Consumer Protection & Financial Education

Transcription

1 Consumer Protection & Financial Education Case of Credit Analysis & conclusions set forth in this presentation represent the opinion of the author solely and do not indicate concurrence of the Banque Du Liban, or any other official entity. Mention of any course of action or procedure followed by Banque Du Liban, or any other entity does not constitute an endorsement or criticism to such action or procedure.

2 Context -- Global Cross border aspect of financial services Variety and complexity of financial products Rising* consumer debt Lack of clarity and transparency Improper risk assessment Relatively low financial literacy Changing retirement schemes and ageing populations 2

3 Stakeholders Consumer Embassies Ministries Educational Bodies (Schools, Universities) Facilitator Municipalitie s Community Intermediaries (NGOs, Unions, Syndicates..) Financial Institution s Media Regulator s 4

4 Role of Banque du Liban (BDL) Maintain a Healthy and Stable Financial System and Economy* Maintain a balanced free market Strengthening confidence in the Financial Services Sector/Market as a whole Improve relationship among stakeholders, mainly: Financial Institutions and Consumers *(art. 7, Law of Money and Credit) 5

5 Required Framework in a Free Market Redress Mechanis m Suitable control and appropriate penalty Ombudsman Financial Educatio n* Information Instruction Advice *OECD publication: Improving Financial Literacy. (25). Consumer Protection Licensing Suitability of products Fit and proper employees Transparency/Disclosur e 6

6 Transparency Project at BDL Banks Main products Clear, Comprehensive & Not Misleading Communication Informed Client Credits Real Time Promotion Deposits Agreements Rational Decisions Investments Statements 7

7 Local Example -- Ads Promoting Non-Financial Features of Financial Products In Your Heart And on Your Card Photo option Mirror option 8

8 Local Example -- Agreements 9

9 Local Example -- Agreements 1

10 Transparency in Credit Directive Reinforced pillars of a clear, comprehensive and not misleading communication Detailed description of products and services Itemisation of cost structure Governing conditions Periodic update Amount Interest Grace period Variable rates Currency Maturity Instalments Fees & charges Insurance Payment allocation Early repayment Balances calculation Collaterals Annual statement Periodic statement 11

11 Transparency in Credit Directive Addressed critical reoccurring issues Validity of information (expiry date if any) No untrue claims: Guaranteed loan Pay at your convenience No advance payment 3-day withdrawal period to review contract and retreat if inconvenient Alleviated restrictions on choice of insurance provider Termination of contract: only due to client breach of contract, and after sending a warning to client Cases of contract amendments clearly spelled out, & communicated to client one month before implementation 12

12 Transparency in Credit Directive Added Standardized Concepts Annual Percentage Rate A standard measure which expresses the total charges for credit and that borrowers can use to compare the credit charges of one deal with another Mandatory Risk Statements Help the client better understand the risks involved when committing to the offered credit product Summary box Main features of a credit card Single Terminology Across All Types of Communication Fixing terminologies and concept for client to be able to compare 13

13 Conclusion Promote Financially Empowered Individuals 14

14 Appendix -Financial Awareness Program Outcome A Kaddeer consumer financially educated and can make financially responsible decisions bac k 15