protecting new and vulnerable clients as financial inclusion proceeds

7/27/2019 Protecting New and Vulnerable Clients as Financial Inclusion Proceeds

1/18

Protecting New and Vulnerable Clients

as Financial Inclusion Proceeds

Financial Inclusion 2020 Client Protection Working Group

September 2013

CreditReporting

FinancialCapability Client

Protection

Addressing Customer

Needs

Technology-EnabledBusinessModels


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2

www.financialinclusion2020.org

Roadmap to Financial InclusionClient ProtectionSeptember 2013

bout the FI2020 Roadmap Working Groups

Whatwillittaketoachieveastateoffullfinancialinclusion?In2011,theCenterforFinancialInclusionaskedthis

questioninaglobalsurvey,andover300practitionersgavetheirperspectivesonthekeyopportunitiesand

obstaclestofinancialinclusion .

Basedontheresponses,theCenteridentifiedfivepriorityfocusareasthatarekeytoachievingfinancialinclusion,

whichhavebeenusedasthebasisforabroadconsultativeprocesstowardaRoadmaptoFullFinancialInclusion.

Overthecourseof2012and2013,thisprocessengageddozensofexpertsandindustryparticipantsindeveloping

anaction-orientedblueprintforreachingnewandunderservedmarkets.Thefivefocusareasare:

AddressingCustomerNeeds ,chairedbytheConsultativeGrouptoAssistthePoor(CGAP),focusesondeepeningourunderstandingofclientneedsandtranslatingthatknowledgeintopracticewhile

expandingtherangeoffinancialservicesavailabletounderservedmarkets.

Technology,chairedbyVisa,analyzesthepotentialofnewtechnology-intensivechannelstoreachnewcustomers,loweroperatingcosts,increasesecurity,anddiversifyfinancialproductsavailabletolow-incomeclients.

FinancialCapability,chairedbyCiti,focusesonempoweringclientstoknowtheirrightsasconsumers,andhavetheskills,attitudes,aspirationsandconfidencetoexercisethoserights.

ClientProtection,chairedbytheSmartCampaign,outlinesstepstodeepentheimplementationofclientprotectionmeasuresforthebenefitofconsumersandstabilityofmarkets.

CreditReporting,chairedbytheInternationalFinanceCorporation(IFC),promotesextendingcreditreportingsystemsinordertoexpandaccessfornewclientswhilemanagingriskforfinancialinstitutions.

Eachofthefiveworkinggroupshascraftedaroadmapthatasks:Whatisthevisionforthistopic?Whatstandsin

thewayofachievingthevisionandwherearethegreatestopportunities?Whataretheenablingactionsand

correspondingactorswhocanadvancethevision?

The Main IdeaWith an enormousinflux ofinexperienced andvulnerablecustomers at stake,attention toconsumerprotection is needednow more than ever

before. We canbuild on the strongconsensus aboutthe principles offinancial consumerprotection.

Theresponsibility toprotectconsumers isshared byfinancial serviceproviders,regulators andconsumers

themselves.

Providers shouldmake clientprotection a part ofthe core identity ofthe bankingprofession. Providersneed to be proactivein applying sharedstandards and

policing their ownindustry.

Consumers will notbe effectivelyprotected withouteffective regulation.Yet, in manycountries, clientprotectionregulation isnascent or weak.

There is an urgentneed for majorinvestments ineffective clientprotection systemswithin the decade.

A promisingopportunityexists toempowercustomers toprotectthemselves,through financialcapability

building,consumerorganizationsand means suchas publication ofcomplaints data.


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responsibilities).Whatfollowsinthissectionisabriefdescriptionoftheactionsandstatusofthese

threegroupswhenthevisionforclientprotectionisrealized.

1.ProvidersActResponsiblyThecoreofclientprotectionisthebehaviorofprovidersintheirproductofferingsandinteractionwith

clients.Underfullinclusionwithclientprotection,allprovidersoffinancialservicestothepoor(both

mainstreamandalternative)implementawidelyacceptedsetoffinancialclientprotectionprinciples.2

TheyapproachclientsasifguidedbyaHippocraticOathtodonoharmandactasfollows:

Provideproductsthataresafe,understandableandrelevantfortheclients.(Forexample,theyguardagainstover-indebtedness.)

