). Banks are required to disclose terms and conditions at 70 account opening in 90 economies (79 percent) and regulated financial institutions in 76 (67 percent). Only in a handful of economies are there requirements for disclosure by unregu- 76 Regulated FIs lated financial institutions. A number of countries, including 54 Italy, Oman, and Saudi Arabia, clarified that all financial service providers are regulated and hence this question does not apply. 21 Unregulated FIs The structure of financial supervision in most jurisdictions implies that financial regulators do not have a mandate to 6 issue requirements for the institutions they do not supervise. 0 20 40 60 80 100 In cases in which a general consumer protection framework Number of Countries exists, the disclosure by unregulated providers may be gov- erned by those laws. The variations in disclosure standards for At opening Periodic different type of providers of credit services may distort the market and confuse the consumers. The efforts to harmonize Note: Based on responses from 114 economies in 2013. 21 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES FIGURE 13. DISCLOSURE AT OPENING FIGURE 14. PERIODIC DISCLOSURE Required insurance 63 Annual percentage rate 57 (applied during the period) Computation method 78 Minimum amount due 58 Annual percentage rate using a standard formula 88 Date due 63 Fees 88 Outstanding balance 65 Minimum balance requirements All transactions concerning the account 47 66 for the period covered by the statement Method of compounding 48 Fees charged for the period 68 Early withdrawal penalties 61 Interest charged for the period 69 Annual percentage yield and interest rate 78 Annual percentage yield 30 Fees and penalties 85 Amount of interest earned 46 Prescribed standardized disclosure format 54 Account balance 50 Recourse rights and processes 58 Fees imposed 52 Local language requirement 60 Procedures to dispute the accuracy 42 Plain language requirement 74 Detailed transactional information 64 0 20 40 60 80 100 0 20 40 60 80 100 Number of Countries Number of Countries Note: Based on responses from 114 economies in 2013. Note: Based on responses from 114 economies in 2013. specific guidance, because disclosure terms need to be tailored bank’s general charges; a summary of the bank’s complaints for different groups of financial products and are proportional procedures; a statement regarding the existence of the office to the risks involved. of banking ombudsman or equivalent institution and basic information relating to its process and procedures; infor- The survey results show that disclosure of terms and condi- mation about any compensation scheme that the bank is a tions at opening is far more common than the requirements member of; an outline of the action and remedies which the for periodic disclosure (Figures 13 and 14). Periodic disclo- bank may take in the event of a default by the consumer; the sure is especially important for certain products such as credit principles-based code of conduct, if any; information on the cards and debit-card-linked accounts where the cost depends methods of computing interest rates paid by or charged to the on the usage. Periodic disclosure not only serves to inform the consumer, any relevant non-interest charges or fees related to consumer, but is also an important tool in detecting fraud or the product offered to the consumer; any service charges to be mistakes. As technology improves and more customers rely paid by the consumer, restrictions, if any, on account transfers on Internet banking, the requirement for paper statements by the consumer, and the procedures for closing an account; may be relaxed. But the contents of the periodic disclosure and clear rules on the reporting procedures that the consumer and the rights of access need to be clearly defined. should follow in the case of unauthorized transactions in general, and stolen cards in particular, as well as the bank’s li- World Bank Good Practices on Financial Consumer ability in such cases. Further, the terms and conditions should Protection40 identify a number of recommendations for the be written in plain language and in a font size and spacing disclosure at account opening. Before a consumer opens a that facilitates the reader’s comprehension. deposit, current (checking) or loan account the bank should make available to the consumer a written copy of its general Survey results show that most economies have requirements terms and conditions, as well as all terms and conditions that to disclose rates and fees for deposit and credit services. More apply to the account to be opened. Collectively, these terms economies put specific disclosure requirements at opening and conditions should include: disclosure of details of the for credit products, especially in relation to credit cards, than for deposit products. Periodic disclosures on credit products, mostly credit cards, are more common than on deposit prod- 40 World Bank, 2012. “Good Practices for Financial Consumer ucts. About half of the economies—54 (47 percent)—stated Protection,” http://responsiblefinance.worldbank.org/~/media/ that there is a prescribed standardized disclosure format in GIAWB/FL/Documents/Misc/Good-practices-for-financial-consumer- protection.pdf 22 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: place. The debate and research on the effectiveness of alterna- referred to as a key-facts statement such as “Schumer Box” tive forms of disclosure is ongoing. used for disclosure in credit card solicitations in the United States indicates that familiarity with the format may make it The Truth in Lending Act of 1968 introduced the annual per- easier for consumers to understand and compare terms across centage rate (APR) disclosure in the United States for the first providers. The Consumer Credit Directive in Europe also in- time and the efforts to improve disclosure continued since troduced a Standard European Consumer Credit Information then. The decades of research and results of extensive con- form enabling comparison of terms across all providers in sumer testing summarized in a recent article by the Federal member countries. While there is a discussion on the need to Reserve indicate that some forms of disclosure are more effec- enable a degree of flexibility to reflect specific features of cer- tive than others.41 The study found that minor differences in tain products, the need for broader minimum standards for language and design features of the disclosure form can have disclosure is not in doubt.43 When Peru embarked on improv- effects on consumer’s understanding of disclosure. Repeated ing financial disclosure, the survey of providers showed that studies show that many consumers find it difficult to under- there were over 4,000 different terms in use to describe various stand annual percentage rates (APR), which shows in a single financial terms. A standard dictionary reduced the number of rate the applicable interest rate and mandatory fees and en- terms to 50 and brought in consistency in disclosure. ables comparison across providers compared to other forms of disclosure. While it is important to ensure that the total cost Effective monitoring of compliance with disclosure standards of the financial product is disclosed to enable comparabil- is required to ensure that providers follow the rules. Price ity, there are mixed results on the effectiveness of alternative comparison websites mentioned earlier are also an important forms of disclosure such as annual percentage rate and further element of improving transparency and disclosure in the refinements are needed based on consumer testing.42 financial markets. Financial education efforts are necessary to improve the basic understanding of financial concepts by There is an indication that presentation of terms matter and consumers. Even with these measures however, disclosure has graphics, titles and boxes all could influence the understand- its limits and the question is whether additional and more ing of the terms presented. The use of standard templates proactive measures of consumer protection are in order. 41 Jeanne M. Hogarth and Ellen A. Merry, 2011. “Designing Disclosures to Inform Consumer Financial Decision-making: Lessons Learned from Consumer Testing,” Federal Reserve Bulletin, August 2011 Vol. 97, No. 3. 