NBS Role in Consumer Education and Protection. Radovan Jelašić, Governor Belgrade, 16 October 2007

Transcription

1 NBS Role in Consumer Education and Protection Radovan Jelašić, Governor Belgrade, 16 October 2007

2 Well informed and educated consumers of financial services are the key precondition to effective functioning of the financial market Clearly, information is critical to the effective functioning of markets. A core principle of economics is that markets are more competitive, and therefore more efficient, when accurate information is available to both consumers and suppliers If consumers are well informed, they are in a better position to make decisions that are in their best interest. Information helps and empowers individual consumers by improving their ability to compare products and choose those that will help them meet their personal goals, and this informed comparison shopping enhances competition. FED Governor, Randall Kroszner 11 October 2007

3 NBS has long been aware that consumer education is necessary in order to strengthen competition Developed countries pay special attention to consumer education, especially after major crises; world practice also shows that educated consumers of financial services are a precondition to effective functioning of the financial system; We as the central bank of Serbia are aware that education and restoration of public trust in financial institutions, primarily banks, is of fundamental import for further development, especially in view of: high level of distrust prevailing since 1990s; limited access of households to banking services for a long period of time; development of a number of financial services (private pension funds, forward currency sales ) completely new to majority of consumers; possibility to borrow in different currencies (RSD, CHF, EUR).

4 Such state of affairs was confirmed by the findings of the TNS Medium Gallup survey conducted last year: 20% of respondents had a preconceived negative attitude towards banks; Close to 25% of respondents did not trust banks at all; 29% of respondents had insufficient knowledge about the banking services they were already using; 40% of respondents failed to shop around, but did business with one bank only; 44% of respondents used payment cards, although one half of such consumers was unaware of the costs relating to use of cards or interest rates charged.

5 Analysis of a sample of credit beneficiaries yielded still more worrying results 33% of respondents said the level of monthly installment was the key criterion for taking a loan; 48% of credit beneficiaries did now know what foreign currency clause was (although in most cases they had already taken a foreign currency clause indexed credit), while 31% were unaware of the exchange rate at which the bank calculated their debt; Although 61% of respondents used the authorized overdraft, as many as 55% were unaware of the interest rate charged on such overdraft; 40% of consumers were unaware of the possibility of credit refinancing, although market conditions improved notably during the past three years; This is why the NBS expects significant support from other institutions and providers of financial services to improve the state of things in the shortest possible time

6 Call Center was set up in October 2005 and Center for Financial Services Consumer Protection in early 2007 Following financial services expansion and an increasing number of aggressive marketing campaigns, the NBS recognized the need to provide objective information to financial services consumers on all aspects of such services; To this end, the NBS set up centers directly engaged in educating and providing information to financial services consumers: NBS Call Centre was set up in October 2005 in order to answer toll-free calls and provide advice to consumers; Center for Financial Services Consumer Protection was set up in 2007 in order to ensure: comprehensive education and provision of information to consumers, to increase their understanding of all aspects of individual financial services; increased transparency of terms of provision of services offered by financial institutions

7 Households interest has been on a steady rise since the centers were formed Number of calls received by the Call Center* 25,000 20,523 20, % 15,000 11,563 10,000 5, Number of written complaints received by the Call Center* % 400 Already in early August 2007, household interest equaled its level in the entire 2006; Based on complaints received in 2007, the Consumer Protection Center initiated 27 mediations, 17 of which were completed, 9 deferred and 1 scheduled * January September 2006 and 2007

8 The number of interested individuals is rising and their queries most frequently refer to new financial instruments 7,000 6,000 5, % Overview of frequently asked questions (1 January 30 September 2007) 26.2% 32.4% Complaints and queries received by the Call Centre most frequently refer to banking operations. 4,000 3, % 2, % 1, % 2.6% 0.3% 0.8% 0 Banking services Insurance companies Exchange transactions Leasing companies VPF Savings bills Frozen f/cy savings Exchange rate lists Other

9 Results of operations of the Center for Financial Services Consumer Protection (1/2) Pre-emptive measures: comprehensive education Centre for Financial Services Consumer Protection has so far published 14 leaflets and brochures (on savings, credits, leasing, private pensions, insurance...) pointing out key details consumers should bear in mind when opting for a given service; direct education by dialing the NBS Call Centre toll-free, private individuals will get detailed information on any financial product; the NBS will in no way directly influence consumers choices of services, but will provide professional assistance regarding criteria and how to analyze them in order to take the right decision. NBS Call Centre Dial toll-free:

10 Results of operations of the Center for Financial Services Consumer Protection (2/2) Intervention measures: Acting on complaints submitting complaints to financial institutions on behalf of consumers and requesting feedback (complaint and corrective measure accepted or complaint rejected); Analyses if client is estimated to have sustained damages which the financial institution is unwilling to recognize; Mediation (participation) in addition to suggesting that disputes be resolved through the mediation process, the NBS Center also has two employees and two certified mediators who take active but objective part in this process; Reports to the NBS supervision if there is a notable rise in the number of complaints against a given financial institution (bank, insurance company or leasing company), the Consumer Protection Center can submit a report thereon to a relevant supervision department recommending detailed analysis of the situation.

11 NBS undertook numerous other activities aiming to protect interest of financial services consumers The new Insurance Law enacted in 2004 in line with EU standards establishes, inter alia, the function of protection of policyholders rights; Together with the Bar Association of Belgrade and the Ministry of Justice, in 2006 the National Bank of Serbia set up the Center for Mediation, i.e. out of court mediation, in order to achieve faster, more efficient and, most importantly, less costly resolution of disputes between parties; In October 2006, the NBS started implementing the new Law on Banks which, in addition to other novelties, introduced the obligation to calculate the effective interest rate in the manner prescribed by the National Bank of Serbia; Support in issuing educational brochures by other financial institutions Procredit Bank.

12 ... and has plans for the future Promotion of savings primarily with younger generations; Analysis of quality of financial services by independent foreign institutions; Issuing of recommendations to banks to engage more in financial services education! Moral suasion of the financial sector via relevant associations!