Priceservicesresponsiblytobeaffordablewhilesustainingtheprovider. Incentivizepersonnelinalignmentwithpreventingover-indebtednessandtreatingclients

ethicallyandrespectfully.

Communicateclearlywithallclients,regardlessofdisabilityorspecialcharacteristics,andprovidefullinformationtoallowforinformeddecisions.

Installsecuritytopreventidentitytheftandmisuseofdata. Followprudentstandardstosafeguardclientssavings. Offeraccessibleandresponsivecomplaintresolutionprocesses. Useclientinteractionstoreinforcetheirfinancialcapability. Maintainaccesstoafinancialinfrastructurethatsupportsclientprotection(i.e.,creditbureaus,

paymentsystemsanddepositinsurancesystems).

Inthisvisionofinclusionwithclientprotection,generalprinciplesaretranslatedintopracticeinthe

formofrecognizedstandards.Suchstandardsarethoroughlyintegratedintotheoperationsof

providers.Commitmenttoclientprotectionisembeddedamongallpersonnel,fromboardmembersto

frontlinestaff.

Providersalsocontributetoclientprotectionbyactingcollectively.Industrybodiesandinvestorgroups

establish,promoteandmonitornorms,standardsandcodesofconduct.Theyworkconstructivelywith

regulatorstoapportionresponsibilityforupholdingstandards.

2.RegulatoryEnvironmentCoversAllProvidersandIsEffective

Acompetitivemarketbringsbenefitstoclientsintheformofimprovementofproductsandservices,as

wellascompetitivepressureforlowerprices.Accordingly,competitionfurtherstheoverallaimof

consumerprotectiontobenefitclients.Weenvisionthatspecificclientprotectioneffortswillbesetina

generalmarketframeworkthatpromotescompetition.Atthesametime,overlyburdensomeregulation

canencourageshadowbankingwhileunregulatedcompetitioncantriggerclientprotectionproblems.

2SeeAnnex1foracross-listingofclientprotectionprinciplesarticulatedbyvariousparties.


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Enlightenedmarketregulatorswillseekabalancethatallowscompetitionamongallfirmsgovernedin

anorderlymanner.Inouridealvision:

Supervisorshavethepoliticalsupporttoimplementandenforceregulationsafterfirstconsultingwithindustryandconsumersonwhatisreasonableanduseful. Allprovidersoffinancialservices,whetherprudentlyregulatedornot,arecovered. Regulatorsmaketheirbesteffortstomonitorandmitigateabusebyfraudstersandpromoters

ofpyramidsandotherillegalschemes,inlightofthewidespreadrisks.

Regulatorsalsoaddressabusebythirdparties(e.g.,caregiversorguardians),aswellasfraudsters,inlightofthewidespreadvulnerabilityofcertainpopulationsegmentstosuchrisks.

Regulationisproportionatetothesetting,natureandextentofproblemsobservedinthemarket,andthecapacitiesofbothregulatorsandserviceproviders.Regulationisnotoverly

restrictive,usescommonsenseanddoesnotimposeanunduefinancialburdenonproviders.

Regulationisinformedbydialoguewithprovidersandclients,whileavoidingcapturebyindustryinterests.

Regulatorshavethemeanstocatchandcontrolrogueplayerstomaintainconfidenceinthefinancialsystem.Theyalsoaddressabusebythirdparties(e.g.,caregivers,guardians)aswellas

fraudsters,inlightofthewidespreadvulnerabilitybycertainpopulationsegmentstosuchrisks.

Regulatorsensurethatrecourse,disputeanddebtresolutionmechanismsareavailabletoclients,beyondthoseofferedbyindividualproviders.

Well-designeddepositand/orinsuranceguaranteeschemesprotectsmalldepositorsandpolicyholderswhilekeepinginstitutionsresponsiblefortheiractions.Well-functioningcreditreporting

mechanismsexist.