42 Various assessments by FSA in the UK can be found at www.fsa. gov.uk/pages/Library/research/Consumer/index.shtml. In Canada Les Études de Marché Créatec, 2008. Qualitative Testing of Proposed 43 World Bank, 2012. “Good Practices for Financial Consumer MasterCard Plain Language Application Form (Ottawa: FCAC,May), Protection,” http://responsiblefinance.worldbank.org/~/media/ www.fcac-acfc.gc.ca/eng/resources/PDFs/2008PlainLanguage-eng. GIAWB/FL/Documents/Misc/Good-practices-for-financial- pdf. Aging Agendas Social Policy Consultants, 2004, Superannuation consumer-protection.pdf; G20/OECD Task Force on Financial Fees Disclosure Consumer Testing Report, prepared for the Association of Consumer Protection, “Update Report on The Work to Support Superannuation Funds of Australia (January), www.superannuation. the Implementation of the G20 High-Level Principles on Financial asn.au/ArticleDocuments/116/AgeingAgendas&ASFA_ Consumer Protection,” http://www.oecd.org/daf/fin/financial- SuperFeesDisclosure.pdf education/G20EffectiveApproachesFCP.pdf 23 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES 6 RESPONSIBLE LENDING Principle 6 of the G20 High Level Principles on Financial In theory, rational informed individuals were not expected Consumer Protection states that financial services providers to borrow beyond their means. Lenders were not expected to and authorized agents should have as an objective to work grant a loan if they had doubts about repayment. But practic- in the best interest of their customers and be responsible for es appeared to be different. Recent research from behavioral upholding financial consumer protection. Depending on the economics provides some insights on consumer decisions.45 nature of the transaction and based on information primar- A review of practices among financial service providers also ily provided by customers, financial services providers should shows that misaligned incentives for financial service provid- assess the related financial capabilities, situation and needs of ers play a role. Compensation for loan officers based on loan their customers before agreeing to provide them with a prod- volumes when an originating institution does not eventually uct, advice or service. carry the credit risk means there is less concern for repayment ability. Revenue generation from late fees and penalties can World Bank Good Practices on Financial Consumer be an important source of income and a lender may prefer a Protection44 also recommends that financial institutions need borrower who pays late. Lenders may also overestimate the to ensure that a product or service offered to the consumer is capacity to repay if there is no adequate credit information in line with the need of the consumer. The consumer should system to check information on the borrower’s existing debts be given a range of options to choose from to meet his or her or reliable means to verify income. requirements. Sufficient information on the product or ser- vice should be provided to the consumer to enable him or her One element of responsible business conduct that the global to select the most suitable and affordable product or service. survey covered is a policy on affordability or limiting over- When offering a new credit product or service significantly indebtedness. The survey asked whether there were explicit increasing the amount of debt assumed by the consumer, the limits set by regulations such as loan-to-income ratio and consumer’s credit worthiness should be properly assessed. whether regulations require lending institutions to assess bor- The aim of affordability provisions is to avoid consumer rower ability to repay the loan, but no specific limits are set. overindebtedness and to help consumers make appropriate The majority of economies—88 (77 percent)—stated that decisions on their financial needs. either one or both of these measures are present. Among those with requirements, slightly more than half—48 economies The issues of over-indebtedness, affordability and responsible (54 percent)—had requirements for lenders to assess the abil- lending became a subject of much debate in the aftermath of ity to repay but no explicit limits, and 40 economies had ex- the recent subprime crisis in the United States. High levels plicit limits in place. The increase in the number of countries of indebtedness by households arguably borrowing beyond with explicit limits from 20 in 2009 to 40 in 2013 is striking their means raised questions on the effectiveness of the exist- and reflects a sea change in the outlook to financial consumer ing consumer protection framework as well as the incentives protection and financial sector regulation in general in the system among financial service providers. aftermath of the financial crisis. 45 For review of recent research please see World Bank, 2013, “Global 44 World Bank, 2012. “Good Practices for Financial Consumer Protec- Financial Development Report 2014: Financial Inclusion,” World tion,” http://responsiblefinance.worldbank.org/~/media/GIAWB/FL/ Bank, Washington DC; Ardic, Ibrahim, and Mylenko, 2011, Consumer Documents/Misc/Good-practices-for-financial-consumer-protection. Protection Laws and Regulations in Deposit and Loan Services: A Cross- pdf Country Analysis. World Bank Policy Research Working Paper 5536. 24 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: FIGURE 15. MOST COUNTRIES DO NOT SET EXPLICIT establishes a debt service-to-income ratio of 15 percent for LIMITS AS PART OF AFFORDABILITY OR REDUCING salaried employees. In Japan, the Money Lending Business OVER-INDEBTEDNESS GUIDANCE Act provides that no new loans may be made when the exist- ing amount outstanding exceeds one-third of the borrower’s annual income. In Malawi, non-deposit taking microfinance 11% institutions are required to restrict loan repayments of sala- 23% ried employees to 50 percent of take-home pay. In Pakistan, monthly amortization payments of consumer loans should not exceed 50 percent of the net disposable income of the 24% prospective borrower. In Saudi Arabia, the debt-service-to- income ratio cannot exceed 33 percent for working persons and 25 percent for pensioners. 42% A number of countries set limits for mortgage lending. In Hong Kong, specific limits relate to mortgage loans and in- clude loan-to-value ratios of 20 to 40 percent depending on No regulations/guidance on a ordability/over-indebtedness - 26 countries the source of income and whether this is a first mortgage. The rules also set a debt service ratio in relation to income Overall guidance on responsible lending, but no explicit limits - 48 countries depending on the size of the mortgage, residential or com- Explicit limits (DSR, LTV) - 27 countries mercial purpose and source of income. In Eastern Europe, Overall guidance and explicit limits - 13 countries where foreign currency exposures constitute an important risk, Hungary put in place loan-to-value limits for mortgages Note: Based on responses from 114 economies in 2013. and vehicle financing in the range of 50 to 80 percent de- pending on loan currency. Romania requires stress tests for exchange rate and interest rate changes on borrower’s ability In most countries, the requirement to assess a borrower’s to repay and sets a loan-to-value limit of 60 to 85 percent ability to repay, without setting explicit limits in relation to depending on the currency of financing. income or value of the financed asset is part of prudential regulations and guidance on risk management to financial In line with rapid growth of credit card users, a number of institutions. These regulations set the requirement in broad countries placed explicit limits relating to credit card lend- terms and do not necessarily provide detailed instructions or ing. In Indonesia, no more than two credit cards are allowed methodology on assessing affordability. As part of the imple- for clients with income below a below certain threshold. In mentation of the Consumer Credit Directive, a number of Panama, the maximum borrowing limit for credit cards is set EU countries expanded guidance on assessing affordability to three times monthly income. In Thailand, the approved and suitability of financial products. One of the elements of credit line for each credit card holder and each personal loan such regulations, for example in Bulgaria, Czech Republic, by regulated institution shall not exceed 5 times the average and Greece, is a requirement to consult relevant databases income per month. And in Taiwan the sum of approved lines such as credit information registries to obtain information on of credit plus the total balance of the credit card applicant’s existing commitments of the loan applicant. In Ireland, for unsecured debts with all financial institutions cannot exceed variable interest rate loans, lenders are required to conduct a 22 times of the average monthly income of the applicant stress test on the consumer’s ability to repay due to a change within the most recent year. in interest rate. The variation of definition of the limits and thresholds reflect Reviewing the regulations that set explicit limits shows that in part domestic-economy contexts and the nature of the usually the limits are applied selectively for specific loan concern, be it currency risk in mortgage finance, anticipation categories such as mortgages, consumer loans, credit cards of a property bubble, rapid expansion of credit card lending or microfinance loans. These explicit limits are also mostly or raising over-indebtedness. There is very little empirical defined as part of prudential regulations often in relation to research on whether these quantitative limits work or justifi- loan risk classification and provisioning requirements and cation for setting the value of the limits. A comprehensive as- address consumer protection and risk management concerns. sessment conducted by the UK’s Financial Service Authority For example, Bolivia requires higher general provisions and as part of mortgage market reform is one study that presents 25 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES an empirical analysis of the correlations between debt service ratio and probability of impairment.46 The study found that debt service ratio was not a strong predictor of loan impair- ment based on the mortgage data they had available, resulting in a recommendation not to set any explicit limits. There are a number of challenges and data constraints in estimating loan affordability. Further analytical work is needed to bet- ter understand the empirical relationship among debt-service ratios, loan-to-value ratios and loan performance. The results are likely to differ across countries and by asset class. Without better understanding of these measures, the concern remains that the imposition of strict debt-service and loan-to-value ratios could restrict access to finance, and push lower income borrowers into informal sector. 