3.ClientsHaveRightsaswellasMeanstoProtectThemselves

Effectiveclientprotectionrequiresthatclientshavesomedegreeoffinancialcapability.Inthisvision,

clients:

Understandenoughabouttheuseoffinancialproductsandservicestobeabletomakeinformedchoices.Theyknowwheretogettheinformationtomakesuchchoices.

Understandtheirrightsandresponsibilitiesasconsumersandwheretoturniftheyencounterproblems.

Thesefinancialcapabilitiesexistatabasiclevelevenamongthemostvulnerableclientgroups,suchasthosewithlowliteracy,theverypoor,andthedisabledordependent.

Toprotectthegainstheyhavemade,clientshavedevelopedwaystoraisetheirvoicestoprotecttheirinterestsinthemarketplace,makingclientprotectiondemand-driven.

Atthesametime,informationneededtoprotectclientsisfreelyavailablethroughmultiplechannels.Thereiswidespreadunderstandingofandsupportforclientprotectionamongthe

generalpublic,opinionleadersandmedia.


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The current regulatory environment

is often designed to protect youth,

for example through age of majority

rules. However, such rules can be a

barrier to youth access. Accordingly,extending current protection regimes

may in fact consolidate rules that

exclude youth and instead, a more

nuanced view should be considered.

Timothy Nourse, President, Making

Cents International

III.CurrentSituation

Atpresent,thisvisionisnotarealityinanycountry,althoughprogresshasbeenacceleratingaroundthe

world.Thissectionnotessomeofthemostimportantbarrierstoclientprotectionforeachofthethree

majoractors.

1. ProvidersDoNotAlwaysActResponsiblyInmostways,providersbenefitwhentheirclientsbenefit,especiallyinthelongerterm.However,the

alignmentofinterestsisimperfect.Somepoorpracticesmayprovideacompetitiveadvantage,

especiallyintheshortterm(e.g.,provisionoftoo-largeloans,non-transparentpricing,orhigh-pressure

salestactics),andsomeenvironmentsareinsufficientlycompetitive.

Providersdisplayawiderangeofattitudesaboutprotectingclients.Therearesociallymotivated

providerswhowilltakeactiononcetheybecomeawareofproblems,andthereareenlightenedproviderswhotakealong-termviewregardingclientrelationshipsandtheirreputation.Attheother

extremearefast-buckprovidersandoutrightfraudsters.Mostprovidersaresomewhereinthemiddle

andwillbehaveaccordingtotheincentivesandrulestheyface.Inpractice,fewprovidersprioritize

clientprotectionprinciplesintheabsenceofregulation.

Theperceptionthatconsumerprotectionsonlyaddcostsanddetractfromrevenuesmaydiscourage

providersfromembracingclientprotection.Providersoftenseeclientprotectionasaregulatory

responsibility,whichpromotesacompliance-basedresponse(i.e.,fulfilltheletterofthelaw,andresist

morestringentregulation).Providersmayalsodisplaycomplacencyabouttheirclientprotection

practices.

Manyproviderstoclientsatthebaseofthepyramidsimplydonotknowhowtoimplementclient

protectionprinciples.Thisspeakstotheabsenceinmanycontextsofexplicitnormsandstandards,as

wellastoweaknessesorcompetingprioritiesamongindustry-supportingbodies.

Vulnerablegroupssuchasyouth,theelderlyandpersonswithdisabilitiesaremoreexposedtotherisk

offinancialabusesfromfamily,friends,guardians,

caregiversandfraudsters.Fromtheconsumers

perspective,protectionfromfraudcanbeamongthe

mostimportantclientprotectionissues.Providersare

oftenwellpositionedtohelpidentifyandprevent

suchabuses.

2. RegulatoryGapsTraditionally,mostfinancialsectorregulatorshave

notexplicitlyaddressedclientprotectionandmarket

conductissues,astheirmandatefocuseson

prudentialregulationforfinancialsystemstability.

Thisischanginginmanycountries,particularly


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followingthe2008globalfinancialcrisis.Nevertheless,historicalantecedentscontinuetoshapelaws

andregulatoryinstitutions,withtheresultthatfinancialservicesclientprotectionregulationoftenfaces

aconfusedorincompletelegalandregulatorymandate.Consequently,financialsectorsupervisorsoften

lackthepowersneededtoeffectivelyprotectconsumers.Inlargerandmoredevelopedcountries,multipleagenciesoftenhaveoverlappingorunclearjurisdiction,whileinmanyoftheleastdeveloped

countries,asinglefinancialregulatorstillgiveslittleregulatoryattentiontoconsumerprotection.In

manycountries,thoseprotectionsthatexistdonotapplytoalltypesofproviders.Practicalchallenges,

suchasthecostofsupervisionandthelackofsupervisorycapacity,createroadblockstoprogress,as

doesthelackofafocaladvocacygrouporsinglecoordinatingchampionforconsumerprotectionina

country.

Atagloballevel,thereislittleinformationaboutthestatusofclientprotectionbycountry,inpart

becausetherearenorecognizedstandardsformeasuringit.Therolesofthestandard-settingbodiesin

thisareaarenotclearlydefined,andtherearefewexamplesofeffective,prudentmarket-conduct

supervisionofservicesaimedatlow-incomeclients.Thepoliticaleconomyofclientprotectionisoften

challengingandcanrunthegamutfromregulatorscapturedbyindustrytopoliticiansouttoget

industry.Moregenerally,ashortageofsufficientpoliticalwilltomakeclientprotectionaprioritycanbe

anissue.

3. ClientsVoicesAreOftenMissingInadditiontotheeducationalandexperientialdifferencesthatmakemanyclientsvulnerabletoabuse,

clientsoftenhavedifficultyadvocatingforthemselvesandrecognizingthattheyhavefinancialrights

duetoinformationimbalances.Thisisespeciallytrueforpoor,illiterateand/orruralclientswhomaybe

appreciativeofgettingaccessforthefirsttimeregardlessofquality.Clientsarerarelyorganizedor

representedinwaysthatallowtheircollectivevoicetobeheard.Consumergroupsarethinlystretched

inmanydevelopingcountries,areoftenfocusedonphysicalproducts,andareonlyrecentlystartingto

developcapabilitiestoaddressfinancialservices.


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PremisesUnderpinningtheRecommendations Therecommendationsthatfollowarebasedonanumberofpremisesaboutthemosteffective

approachestoclientprotection:

Clientprotectionisasharedresponsibility ofallactorsinthefinancialsystem,notjustregulators.

Inparticular, providersmusttakeproactiveresponsibility tointegrateclientprotectionintotheircorporatecultureandoperations.Effortstoencourageandequipproviderstodosoare

relativelyunderdevelopedandthusrepresentanimportantopportunity.

Clientprotectionregulationmustbetailoredtothecountrycontext. Somecountrieswillfavoramorerule-basedapproachwhileotherstakeaprinciple-basedapproach.Approachesthatare

tooabstractorambiguouscanhinderinvestmentsbyproviders.Somecountrieswillrequirea

highlysophisticatedapparatus,whileotherswillhaverelativelysimpleframeworks.

Importantly,theglobalcommunitygenerallysharestheprinciplesofclientprotection ,andthisagreementprovidesamajoropportunityforprogress. Strengtheningtheclientsabilitytoprotectthemselves bothindividuallyandcollectivelycould

helpachievethebalanceneededforsustainedclientprotection.Thisareaalsorepresentsa

majoropportunityforprogress.

Recentprogressprovidesmomentumforaction.Followingthefinancialcrisisof2008-2009,clientprotectionmovedfarupontheactionagendaforthefinancialsector,andthisincreased

attentionisnowbeginningtobearfruit.

In2011,partlyattheurgingofconsumergroups,

G20leadersendorsedhigh-levelprincipleson

financialconsumerprotectionandcalledforwork

tosupporttheprinciples.In2012,theWorldBank

developedcomprehensiveguidanceforregulators

ongoodpractices,andin2013,theSmart

Campaign,amicrofinance-focusedclient

protectioneffort,introducedathird-party

certificationprogram.Theseactionsarereinforced

bypolicyeffortsinmanydeveloping(e.g.,Rwanda,PeruandthePhilippines)anddevelopednations

(e.g.,theUnitedKingdom,theUnitedStatesandSouthAfrica)thatarecreatingorrefreshingnational

strategiesforconsumerprotectionandfinancialcapability.Withanincreasingnumberofinitiatives,the

globalstageissetforprogressonfinancialclientprotection.