46 U.K. Financial Services Authority, “Mortgage Market review: proposed package of reforms.” Consultation Paper CP11/31 http://www.fsa.gov. uk/pages/Library/Policy/CP/2011/11_31.shtml 26 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: DISPUTE RESOLUTION AND RECOURSE 7  Principle 9 of the G20 High Level Principles on Financial statistics on complaints received and addressed by financial Consumer Protection states that jurisdictions should ensure service providers. As discussed in section 3, a relatively small that consumers have access to adequate complaints handling but increasing number of supervisors report collecting com- and redress mechanisms that are accessible, affordable, inde- plaints statistics (49 in 2013 compared to 23 in 2010, Figure pendent, fair, accountable, timely and efficient. There are a 7). Complaints statistics monitoring can be an important number of mechanisms for handling complaints and resolv- indicator of the emerging problems in the financial sector ing disputes within modern financial system. and can help identify issues relating to specific institutions or products. World Bank Good Practices on Financial Consumer Protection47 recommend that every financial institution has If a financial institution and a consumer cannot resolve a designated contact point with clear procedures for han- a dispute, they can turn to courts for resolution. Dispute dling customer complaints, including complaints submitted resolution through courts, however, is costly and time- verbally. Consumers have access to an affordable, efficient, consuming. Alternative dispute resolution systems such as respected, professionally qualified and adequately resourced financial ombudsmen or mediation services seek to assist the mechanism for dispute resolution, such as an independent parties in resolving a dispute out of court. The key principles financial ombudsman or equivalent institution with effec- of operation for such mechanisms include independence, tive enforcement capacity. Statistics of customer complaints, transparency, fairness and effectiveness. In addition to help- including those related to breaches of codes of conduct, are ing resolve disputes, financial ombudsmen can deal with con- periodically compiled and published by the ombudsman or sumer enquiries and share the lessons from their work to help financial supervisory authority. governments, regulators, financial businesses and consumers improve the financial consumer protection framework.48 The first line of defense in resolving disputes between finan- cial service users and providers are the complaint-handling The survey asked respondents to indicate whether there was mechanisms within financial service providers. Financial a system that allowed a customer of a financial institution to institutions should have mechanisms to receive and handle seek affordable and efficient recourse with a third party such complaints from their customers. According to the 2013 as a supervisory agency, a financial ombudsman or equivalent survey results, the majority of jurisdictions—83 out of 114 institution in the event that the customer’s complaint was (73 percent)—have a requirement in place for financial insti- not resolved to the customer’s satisfaction under the internal tutions to implement procedures and processes for resolving procedures of the relevant financial institution. The majority customer complaints. The number of countries with such of economies—85 (75 percent)—operate some form of an requirements increased dramatically between 2010 and 2013 alternative dispute resolution mechanism and often parallel from 55 to 80 for the countries for which survey data for both mechanisms exist (Figure 16). years is available. To monitor the functioning of complaints handling by financial institutions, supervisors can collect the The countries that reported having a financial ombudsman or similar entity were asked to classify the existing mechanisms 47 World Bank, 2012. “Good Practices for Financial Consumer Protection,” http://responsiblefinance.worldbank.org/~/media/ 48 Thomas, David and Francis Frizon, 2012. “Resolving disputes between GIAWB/FL/Documents/Misc/Good-practices-for-financial-consumer- consumers and financial businesses: Fundamentals for a financial protection.pdf ombudsman,” World Bank. 27 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES FIGURE 16. MOST COUNTRIES HAVE A THIRD PARTY FIGURE 17. IN A THIRD OF ECONOMIES, FINANCIAL DISPUTE RESOLUTION MECHANISM IN PLACE SUPERVISORS OPERATE OMBUDSMAN-LIKE ENTITY Financial ombudsman 69 14% 17% Mediation /Arbitration service 30 22% 46% No dispute resolution system 29 General ombudsman 18 Industry based - 12 countries Independent statutory body - 15 countries 0 20 40 60 80 Within supervisory agency - 32 countries Number of Countries Multiple - 10 countries Note: Based on responses from 114 economies in 2013. Note: For 69 economies with financial ombudsman or similar institutions. into one of three broad categories: (i) independent statutory body, (ii) industry-based, or (iii) an entity or function within a supervisory agency. An independent statutory body is es- the types, with industry-based ombudsmen being less likely tablished by legislation and usually funded by its members to have powers for binding decisions (41 percent) and inde- or a combination of member contributions and allocation pendent ombudsmen more likely to have such powers (63 from a central government or a responsible regulatory agency percent), reflecting the nature of legal framework. Further budget. An industry-based, dispute-resolution mechanism is review shows that the structure and authority of an ombuds- formed by an industry association or its members and is fi- man or equivalent institution varies greatly among countries, nanced by association or member contributions. Independent making any generalizations difficult. As an example, an inde- statutory bodies and industry based ombudsmen are mostly pendent ombudsman in Italy, Arbitro Bancario Finanziario found in European countries and high-income OECD coun- (ABF), makes decisions that have the effect of recommenda- tries. For most economies (41 out of 69) that had a financial tions and are not binding on either party. However, if the ombudsman or a similar entity, it was hosted by a regulatory institution does not comply with an ABF decision its breach agency (Figure 17). In this case, an agency responsible for fi- is published on the website of ABF and at the expense of the nancial consumer protection also has a function to collect and institution in two national newspapers. The decisions of the respond complaints and assist in the resolution of disputes. UK ombudsman are binding on both parties but only once The activities of such entity are most often funded from the the consumer has agreed to the suggested award. budget of the regulatory agency. Continued international efforts focus on identifying the key The analyses of the functions performed by different types of principles of operation and promoting best practices in opera- ombudsmen show that these are largely similar across coun- tion of dispute resolution mechanisms. As the survey shows, tries with the primary focus on receiving and responding to regardless of the form, there is a fair amount of homogeneity complaints and directly assisting in resolving disputes. Not of the functions performed by these institutions. The specific surprisingly, supervisor-operated, dispute-resolution mecha- choice of locating the service within a supervisory agency, nisms are more likely to assist dispute resolution indirectly having a statutory entity, having an industry based organiza- by involving regulatory agencies compared to independent or tion, whether having a single ombudsman for all services or industry-based ombudsmen. Overall, about half of respon- industry specific entities, all depends on the specific situation dents stated that the dispute resolution mechanism can make within a country and is somewhat secondary, as long as the binding decisions on a case. There is a slight variation across key principles are incorporated. 