IV.Recommendations

The Smart Campaign

The Smart Campaign is a provider-led initiative

to embed a set of client protection principles

deep within the fabric of the microfinance sector.

It offers training and tools, and it certifies

financial institutions that meet its standards.

Over 1,200 financial institutions worldwide haveendorsed the Smart Campaign.


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However,agreatdealofgroundislefttocover,andinmanycountries,thejourneyisonlystarting.

Successrequiresthethreemaingroupsofactorstocommittodotheirpart.Weenvisionamassive

campaigntobuildpoliticalandstakeholderwillandcapacitytoimplementclientprotectionwithinthe

decade.

Thefollowingrecommendationsaredividedintofourkeyactionareasforachievingclientprotection:

buildprovidercapacityandcommitmenttoimplement;improveregulationandmarketenvironment;

empowerclients;andadditionalactionstobuildpoliticalwill.

BUILDPROVIDERCAPACITYANDCOMMITMENTTOIMPLEMENTProvidersmusttakeactiveresponsibilityforimplementingclientprotection,bothasindividualfirmsand

collectivelyasanindustry.Werecommendthatfinancialservicesprovidersandtheirsupport

organizationstakethefollowingsteps:

1. Embrace Client Protection as a Core Part of the FinancialServices Profession

Developingacultureofclientprotectioninsideproviderorganizationsrequiresactionsmotivated

bothbyclientandemployeeloyalty.Employeesliketoworkforresponsibleorganizations;global

andnationalrankingsandawardscanprovideincentivesandclearstep-by-stepguidescanshow

theway.Coursestaughtbyassociationsandtrainingprogramsforbanking,insuranceand

microfinancecanalsoplayanimportantrole.

ActionPoint:AcorollaryofthiseffortcouldbeaFinancialConsumerBillofRightsfor

clientsbasedontheclientprotectionprinciples(detailedinAppendix1).

2. Drive Client Loyalty by Implementing Client ProtectionStandards

Broadlyacceptedprinciplesmustbetranslatedintospecificstandardsofresponsiblepracticethat

areseenasclientloyalty-building.Industrybodiesareimportantfocalpointsforstandard-setting,

anditisuptoeveryfinancialserviceprovidertointegrateacceptedstandardsintooperations,

includingthroughpolicies,marketing,stafftrainingand/orrewardsystems.

ProvidersSupport

Organizations

ProvidersSupport

Organizations


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IMPROVEREGULATIONANDMARKETENVIRONMENTThesinglemostimportantfocusforimprovingclientprotectionistheimplementationofeffectiveclient

protectionregulationsandsupervisionbyfinancialservicesauthoritiesineverycountry.

3. Promote Credible Certification and Self-Regulation

Providergroupsshoulddevelopcertificationprogramsand/orself-regulatorysystemsin

associations,governedbysustainablecertifyingbodies,toprovidethird-partyopinionsofcompliancewithclientprotectionprinciplesandtoimprovepracticeswhilebridgingthegapwith

formalregulation.Thisisespeciallyimportantinjurisdictionswithoutstrongregulation.Ensurethat

certificationbecomesatrustedtoolformicrofinanceandmainstreaminvestorsandevenclients.

4. Develop Systems to Spot Abuse of Vulnerable Clients by ThirdPartiesTrainstaffonfraudorexploitationwarningsignals.Implementelectronicfrauddetectionsystems

torecognizeunusualpatternsofbehavior(suchasthosealreadyinplaceforcreditcard

companies).

5. Make it a Global Commitment

Wecallontheglobalcommunitytoadoptasahigh-levelpublicgoaltheimplementationof

standardsforfinancialclientprotectionineverycountryby2020.Individualnationscanpublically

committotheirparticularintentionsinbankingviatheMayaDeclarationsponsoredbytheAlliance

forFinancialInclusion(AFI)andinsurancewiththeInternationalAssociationofInsurance

Supervisors(IAIS).

ProvidersSupport

Organizations

ProvidersSupport

Organizations

SupportOrganizationsRegulators


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6. Implement National Client Protection Regulatory Frameworks

Everycountryshouldimplementaregulatoryframeworkbasedongloballyacceptedprinciples(see

Appendix1).Characteristicsofgoodframeworksare:

Adaptedtonationalcontexts,emergingtechnologies,clientneeds,andlegal,regulatory

andinstitutionalframeworks,followingtheconceptofproportionateregulation.

Coverallprovidersoffinancialservices.

Basedonevidenceidentifyingthemostimportantproblemsandwhatworkstoprotect

clients.

Developedindialoguewithfinancialserviceprovidersandconsumers.

Minimizecostsofcompliancetoavoidrestrictingtheavailabilityofserviceswhile

contributingtogenuineprotection.

IncludesdepositandinsuranceguaranteeschemesstructuredinlinewiththeCore

PrinciplesforEffectiveDepositInsuranceSystemsdevelopedbytheBaselCommitteeonBankingSupervisionandInternationalAssociationofDepositInsurers(IADI).

Backedbyeffectivesupervisorswithlegalenforcementbodiesthathaverealteethandthat

allowforanappealprocessbyproviders.

7. Ensure That Clients Have Access to Effective RecourseSystems

Everycountryneedstohaveinplaceredresssystemsorombudsmanthatspecializeinfinancial

servicesandhasjurisdictionalpowertoact.Thesesystemsmustbewidelyavailable,freetouseand

knowntoclientsandmusthaveameanstoassistclientswithabusescomingfromthirdparties.

Regulatorsshouldalsomonitorthemarketbyproactivelylookingforpatternsthatsuggestscams

andschemes.

SupportOrganizations

Regulators

Regulators


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8. Build National Capacity to Design and Implement ClientProtection Regulation

Globalandnationalsupportorganizationsshouldallocateresourcesatasignificantlyincreasedpacetoaiddevelopmentofregulatoryandsupervisorycapacityforclientprotection.Whilecurrent

efforts,suchasthoseofAFIandtheTorontoCentreareofhighquality,theirscaleandcoverageis

insufficient.Allsupervisorswhoneedtrainingshouldreceiveitby2016.Thetypesofsupporting

resourcesneededinclude:

Guidanceandtoolkitsrelatingtoeachoftheclientprotectionprinciples.

Casestudiesofhowclientprotectionhasbeenimplemented.

Modellegislation,manualsandmonitoringandevaluationframeworks.

Technicalassistanceforassessingthecurrentstatusofacountrysconsumerprotection

environment,developinglegislation,policyandregulationsandsettingupenforcement

mechanisms.(Example:expansionoftheWorldBanksfinancialconsumerprotectionassessmentprocess.)

Exchangesamongregulatorsforpeer-learning.

9. Ensure Client Protection Keeps Pace With TechnologicalDevelopments

Regulatorsmustkeeppacewithchangesandensurethatnewtechnologiesareallowedtodevelop

andemergewhilecloselymonitoringnewdevelopmentsandtheirusagetoensureclientsrights

anddataareprotected.Asdemonstratedwithonlinecommerce,onceclientsfeeltheyhave

protectionsandrecourse,themassmarketofconsumersaremorelikelytoadoptinnovations.


Capacity-BuildingAgenda

Regulators Technology-EnabledBusinessModels


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EMPOWERCLIENTSWhilelower-incomeclientscanbeeffectiveadvocatesforthemselves,arangeofactorscanassistthemin

raisingtheirvoices.Somesucheffortsareamongthemostinnovativepossibilitiesintherealmofclient

protection.Withthatinmind,wemust:

10. Develop Means for Clients to Raise Their Own Voices

Providersshouldincorporatetheclientvoiceattheboardandseniormanagementlevels.Client

protectionproblemsmightbeminimizedifdecision-makersregularlyhearclientsperspectives.This

couldbeaccomplishedthroughsuchmeansasclientownership(aswithcreditunions)oruseof

regularclientopinionresearchandcanbesupportedbyanombudsmanspublishingofcomplaints

andpositivedatathatclientscanusetochooseprovidersandthatincentivizeproviderstobecome

moreclient-responsive.