28 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: 8 FINANCIAL EDUCATION Principle 5 of the G20 High Level Principles on Financial number of international initiatives and extensive reforms at Consumer Protection states that financial education and a national level. awareness should be promoted by all relevant stakeholders, and clear information on consumer protection, rights and In addition to the High-Level Principles on Financial responsibilities should be easily accessible by consumers. Consumer Protection, the High-level Principles on National Appropriate mechanisms should be developed to help existing Strategies for Financial Education endorsed by G20 state and future consumers develop the knowledge, skills and con- that “[a]ll potentially relevant public stakeholders should be fidence to appropriately understand risks, including financial involved, to the extent possible, including ministries (and risks and opportunities, make informed choices, know where in particular the Ministries of Finance and Education), the to go for assistance and take effective action to improve their Central Bank, the financial regulator(s) and supervisor(s), as own financial well-being. well as other public national, regional and local authorities.” World Bank Good Practices on Financial Consumer The survey asked a number of questions on the role financial Protection49 recommend that a broad-based program of fi- regulators play in promoting financial education in their nancial education and information is developed to increase countries (Figure 18). The majority of regulators, in 63 the financial literacy of the population. A range of organiza- economies (55 percent), responded positively to the question, tions, including those of the government, state agencies and “Does your agency have the responsibility to implement and/ non-government organizations, should be involved in devel- or oversee any aspect of financial education/literacy?” In 18 oping and implementing the financial literacy program. The more economies (16 percent), financial supervisory agencies financial literacy of consumers and the impact of consumer do not have an explicit mandate for financial education and empowerment measures are measured through broad-based literacy but introduced some elements of financial education household surveys that are repeated from time to time to see within their broader mandate for financial stability or finan- if the current policies are having the desired impact on the cial development. financial marketplace. The activities undertaken by regulators fall in two broad cat- Effective consumer protection frameworks and institutional egories: improving public awareness on financial sector topics structures are necessary but not sufficient conditions for and working directly with financial service providers and us- effective protection of the interests of the consumer of the ers to deliver financial education. The activities to improve financial services. Only informed and educated users of fi- awareness include publication and posting on agency websites nancial services can be fully empowered by the opportunities various educational materials on the role of the financial sys- modern financial system provides. Increasing awareness of the tem and its various institutions and guidance to consumers importance of financial literacy and capability and the crucial on various financial consumer products. The vast majority of role public policy must play in this area have resulted in a respondents indicated that this was part of their duties and was managed by communications department or as part of the activities of a financial education unit within a financial regulator. 49 World Bank, 2012. “Good Practices for Financial Consumer Protection,” http://responsiblefinance.worldbank.org/~/media/ GIAWB/FL/Documents/Misc/Good-practices-for-financial-consumer- protection.pdf 29 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES FIGURE 18. MOST FINANCIAL AUTHORITIES PROVIDE FIGURE 19. PROVIDING TRAINING, AWARENESS AND FINANCIAL LITERACY MATERIAL, OFTEN WITHIN A DEVELOPING TRAINING MATERIALS ARE THE MOST BROADER MANDATE FOR FINANCIAL STABILITY AND COMMON DEVELOPMENT Develop training materials 63 29% Provide training directly 60 55% Develop a stategy 49 for financial literacy 16% Conduct survey 37 of financial literacy Responsible for financial literacy - 63 countries Issue guidelines on FL to FIs 34 No explicit authority, but involved in financial literacy - 18 countries 0 10 20 30 40 50 60 70 Not involved in financial literacy - 33 countries Number of Countries Note: Based on responses from 114 economies in 2013. Note: Based on responses from 114 economies in 2013. World Bank Good Practices on Financial Consumer education activities, most were focused on designing training Protection50 encourage regulators and consumer associations materials (63 economies or 78 percent) and providing train- to provide, via the internet and printed publications, inde- ing directly (60 economies or 74 percent). Supervisors in 49 pendent information on the key features, benefits and risks economies (60 percent) indicated that they developed and and where practicable the costs of the main types of banking monitored implementation of strategies for financial literacy, products and services. Consumers and potential consumers education or capability. Slightly less than half (46 percent are more likely to have the confidence to purchase financial or 37 economies) indicated that they conduct a survey of products and services which are suitable for them if they have financial capability/literacy and publish regular reports. Only access to information which is reliable and objective. Financial 34 regulators (42 percent) stated that they issued guidelines regulators are well placed to provide this. The relevant author- to the providers of financial services on financial education/ ity or institution should encourage efforts to enable consum- literacy. ers to better understand the products and services being of- fered to consumers by banking institutions, such as providing Delivery of financial education requires the coordination of a comparative price information and undertaking educational number of government agencies including not only financial campaigns. The relevant authority or institution should adopt regulators but education ministries and often social protection policies that encourage non-governmental organizations to and welfare ministries to address the needs of disadvantaged provide consumer awareness programs to the public regarding groups. A national strategy for financial education can be an banking products and services. effective platform to coordinate the efforts of various govern- ment agencies, ensure efficient allocation of budget resources The survey asked a question concerning more targeted finan- and put in place a systematic approach for delivering financial cial education efforts of supervisors (Figure 19). Among the education in a country through variety of channels. supervisors indicating that they were involved in financial The High-level Principles on National Strategies for Financial Education define a national strategy for financial education 50 World Bank, 2012. “Good Practices for Financial Consumer as “a nationally coordinated approach to financial education Protection,” http://responsiblefinance.worldbank.org/~/media/ that consists of an adapted framework or program that (1) GIAWB/FL/Documents/Misc/Good-practices-for-financial-consumer- recognizes the importance of financial education, including protection.pdf 30 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: possibly through legislation, and defines its meaning and effects and generalizing the results from these interventions scope at the national level in relation to identified national for broader policy formulation is a challenge. needs and gaps; (2) involves the cooperation of different stakeholders and the identification of a national leader or co- The 2014 World Bank Global Financial Development Report ordinating body/council; (3) establishes a roadmap to achieve provides an overview of the results of impact analysis of fi- specific and predetermined objectives within a set period of nancial education programs.53 Drawing on over 100 studies, time; and (4) provides guidance to be applied by individual the report finds that financial capability is closely aligned with programs to efficiently and appropriately contribute to the the level of general education and programs targeting spe- NS.” Such strategy can be a part of a broader financial inclu- cific groups for example those with lower levels of education sion strategy. have measurable effect. There is evidence that school-based programs can improve knowledge of financial concepts and A review conducted by OECD in 2012 identified 15 coun- influence behavior. Financial education delivered at teach- tries that have designed and implemented a national strategy able moments such as when a consumer is in the process of and 21 countries are considering or designing a national strat- making a financial decision, such as obtaining a mortgage or egy.51 In this year, the World Bank Global Survey summarized restructuring debts, appear more effective. Combining finan- here and covering financial regulators in 114 countries, 49 cial literacy training with other interventions such as financial responded that their responsibilities included “developing counseling and reminders are found more effective. The ob- and monitoring implementation of a strategy for financial jective of improved financial education is changed behavior literacy/education/capability.”52 and thus it is not just the knowledge of financial concepts that matters but a change in habits and behavior. In this respect, There is no one-size-fits-all solution and the approaches dif- the use of social and mass media, for example, by portraying fer greatly among countries. Other coordination mechanisms characters dealing with various financial challenges in movies such as memorandums of understanding signed between and popular television shows, have a potential. Recent work relevant agencies or working committees to