ActionPoint:Anespeciallypromisingareaistocreateforumsforclientstovoicekudosandcomplaintsregardingfinancialservicesproviders(e.g.,aTripAdvisorforfinancial

services).

11. Develop Client Financial Capability Through MultipleChannels

Inthiscontext,thefocusistoensurethatconsumerrightsandresponsibilitiesreceiveemphasis

throughoutfinancialeducationprogramming,whetherprovidedbygovernment,independentorganizationsorproviders.

12. Continue Base of the Pyramid Client Research to InformClient Protection Policymaking and Program Design

Particularlyimportantare:

Researchthatrevealsclientviewsandconcerns,

Behavioralresearch.

Developmentofnational-levelclientprotectionindicators.

Thelatterholdsparticularpromiseforcraftingeffectiveinterventions.

ProvidersSupport

Organizations

FinancialCapabilityProviders



ResearchAgenda


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ADDITIONALACTIONSTOBUILDPOLITICALWILL

13. Articulate the Benefits of Client Protection for Clients,Providers and General Economic Stability

Buildingbusinessandsocialcasesforclientprotectionrequiresmetricsformonitoringclient

protectioneffectiveness,micro-levelresearchonclientoutcomes,dataonthecostsand,

potentially,revenuegrowthviaincreasedloyaltyforprovidersthatimplementthestandards.

Supervisorscanuseconsumerprotectionasaforward-lookingindicatorofrisk.

14. Build the Capacity of Media and Consumer Advocacy Groupsto Focus on Financial Consumer Protection, and Ensure thatPolitical Leaders Hear All Voices Before Enacting Legislation

Consumergroups,togetherwithfairmediaeducatedonfinancialissues,cangeneratepoliticalwill

toimproveclientprotection.

ResearchAgenda

SupportOrganizationsProviders


Capacity-BuildingAgenda


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Annex 1. Principles of Financial Consumer Protection Compared

G20High-LevelPrinciples

onFinancialConsumer

Protection

GoodPracticesfor

FinancialConsumer

Protection

ClientProtection

Principles

Legal,Regulatoryand

SupervisoryFramework

__

__

RoleofOversightBodies ConsumerProtectionInstitutions __

EquitableandFairTreatmentof

Consumers

CustomerAccountHandlingand

Maintenance

Fairandrespectfultreatment

ofclients

DisclosureandTransparency

DisclosureandSalesPractices Transparency

FinancialEducationand

Awareness

ConsumerEmpowerment&

FinancialLiteracy

__

ResponsibleBusinessConductofFinancialServiceProvidersand

AuthorizedAgents

__ Responsiblepricing

ProtectionofConsumerAssets

againstFraudandMisuse

__ __

ProtectionofConsumerData

andPrivacy

PrivacyandDataProtection Privacyofclientdata

ComplaintsHandlingand

Redress

DisputeResolutionMechanisms Mechanismsforcomplaint

resolution

Competition Competition&Consumer

Education

__

__

DepositInsurance&Insolvency __

__

__ Appropriateproductdesign

anddelivery

__ __ Preventionofover-

indebtedness


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Annex 2. Initiatives We Endorse

AllianceforFinancialInclusion(AFI) Asaconveneroffinancialinclusionregulatorsandsponsorofthe

MayaDeclaration,AFIhasauniqueroleinbuildingregulatorycommitmenttoandknowledgeaboutappropriateclientprotectionregulation.AFIsworkinggrouponconsumerempowermentandmarket

conductisafocalpointfortheseefforts.

ConsumersInternationalAnindependent,globalcampaigningvoiceforconsumerswithover220member

organizationsin115countries,CIbeganacampaignonfinancialconsumerprotectionin2011andhelped

movetheG20toaction.

ConsultativeGrouptoAssistthePoor(CGAP) AWorldBankresourcefordonors,policymakersand

providersforfinancialinclusion,CGAPisanimplementingpartneroftheGPFIandathoughtleaderon

consumerprotection,amongotherareasoffinancialinclusion.

GlobalPartnershipforFinancialInclusion(GPFI) AninclusiveplatformforallG20countries,interested

non-G20countriesandotherrelevantstakeholderstocarryforwardworkonfinancialinclusion,including

implementationoftheFinancialInclusionActionPlan,GPFIwasendorsedattheG20SummitinSouthKorea.

CountriesLeadinginConsumerProtection Perfectioninconsumerprotectionisnotanattainablegoal,but

theideashouldhelpusdesignacoresetofprotections.High-incomecountriesincludingCanada,theUnited

Kingdom,Australia,theNetherlandsandtheEuropeanUnionasawholehavesomestrongconsumer

protectionsinplace.Lower-andmiddle-incomecountrieswithreasonablystrongconsumerprotectionfor

financialservicesincludeSouthAfrica,Mexico,Malaysia,PeruandArmenia.

InfoNETAglobalnetworkof54national-levelfinancialsectorombudsmanfrom36countries,InfoNET

providestrainingandsupporttoitsmembersandemergingmarketombudsmen.

MicrofinanceTransparencyPromotesmicrofinancepricingtransparencybypublishingpricingdataand

promotingpublicdisclosureandeducation.

OrganizationforEconomicCo-operationandDevelopment Aforumforgovernmentsto developpolicies

thatwillimprovetheeconomicandsocialwell-beingofpeoplearoundtheworld,theOECDdeveloped9

principlesonfinancialconsumerprotectionthatwereendorsedbytheG20.Theorganizationisalsoplayinga

leadroleinestablishingtheInternationalFinancialConsumerProtectionNetwork(FinCoNet).

SmartCampaign Aglobalefforttounitemicrofinanceleaderstoembedasetofclientprotectionprinciples

intothefabricoftheirindustry,housedattheCenterforFinancialInclusion.

TreatingClientsFairly AprincipleoftheUKFinancialConductAuthoritywherebyfinancialserviceproviders

mustdemonstratethattheyareconsistentlydeliveringfairoutcomestoconsumers,thisapproachrequires

seniormanagementtotakeresponsibilityforensuringthatfinancialserviceprovidersestablishan

appropriateculturebackedbyoperatingnormsapplicabletostaffatalllevels.


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WorldBankTheWorldBankhasestablishedacommunityofconsumerprotectionandfinancialliteracy

practices,includingacomprehensive2010surveyonthestatusofconsumerprotectionregulatory

frameworksand39goodpracticesforfinancialconsumerprotectionatanationallevel.

Thisworkingpaperwascreatedthroughaseriesofconsultationswithanexpertsworkinggroupon

ClientProtection.WewishtoexpressourgratitudetotheClientProtectionWorkingGroupmembers

fortheiractiveparticipationingroupdiscussionsandthoughtfulcontributions.

Wealsothankthemanyadditionalexpertswhorevieweddraftsofthepaperandprovidedinput.

Finally,wewishtothankthemanyCFIandAccionstaffmemberswhoprovidedsupportincluding

AllisonBernstein,MereneBotsio,ElizabethDavidson,AnitaGardeva,SonjaKellyandAmandaLotz.

TheCenterforFinancialInclusionacceptsresponsibilityfortheviewsexpressedinthispaper.Those

viewsdonotnecessarilyreflecttheviewsofindividualworkinggroupmembersortheir

organizations.

ExpertsWorkingGrouponClientProtection

ElisabethRhyne,CenterforFinancialInclusion

(Co-chair)

DavidGrace,Consultant,U.S.(Co-chair)MichaelChapman,OrganisationforEconomicCo-

operationandDevelopment(OECD)

JohannaJaeger,WorldBank

AshokNarain,Consultant,India

BrigitteKlein,DeutscheGesellschaftfr

InternationaleZusammenarbeit(GIZ)

KarenNiederkohr,Consultant,U.S.AndrewPospielovsky, Consultant,Egypt

CliffordRosenthal,U.S.ConsumerFinancial

ProtectionBureau

MichaelBurbano,Ecuador


18/18

This publication was produced by Financial Inclusion 2020:

1101 15th Street NW, Suite 400, Washington, DC 20005 USA Tel 202.393.5113 Fax 202.393.5115

protecting new and vulnerable clients as financial inclusion proceeds

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