coordinate the undertaken by the World Bank and funded by the Russian work of various agencies are present in a number of countries. Federation on measuring financial capability and the effec- The work on financial education is led by financial regulators tiveness of financial education included large-scale evalua- in some countries, including Bank Negara in Malaysia and tions of various financial education initiatives and resulted in ASIC in Australia, by ministries of finance in others, such as the development of a toolkit for the evaluation of financial South Africa and Netherlands, or ministries of education, as capability programs.54 in Latvia and Lithuania. Financial regulators can play an important role in facilitating The research on the effectiveness of various financial educa- financial education. From a supervisory perspective, there is a tion approaches is ongoing. Financial education programs need for identifying best practices for the approaches that fi- vary greatly in terms of content, audience and delivery chan- nancial regulatory agencies can take to enhance overall finan- nels. Classroom training for students in school, explanatory cial education efforts by leveraging their role as supervisors of sessions for first-time home buyers on getting a mortgage financial institutions. Some of the debated issues now include provided by a lender, computer games teaching to save or whether providers of financial education should be regulated, invest and television shows highlighting the risks of borrow- what form can guidance on providing financial advice take ing beyond one’s means are just some examples of financial and how to ensure that guidance provided by financial insti- education programs countries put in place. Measuring the tutions is adequate. 51 Grifoni, Andrea and Flore-Anne Messy, 2012. “Current Status of National Strategies for Financial Education: A Comparative Analysis and Relevant Practices,” OECD Working Papers on Finance, Insurance and Private Pensions No. 16. The paper focused on a review of relevant information for 47 countries. 52 The survey did not ask respondents to provide information on the details of the mentioned strategies, and it is not possible to determine whether these refer to specific financial education strategies, financial 53 World Bank, 2013. “Global Financial Development Report 2014: inclusion or broader financial sector development strategies which may Financial Inclusion,” World Bank, Washington DC. have elements of financial education. 54 Please see http://www.finlitedu.org/evaluation/wb/ 31 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES ANNEX 1: LEGAL & REGULATORY FRAMEWORK General CP law without CP law with explicit CP regulations within the explicit reference to reference to financial framework of financial Economy financial services services Separate FCP law sector legislation Other FCP law or regulation Albania ü ü Algeria ü ü Argentina ü ü ü ü Armenia ü ü ü Australia ü ü ü ü Austria ü ü ü ü Azerbaijan ü ü Bangladesh ü ü Belarus ü ü ü Belgium ü ü ü Benin ü Bolivia ü ü Bosnia and Herzegovina ü ü ü Botswana ü ü Brazil ü ü Bulgaria ü ü ü ü Burkina Faso ü Burundi ü Cabo Verde ü ü ü Canada ü ü ü Chile ü ü ü ü China ü ü Colombia ü ü ü ü Congo, Dem. Rep. ü ü Costa Rica ü Côte d’Ivoire ü Croatia ü ü ü ü Czech Republic ü ü ü ü Denmark ü ü ü ü Dominican Republic ü ü ü Ecuador ü ü ü El Salvador ü ü Estonia ü ü Finland ü ü France ü ü Gambia, The ü ü Georgia ü Germany ü ü ü Greece ü ü ü Guatemala ü Guinea-Bissau ü Honduras ü ü continued on next page 32 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: General CP law without CP law with explicit CP regulations within the explicit reference to reference to financial framework of financial Economy financial services services Separate FCP law sector legislation Other FCP law or regulation Hong Kong SAR, China ü ü Hungary ü ü ü ü Iceland ü ü ü Indonesia ü ü ü Iran, Islamic Rep. ü ü Ireland ü ü ü ü Israel ü ü ü ü ü Italy ü ü ü ü Jamaica ü ü ü Japan ü ü ü Kazakhstan ü ü ü ü Kenya ü ü ü ü Korea, Rep. ü ü Kyrgyz Republic ü ü Latvia ü ü Lebanon ü ü ü Lithuania ü ü ü Luxembourg ü ü Macedonia, FYR ü ü ü Madagascar ü ü Malawi ü ü ü Malaysia ü ü Mali ü Mauritius ü ü ü ü Mexico ü ü ü ü ü Moldova ü ü ü Mongolia ü ü Morocco ü ü ü Namibia ü ü Nepal ü ü Netherlands ü ü ü ü Nicaragua ü ü Niger ü Nigeria ü ü Norway ü ü ü Oman ü ü Pakistan ü ü Panama ü ü ü Paraguay ü Peru ü ü ü ü ü Philippines ü ü ü Poland ü ü ü ü continued on next page 33 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES ANNEX 1: LEGAL & REGULATORY FRAMEWORK (continued) General CP law without CP law with explicit CP regulations within the explicit reference to reference to financial framework of financial Economy financial services services Separate FCP law sector legislation Other FCP law or regulation Portugal ü ü ü Romania ü ü ü Russian Federation ü Saudi Arabia ü ü ü ü ü Senegal ü Serbia ü ü ü ü Slovak Republic ü ü ü Slovenia ü ü ü South Africa ü ü ü Spain ü ü ü Sri Lanka ü ü Sudan ü Swaziland ü Switzerland ü ü ü ü Taiwan, China ü ü ü Tajikistan ü ü Tanzania ü ü ü Thailand ü ü Togo ü Turkey ü ü ü Uganda ü ü Ukraine ü ü United Arab Emirates ü ü United Kingdom ü ü ü ü United States ü ü ü ü ü Uruguay ü ü ü Venezuela, RB ü ü Zambia ü ü 34 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: This page intentionally left blank. 35 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES 36 Chile Brazil China Benin Bolivia Algeria Austria Croatia Finland Canada Estonia Belarus Albania Burundi Ecuador Belgium Bulgaria Armenia Australia Denmark Economy Colombia Argentina Botswana Azerbaijan Costa Rica El Salvador Cabo Verde Bangladesh Côte d’Ivoire Burkina Faso Czech Republic Congo, Dem. Rep. Dominican Republic Bosnia and Herzegovina CP supervision falls under a ü ü ü ü ü ü ü ü single supervisory agency CP supervision falls under ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü multiple agencies CP supervision responsibilities fall under a single agency dedicated to broad ü ü ü financial market conduct supervision CP supervision responsibilities fall under a single specialized FCP agency that does not have broader financial sector market conduct supervisory responsibilities CP responsibilities fall under an agency or agencies responsible for broader INSTITUTIONAL STRUCTURE FOR CP SUPERVISION ü ü ü ü ü ü ü ü ü ü consumer protection supervision Agency is responsible for implementing ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü any aspect of FCP laws Agency has a designated unit to work on ü ü ü ü ü ü ü FCP as part of prudential supervision Agency has a designated unit to work on financial consumer protection ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü separate from prudential supervision SUPERVISORY RESOURCES Agency is responsible for financial consumer protection, ü ü ü ü ü ü ü ü ü ü but no separate unit exists Financial institutions are required to report statistics on the number ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ANNEX 2: INSTITUTIONAL ARRANGEMENTS of complaints to the agency Financial institutions are required to report rates and fees for ü ü ü ü ü ü ü ü ü ü ü ü ü financial services which are posted on the agency website To ensure compliance, agency operates a ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü hotline/call center to receive complaints Responsible agency ensures compliance COMPLIANCE MONITORING TOOLS by monitoring the market including ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü continued on next page advertisements and websites GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: Mystery/incognito shopping ü ü ü ü Interviews, focus groups and research with consumers are carried ü ü ü ü ü out to ensure compliance On-site inspection and investigation ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü of FIs to ensure compliance Off-site inspection and investigation ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü of FIs to ensure compliance (Compliance Monitoring Tools, continued) Register/record complaints ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Responds to complaints ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Analyze/publish complaints statistics ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Assist directly in resolution of complaints ü ü ü ü ü ü ü ü ü ü ü ü Assist indirectly in resolution ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü of complaints OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES AGENCY ACTION IN RELATION TO COMPLAINTS Make binding decisions for any ü ü ü ü ü ü ü of the parties involved Issue warnings to FIs ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Require providers to refund ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü excess charges Requiring providers to withdraw ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü misleading advertisements Impose fines and penalties ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ENFORCEMENT ACTIONS Issue public notices of violations ü ü ü ü ü ü ü ü ü ü ü ü ü ü Withdraw offending provider’s ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü license to operate continued on next page 37 38 Mali Italy Israel Japan Kenya Latvia France Ireland Greece Mexico Malawi Iceland Guyana Georgia Jamaica Hungary Lebanon Malaysia Germany Economy Lithuania Mauritius Honduras Indonesia Guatemala Korea, Rep. Kazakhstan Madagascar Luxembourg Gambia, The Guinea-Bissau Kyrgyz Republic Macedonia, FYR Iran, Islamic Rep. Hong Kong SAR, China CP supervision falls under a ü ü ü ü ü ü ü ü ü ü ü ü ü ü single supervisory agency CP supervision falls under ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü multiple agencies CP supervision responsibilities fall under a single agency dedicated to broad ü financial market conduct supervision CP supervision responsibilities fall under a single specialized FCP agency that does not have broader financial sector market conduct supervisory responsibilities CP responsibilities fall under an agency or agencies responsible for broader INSTITUTIONAL STRUCTURE FOR CP SUPERVISION ü ü ü ü ü ü ü ü consumer protection supervision Agency is responsible for implementing ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü any aspect of FCP laws Agency has a designated unit to work on ü ü ü ü ü ü ü ü ü ü ü ü FCP as part of prudential supervision Agency has a designated unit to work on financial consumer protection ü ü ü ü ü ü ü ü ü ü ü ü ü ü separate from prudential supervision SUPERVISORY RESOURCES Agency is responsible for financial consumer protection, ü ü ü but no separate unit exists Financial institutions are required to report statistics on the number ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü of complaints to the agency Financial institutions are required to report rates and fees for ü ü ü ü ü ü ü ü ü ü ü financial services which are posted on the agency website ANNEX 2: INSTITUTIONAL ARRANGEMENTS (continued) To ensure compliance, agency operates a ü ü ü ü ü ü ü ü ü ü ü ü ü ü hotline/call center to receive complaints Responsible agency ensures compliance COMPLIANCE MONITORING TOOLS by monitoring the market including ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü continued on next page advertisements and websites GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: Mystery/incognito shopping ü ü ü ü ü ü ü ü ü ü ü ü ü ü Interviews, focus groups and research with consumers are carried ü ü ü ü ü ü ü ü ü ü ü ü ü out to ensure compliance On-site inspection and investigation ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü of FIs to ensure compliance Off-site inspection and investigation ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü of FIs to ensure compliance (Compliance Monitoring Tools, continued) Register/record complaints ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Responds to complaints ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Analyze/publish complaints statistics ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Assist directly in resolution of complaints ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Assist indirectly in resolution ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü of complaints OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES AGENCY ACTION IN RELATION TO COMPLAINTS Make binding decisions for any ü ü ü ü ü ü of the parties involved Issue warnings to FIs ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Require providers to refund ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü excess charges Requiring providers to withdraw ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü misleading advertisements Impose fines and penalties ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ENFORCEMENT ACTIONS Issue public notices of violations ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Withdraw offending provider’s ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü license to operate continued on next page 39 40 Peru Niger Spain Nepal Oman Sudan Serbia Poland Nigeria Norway Senegal Panama Namibia Slovenia Pakistan Moldova Portugal Morocco Romania Tanzania Economy Sri Lanka Mongolia Tajikistan Paraguay Swaziland Nicaragua Philippines Switzerland Netherlands South Africa Saudi Arabia Taiwan, China Slovak Republic Russian Federation CP supervision falls under a ü ü ü ü ü single supervisory agency CP supervision falls under ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü multiple agencies CP supervision responsibilities fall under a single agency dedicated to broad ü financial market conduct supervision CP supervision responsibilities fall under a single specialized FCP agency that does not have broader financial sector market conduct supervisory responsibilities CP responsibilities fall under an agency or agencies responsible for broader INSTITUTIONAL STRUCTURE FOR CP SUPERVISION ü ü ü ü ü ü ü ü ü ü ü ü consumer protection supervision Agency is responsible for implementing ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü any aspect of FCP laws Agency has a designated unit to work on ü ü ü ü ü ü ü ü FCP as part of prudential supervision Agency has a designated unit to work on financial consumer protection ü ü ü ü ü ü ü ü ü ü ü ü separate from prudential supervision SUPERVISORY RESOURCES Agency is responsible for financial consumer protection, ü ü ü ü ü ü ü ü ü ü ü but no separate unit exists Financial institutions are required to report statistics on the number ü ü ü ü ü ü ü ü ü ü ü ü of complaints to the agency Financial institutions are required to report rates and fees for ü ü ü ü ü ü ü ü ü financial services which are posted on the agency website ANNEX 2: INSTITUTIONAL ARRANGEMENTS (continued) To ensure compliance, agency operates a ü ü ü ü ü ü ü ü ü ü ü ü ü hotline/call center to receive complaints Responsible agency ensures compliance COMPLIANCE MONITORING TOOLS by monitoring the market including ü ü ü ü ü ü ü ü ü ü ü continued on next page advertisements and websites GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: Mystery/incognito shopping ü ü ü ü ü ü ü ü Interviews, focus groups and research with consumers are carried ü ü ü ü ü ü ü ü out to ensure compliance On-site inspection and investigation ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü of FIs to ensure compliance Off-site inspection and investigation ü ü ü ü ü ü ü ü ü ü ü ü ü of FIs to ensure compliance (Compliance Monitoring Tools, continued) Register/record complaints ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Responds to complaints ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Analyze/publish complaints statistics ü ü ü ü ü ü ü ü ü ü ü ü Assist directly in resolution of complaints ü ü ü ü ü ü ü ü ü ü ü ü ü ü Assist indirectly in resolution ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü of complaints OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES AGENCY ACTION IN RELATION TO COMPLAINTS Make binding decisions for any ü ü ü ü ü ü ü ü ü ü ü ü of the parties involved Issue warnings to FIs ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü Require providers to refund ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü excess charges Requiring providers to withdraw ü ü ü ü ü ü ü ü ü ü ü ü ü ü misleading advertisements Impose fines and penalties ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ENFORCEMENT ACTIONS Issue public notices of violations ü ü ü ü ü ü ü ü ü Withdraw offending provider’s ü ü ü ü ü ü ü ü ü license to operate continued on next page 41 42 Togo Turkey Zambia Uganda Ukraine Thailand Uruguay Economy United States Venezuela, RB United Kingdom United Arab Emirates CP supervision falls under a ü ü single supervisory agency CP supervision falls under ü ü ü ü ü ü ü multiple agencies CP supervision responsibilities fall under a single agency dedicated to broad ü ü financial market conduct supervision CP supervision responsibilities fall under a single specialized FCP agency that does not have broader financial sector market conduct supervisory responsibilities CP responsibilities fall under an agency or agencies responsible for broader INSTITUTIONAL STRUCTURE FOR CP SUPERVISION ü ü ü ü consumer protection supervision Agency is responsible for implementing ü ü ü ü ü ü ü ü ü ü ü any aspect of FCP laws Agency has a designated unit to work on ü ü ü ü ü ü FCP as part of prudential supervision Agency has a designated unit to work on financial consumer protection ü ü separate from prudential supervision SUPERVISORY RESOURCES Agency is responsible for financial consumer protection, ü ü ü ü but no separate unit exists Financial institutions are required to report statistics on the number ü ü ü ü ü of complaints to the agency Financial institutions are required to report rates and fees for ü ü ü ü ü financial services which are posted on the agency website ANNEX 2: INSTITUTIONAL ARRANGEMENTS (continued) To ensure compliance, agency operates a ü ü ü ü ü ü hotline/call center to receive complaints Responsible agency ensures compliance COMPLIANCE MONITORING TOOLS by monitoring the market including ü ü ü ü ü ü ü advertisements and websites GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: Mystery/incognito shopping ü Interviews, focus groups and research with consumers are carried ü ü out to ensure compliance On-site inspection and investigation ü ü ü ü ü ü ü ü ü ü of FIs to ensure compliance Off-site inspection and investigation ü ü ü ü ü ü ü of FIs to ensure compliance (Compliance Monitoring Tools, continued) Register/record complaints ü ü ü ü ü ü ü ü Responds to complaints ü ü ü ü ü ü ü ü ü Analyze/publish complaints statistics ü ü ü ü ü ü Assist directly in resolution of complaints ü ü ü ü ü Assist indirectly in resolution ü ü ü ü ü ü ü ü of complaints OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES AGENCY ACTION IN RELATION TO COMPLAINTS Make binding decisions for any ü ü of the parties involved Issue warnings to FIs ü ü ü ü ü ü ü ü ü Require providers to refund ü ü ü ü ü ü ü excess charges Requiring providers to withdraw ü ü ü ü ü ü ü ü misleading advertisements Impose fines and penalties ü ü ü ü ü ü ü ENFORCEMENT ACTIONS Issue public notices of violations ü ü ü Withdraw offending provider’s ü license to operate 43 ANNEX 3: DISCLOSURE PRACTICES DISCLOSURE REQUIREMENTS AT DISCLOSURE REQUIREMENTS AT DISCLOSURE REQUIREMENTS AT ACCOUNT OPENING: GENERAL ACCOUNT OPENING: DEPOSIT PRODUCTS ACCOUNT OPENING: CREDIT PRODUCTS Annual percentage rate using standard formula Compounding method yield and interest rate Computation method Required insurance Annual percentage Fees and penalties Minimum balance disclosure format Early withdrawal Recourse rights Local language Plain language and processes requirements Standardized penalties Fees Economy Albania ü ü ü ü ü ü ü ü Algeria ü ü ü ü ü ü ü ü ü ü ü Argentina ü ü ü ü ü ü ü ü ü ü ü ü ü Armenia ü ü ü ü ü ü ü ü ü ü ü ü ü Australia ü ü ü ü ü ü Austria ü ü ü ü ü ü ü ü Azerbaijan ü ü ü ü ü ü ü ü ü Bangladesh ü ü ü ü ü ü ü ü ü Belarus ü ü ü ü Belgium ü ü ü ü ü ü ü ü ü Benin ü ü ü Bolivia ü ü ü ü ü ü ü ü ü Bosnia and Herzegovina ü ü ü ü ü ü ü ü ü ü ü Botswana ü ü ü ü ü ü ü ü ü ü Brazil ü ü ü ü ü ü Bulgaria ü ü ü ü ü ü ü ü ü ü Burkina Faso ü ü ü Burundi ü ü ü ü ü Cabo Verde ü ü ü ü ü Canada ü ü ü ü ü ü ü ü ü ü Chile ü ü ü ü ü ü ü ü ü China ü ü ü ü ü ü ü ü ü ü ü ü ü Colombia ü ü ü ü ü ü ü ü ü Congo, Dem. Rep. ü ü ü ü ü ü ü ü ü Costa Rica ü ü ü ü Côte d’Ivoire ü ü ü Croatia ü ü ü ü ü ü ü ü ü ü ü ü Czech Republic ü ü ü ü ü ü ü ü ü ü ü ü Denmark ü ü ü ü ü ü ü ü ü ü ü ü Dominican Republic ü ü ü ü ü ü ü ü ü ü Ecuador ü ü ü ü ü ü ü ü El Salvador ü ü ü ü ü ü ü ü ü ü ü Estonia ü ü ü ü ü ü ü ü Finland ü ü ü ü ü ü ü ü ü ü ü ü France ü ü ü ü ü ü ü ü ü ü 44 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: REQUIREMENT FOR A MONTHLY ACCOUNT PERIODIC STATEMENT FREE DISCLOSURE: PERIODIC DISCLOSURE: PERIODIC DISCLOSURE: OTHER OF CHARGE GENERAL DEPOSIT PRODUCTS CREDIT PRODUCTS DISCLOSURE Non-bank regulated FIs concerning the account Detailed transactional Minimum amount due for a specified period writing of changes in Outstanding balance Interest charged for terms/conditions of Notify customers in information for the Annual percentage Annual percentage for credit products Fees charged for a a specified period standard formula their agreements Account balance reporting period specified period All transactions interest earned The amount of yield using a Date due Banks rates Fees ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü continued on next page 45 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES ANNEX 3: DISCLOSURE PRACTICES (continued) DISCLOSURE REQUIREMENTS AT DISCLOSURE REQUIREMENTS AT DISCLOSURE REQUIREMENTS AT ACCOUNT OPENING: GENERAL ACCOUNT OPENING: DEPOSIT PRODUCTS ACCOUNT OPENING: CREDIT PRODUCTS Annual percentage rate using standard formula Compounding method yield and interest rate Computation method Required insurance Annual percentage Fees and penalties Minimum balance disclosure format Early withdrawal Recourse rights Local language Plain language and processes requirements Standardized penalties Fees Economy Georgia ü ü ü ü ü ü ü ü ü ü ü ü ü Germany ü ü ü ü ü ü ü ü ü ü ü ü Greece ü ü ü ü ü ü ü ü ü ü Guatemala ü Guinea-Bissau ü ü ü Honduras ü ü ü ü ü ü ü ü ü Hong Kong SAR, China ü ü ü ü ü ü ü ü ü ü ü Hungary ü ü ü ü ü ü ü ü ü ü Iceland ü ü ü Indonesia ü ü ü ü ü ü ü Iran, Islamic Rep. ü ü ü ü ü ü ü ü ü Ireland ü ü ü ü ü ü ü ü ü ü Israel ü ü ü ü ü ü ü ü ü ü ü Italy ü ü ü ü ü ü ü ü ü ü ü ü ü Japan ü ü ü ü ü ü ü ü ü ü ü ü Kazakhstan ü ü ü ü ü ü ü ü ü ü Kenya ü ü ü ü ü ü ü ü Korea, Rep. ü ü ü ü ü ü ü Kyrgyz Republic ü ü ü ü Latvia Lebanon ü ü ü ü ü ü ü Lithuania ü ü ü ü ü ü ü ü Luxembourg ü ü ü ü ü ü Macedonia, FYR ü ü ü ü ü ü Malawi ü ü ü ü ü ü ü Malaysia ü ü ü ü ü ü ü ü ü ü ü ü Mali ü ü ü Mauritius Mexico ü ü ü ü ü ü ü ü ü ü ü ü ü Moldova ü ü ü ü ü ü ü ü ü ü ü Mongolia ü ü ü ü ü ü ü ü ü Morocco ü ü ü ü ü ü ü ü ü Namibia ü ü ü ü Nepal ü ü ü ü ü ü ü ü ü Netherlands ü ü ü ü ü ü ü ü ü ü ü ü ü Nicaragua ü ü ü ü ü 46 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: REQUIREMENT FOR A MONTHLY ACCOUNT PERIODIC STATEMENT FREE DISCLOSURE: PERIODIC DISCLOSURE: PERIODIC DISCLOSURE: OTHER OF CHARGE GENERAL DEPOSIT PRODUCTS CREDIT PRODUCTS DISCLOSURE Non-bank regulated FIs concerning the account Detailed transactional Minimum amount due for a specified period writing of changes in Outstanding balance Interest charged for terms/conditions of Notify customers in information for the Annual percentage Annual percentage for credit products Fees charged for a a specified period standard formula their agreements Account balance reporting period specified period All transactions interest earned The amount of yield using a Date due Banks rates Fees ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü continued on next page 47 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES ANNEX 3: DISCLOSURE PRACTICES (continued) DISCLOSURE REQUIREMENTS AT DISCLOSURE REQUIREMENTS AT DISCLOSURE REQUIREMENTS AT ACCOUNT OPENING: GENERAL ACCOUNT OPENING: DEPOSIT PRODUCTS ACCOUNT OPENING: CREDIT PRODUCTS Annual percentage rate using standard formula Compounding method yield and interest rate Computation method Required insurance Annual percentage Fees and penalties Minimum balance disclosure format Early withdrawal Recourse rights Local language Plain language and processes requirements Standardized penalties Fees Economy Niger ü ü ü Nigeria ü ü ü ü ü ü ü ü Norway ü ü ü ü ü ü Oman ü ü ü ü ü ü ü ü ü ü Pakistan Panama ü ü ü ü ü ü Paraguay ü ü ü ü ü ü ü ü ü Peru ü ü ü ü ü ü ü ü ü ü ü ü ü Philippines ü ü ü ü ü ü ü ü ü ü Portugal ü ü ü ü ü ü ü ü ü ü ü ü Romania Russian Federation ü ü ü ü ü ü ü ü ü Saudi Arabia ü ü ü ü ü ü ü Senegal ü ü ü Serbia ü ü ü ü ü ü ü ü ü ü ü ü Slovak Republic ü ü ü ü ü ü ü ü ü ü Slovenia ü ü ü ü ü ü ü ü South Africa ü ü ü ü ü ü ü ü ü ü Spain ü ü ü ü ü ü ü ü Sri Lanka ü ü ü ü ü ü ü ü ü ü ü ü ü Sudan ü ü Swaziland ü ü ü ü ü ü ü ü ü ü ü ü Switzerland ü ü ü ü ü Taiwan, China ü ü ü ü ü ü ü ü ü ü ü Tanzania Thailand ü ü ü ü ü ü ü ü ü ü ü ü ü Togo ü ü ü Turkey ü ü ü ü ü ü ü ü ü ü ü ü Uganda ü ü ü ü ü ü ü ü ü ü Ukraine ü ü ü ü ü United Arab Emirates ü ü ü ü ü United Kingdom ü ü ü ü ü ü ü ü ü United States ü ü ü ü ü ü ü ü ü ü ü ü ü Uruguay ü ü ü ü ü ü ü ü ü ü ü ü ü Venezuela, RB ü ü ü ü ü ü ü ü ü ü ü ü Zambia ü ü ü ü ü ü ü ü ü ü ü 48 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: REQUIREMENT FOR A MONTHLY ACCOUNT PERIODIC STATEMENT FREE DISCLOSURE: PERIODIC DISCLOSURE: PERIODIC DISCLOSURE: OTHER OF CHARGE GENERAL DEPOSIT PRODUCTS CREDIT PRODUCTS DISCLOSURE Non-bank regulated FIs concerning the account Detailed transactional Minimum amount due for a specified period writing of changes in Outstanding balance Interest charged for terms/conditions of Notify customers in information for the Annual percentage Annual percentage for credit products Fees charged for a a specified period standard formula their agreements Account balance reporting period specified period All transactions interest earned The amount of yield using a Date due Banks rates Fees ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü ü 49 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES ANNEX 4: BUSINESS PRACTICES Laws require lending Law restricts Laws have institution to Law restricts unauthorized Law defines explicit limits assess borrower unfair or Law restricts use of client elements of that restrict ability to repay Law restricts high-pressure Law restricts Law restricts abusive data or breach responsible excessive the loan, but deceptive selling bundling prepayment collection of client lending borrowing by no specific Economy advertising practices and tying fees practices confidentiality practices individuals limits are set Albania Algeria Argentina Armenia Australia Austria Azerbaijan Bangladesh Belarus Belgium Benin Bolivia Bosnia and Herzegovina Botswana Brazil Bulgaria Burkina Faso Burundi Cabo Verde Canada Chile China Colombia Congo, Dem. Rep. Costa Rica Côte d’Ivoire Croatia Czech Republic Denmark Dominican Republic Ecuador El Salvador Estonia Finland France Gambia, The Georgia Germany Greece continued on next page 50 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: Laws require lending Law restricts Laws have institution to Law restricts unauthorized Law defines explicit limits assess borrower unfair or Law restricts use of client elements of that restrict ability to repay Law restricts high-pressure Law restricts Law restricts abusive data or breach responsible excessive the loan, but deceptive selling bundling prepayment collection of client lending borrowing by no specific Economy advertising practices and tying fees practices confidentiality practices individuals limits are set Guatemala Guinea-Bissau Guyana Honduras Hong Kong SAR, China Hungary Iceland Indonesia Iran, Islamic Rep. Ireland Israel Italy Jamaica Japan Kazakhstan Kenya Korea, Rep. Kyrgyz Republic Latvia Lebanon Lithuania Luxembourg Macedonia, FYR Madagascar Malawi Malaysia Mali Mauritius Mexico Moldova Mongolia Morocco Namibia Nepal Netherlands Nicaragua Niger Nigeria Norway continued on next page 51 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES ANNEX 4: BUSINESS PRACTICES (continued) Laws require lending Law restricts Laws have institution to Law restricts unauthorized Law defines explicit limits assess borrower unfair or Law restricts use of client elements of that restrict ability to repay Law restricts high-pressure Law restricts Law restricts abusive data or breach responsible excessive the loan, but deceptive selling bundling prepayment collection of client lending borrowing by no specific Economy advertising practices and tying fees practices confidentiality practices individuals limits are set Oman Pakistan Panama Paraguay Peru Philippines Poland Portugal Romania Russian Federation Saudi Arabia Senegal Serbia Slovak Republic Slovenia South Africa Spain Sri Lanka Sudan Swaziland Switzerland Taiwan, China Tajikistan Tanzania Thailand Togo Turkey Uganda Ukraine United Arab Emirates United Kingdom United States Uruguay Venezuela, RB Zambia 52 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: This page intentionally left blank. 53 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES ANNEX 5: DISPUTE RESOLUTION MECHANISMS REQUIREMENTS FOR FIs IN RELATION STRUCTURE OF OMBUDSMAN OR SIMILAR OUT OF TO DISPUTE RESOLUTION COURT DISPUTE RESOLUTION MECHANISM Implement procedures timeliness of response resolution mechanism Financial ombudsman Financial ombudsman financial ombudsman General ombudsman resolved in court, no resolving customer alternative dispute within supervisory is an independent Mediation service and processes for Disputes must be Set standards on Set standards on filing complaints accessibility for Industry based statutory body for complaints complaints resolution agency Economy Albania Algeria Argentina Armenia Australia Austria Azerbaijan Bangladesh Belarus Belgium Benin Bolivia Bosnia and Herzegovina Botswana Brazil Bulgaria Burkina Faso Burundi Cabo Verde Canada Chile China Colombia Congo, Dem. Rep. Costa Rica Côte d’Ivoire Croatia Czech Republic Denmark Dominican Republic Ecuador El Salvador Estonia Finland France Gambia, The Georgia Germany 54 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: Register/record complaints Respond to complaints Analyze complaints/ publish statistics Assist directly in dispute resolution OMBUDSMAN OR SIMILAR INSTITUTION ACTIVITIES Assist indirectly in dispute resolution OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES Make binding decisions Budget allocation from the central government Annual budget allocation from government authority Financial industry association OR SIMILAR INSTITUTION FUNDING MECHANISM FOR OMBUDSMAN Funded by members continued on next page 55 ANNEX 5: DISPUTE RESOLUTION MECHANISMS (continued) REQUIREMENTS FOR FIs IN RELATION STRUCTURE OF OMBUDSMAN OR SIMILAR OUT OF TO DISPUTE RESOLUTION COURT DISPUTE RESOLUTION MECHANISM Implement procedures timeliness of response resolution mechanism Financial ombudsman Financial ombudsman financial ombudsman General ombudsman resolved in court, no resolving customer alternative dispute within supervisory is an independent Mediation service and processes for Disputes must be Set standards on Set standards on filing complaints accessibility for Industry based statutory body for complaints complaints resolution agency Economy Greece Guatemala Guinea-Bissau Guyana Honduras Hong Kong SAR, China Hungary Iceland Indonesia Iran, Islamic Rep. Ireland Israel Italy Jamaica Japan Kazakhstan Kenya Korea, Rep. Kyrgyz Republic Latvia Lebanon Lithuania Luxembourg Macedonia, FYR Madagascar Malawi Malaysia Mali Mauritius Mexico Moldova Mongolia Morocco Namibia Nepal Netherlands Nicaragua 56 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: Register/record complaints Respond to complaints Analyze complaints/ publish statistics Assist directly in dispute resolution OMBUDSMAN OR SIMILAR INSTITUTION ACTIVITIES Assist indirectly in dispute resolution OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES Make binding decisions Budget allocation from the central government Annual budget allocation from government authority Financial industry association OR SIMILAR INSTITUTION FUNDING MECHANISM FOR OMBUDSMAN Funded by members continued on next page 57 ANNEX 5: DISPUTE RESOLUTION MECHANISMS (continued) REQUIREMENTS FOR FIs IN RELATION STRUCTURE OF OMBUDSMAN OR SIMILAR OUT OF TO DISPUTE RESOLUTION COURT DISPUTE RESOLUTION MECHANISM Implement procedures timeliness of response resolution mechanism Financial ombudsman Financial ombudsman financial ombudsman General ombudsman resolved in court, no resolving customer alternative dispute within supervisory is an independent Mediation service and processes for Disputes must be Set standards on Set standards on filing complaints accessibility for Industry based statutory body for complaints complaints resolution agency Economy Niger Nigeria Norway Oman Pakistan Panama Paraguay Peru Philippines Poland Portugal Romania Russian Federation Saudi Arabia Senegal Serbia Slovak Republic Slovenia South Africa Spain Sri Lanka Sudan Swaziland Switzerland Taiwan, China Tajikistan Tanzania Thailand Togo Turkey Uganda Ukraine United Arab Emirates United Kingdom United States Uruguay Venezuela, RB Zambia 58 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: Register/record complaints Respond to complaints Analyze complaints/ publish statistics Assist directly in dispute resolution OMBUDSMAN OR SIMILAR INSTITUTION ACTIVITIES Assist indirectly in dispute resolution OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES Make binding decisions Budget allocation from the central government Annual budget allocation from government authority Financial industry association OR SIMILAR INSTITUTION FUNDING MECHANISM FOR OMBUDSMAN Funded by members 59 ANNEX 6: FINANCIAL EDUCATION (2013) Agency has the responsibility Agency conducts a Agency develops Agency provides Agency issues guidelines to Agency develops to implement and/or oversee survey of financial and monitors training on the providers of financial training any aspect of financial capability/literacy and implementation financial literacy services on financial materials on Economy education/literacy publishes regular reports of a strategy topics education/literacy financial topics Albania ü ü ü ü ü Algeria ü ü ü ü Argentina ü ü ü Armenia ü ü ü ü Australia ü ü ü Austria ü Azerbaijan ü ü ü ü ü Bangladesh ü Belarus ü ü Belgium ü ü ü ü Benin Bolivia ü ü ü ü ü ü Bosnia and Herzegovina ü ü ü Botswana ü ü ü Brazil ü ü ü ü ü Bulgaria ü Burkina Faso Burundi Cabo Verde ü ü ü Canada ü ü ü ü ü Chile ü ü ü ü China ü ü ü ü ü Colombia ü ü ü ü Congo, Dem. Rep. ü ü ü ü Costa Rica Côte d’Ivoire Croatia Czech Republic ü ü ü ü ü Denmark ü ü ü ü Dominican Republic ü ü ü Ecuador ü ü ü ü ü El Salvador ü ü ü ü Estonia ü ü ü Finland ü ü ü France ü Gambia, The ü ü Georgia Germany Greece Guatemala ü ü ü ü Guinea-Bissau Guyana ü ü ü continued on next page 60 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: Agency has the responsibility Agency conducts a Agency develops Agency provides Agency issues guidelines to Agency develops to implement and/or oversee survey of financial and monitors training on the providers of financial training any aspect of financial capability/literacy and implementation financial literacy services on financial materials on Economy education/literacy publishes regular reports of a strategy topics education/literacy financial topics Honduras Hong Kong SAR, China ü ü ü ü Hungary ü ü ü ü Iceland Indonesia ü ü ü ü ü ü Iran, Islamic Rep. Ireland Israel ü ü ü ü ü ü Italy ü ü ü Jamaica Japan ü ü ü ü ü ü Kazakhstan ü ü ü ü ü ü Kenya ü ü ü Korea, Rep. ü ü ü ü ü ü Kyrgyz Republic ü Latvia ü ü ü ü ü Lebanon Lithuania ü ü ü ü ü ü Luxembourg ü ü ü Macedonia, FYR ü ü ü Madagascar Malawi ü ü ü ü ü ü Malaysia ü ü ü ü ü ü Mali Mauritius ü ü Mexico ü ü ü ü ü Moldova Mongolia ü Morocco ü ü ü Namibia Nepal Netherlands ü ü ü ü ü Nicaragua Niger Nigeria ü ü ü ü ü Norway Oman Pakistan ü ü ü ü ü Panama ü Paraguay ü Peru ü ü ü ü ü Philippines ü ü ü continued on next page 61 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES ANNEX 6: FINANCIAL EDUCATION (continued) Agency has the responsibility Agency conducts a Agency develops Agency provides Agency issues guidelines to Agency develops to implement and/or oversee survey of financial and monitors training on the providers of financial training any aspect of financial capability/literacy and implementation financial literacy services on financial materials on Economy education/literacy publishes regular reports of a strategy topics education/literacy financial topics Poland ü ü ü ü Portugal ü ü ü ü ü ü Romania ü ü Russian Federation ü ü ü ü Saudi Arabia ü ü ü Senegal Serbia ü ü ü ü ü Slovak Republic ü ü ü Slovenia South Africa ü ü ü ü ü ü Spain ü ü Sri Lanka Sudan Swaziland ü ü ü Switzerland Taiwan, China ü ü ü ü ü ü Tajikistan Tanzania ü Thailand ü ü ü ü Togo Turkey ü ü ü ü ü Uganda ü ü ü ü ü Ukraine ü ü ü United Arab Emirates ü United Kingdom ü ü ü ü ü ü United States ü ü ü ü ü ü Uruguay ü ü ü ü Venezuela, RB ü Zambia ü ü ü ü 62 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: This page intentionally left blank. 63 OVERSIGHT FRAMEWORKS AND PRACTICES IN 114 ECONOMIES This page intentionally left blank. 64 GLOBAL SURVEY ON CONSUMER PROTECTION AND FINANCIAL LITERACY: FINANCIAL INCLUSION AND INFRASTRUCTURE GLOBAL PRACTICE THE WORLD BANK 1818 H STREET, NW WASHINGTON DC 20433 responsiblefinance.worldbank.org www.worldbank.org/financialinclusion