Publication: Good Practices for Consumer Protection and Financial Literacy in Europe and Central Asia : A Diagnostic Tool
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2010-08
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2013-03-21
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This paper discusses how the importance of adequate consumer protection and financial literacy for the long-term stability of the financial sector, has been highlighted by the recent turmoil in financial markets worldwide. It presents a set of Good Practices for Consumer Protection and Financial Literacy, developed by the World Bank's Europe and Central Asia Region, using international experience as a guide. The Good Practices provide a practical tool for systematic analysis of laws, regulations and institutions involved in consumer protection and financial literacy, and allow detailed cross-country comparisons. The paper provides the four key concepts on which they are based: consumer disclosure should be simple, easy to understand and comparable; abusive business practices by financial service providers should be prohibited; consumers should have an easy, inexpensive and speedy method of resolving disputes with financial institutions; and financial education should be available to consumers so that they can understand financial services and products and make informed decisions.
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“Rutledge, Susan L.; Annamalai, Nagavalli; Lester, Rodney; Symonds, Richard L.. 2010. Good Practices for Consumer Protection and Financial Literacy in Europe and Central Asia : A Diagnostic Tool. ECSPF Working Paper;001. © World Bank. http://hdl.handle.net/10986/12828 License: CC BY 3.0 IGO.”
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Publication Good Practices for Financial Consumer Protection(Washington, DC, 2012-06)Financial consumer protection sets clear rules of conduct for financial firms regarding their retail customers. It aims to ensure that consumers: 1) receive information to allow them to make informed decisions, 2) are not subject to unfair or deceptive practices, and 3) have access to recourse mechanisms to resolve disputes. Complementary financial literacy initiatives are aimed at giving consumers the knowledge and skills to understand the risks and rewards of using financial products and services-and their legal rights and obligations in using them. Clear rules of conduct for financial institutions, combined with programs of financial education for consumers, will increase consumer trust in financial markets and will support the development of these markets. International and regional non-government organizations are also playing an increasingly important role in financial consumer protection. The responsible finance forum lists financial consumer protection regulation and financial capability as two of the three pillars of the framework for responsible finance. This summary is not exhaustive but helps illustrate the many ongoing international initiatives that support financial consumer protection. All the initiatives are helpful in strengthening the global response to weaknesses in financial consumer protection. Nevertheless, still more could be done by civil society organizations, particularly those operating at a global level. The World Bank is also supporting the international dialogue on financial consumer protection through development of good practices based on country-level experience and ongoing technical assistance. The good practices provide a comprehensive diagnostic tool to help identify the consumer protection issues in all parts of the financial sector.Publication Armenia : Diagnostic Review of Consumer Protection and Financial Literacy, Volume 2. Comparison with Good Practices(Washington, DC, 2012-06)The objectives of the diagnostic review of consumer protection and financial literacy for Armenia are: (i) to assess the existing financial consumer protection framework, by reviewing laws, regulations and practices in Armenia compared to international good practices; and (ii) to provide recommendations on ways to improve consumer protection and financial literacy in Armenia. The review provides a detailed assessment of the institutional, legal and regulatory framework in four financial segments, namely banking, non-bank credit institutions, securities, and insurance. Many key steps have already been taken in financial consumer protection, especially at the regulatory and institutional levels. Regarding the institutional framework, adequate resources need to be allocated to the consumer protection team and modern supervisory tools should be made available. Consumer organizations should be strengthened and motivated to assist the Central Bank of Armenia (CBA) in market monitoring. In terms of consumer disclosure, the CBA should issue regulations that require financial institutions to provide clear, understandable, timely, comparable and standardized information to consumers. In the area of regulation of business practices, the CBA should require that sales agents are well trained and should test them regularly. All financial institutions should regularly analyze the complaints received and the analysis should be provided to the CBA. The Steering Committee for the National Strategy of Financial Education should become the key body to manage financial education in Armenia.Publication Croatia : Diagnostic Review of Consumer Protection and Financial Literacy, Volume 1. Key Findings and Recommendations(Washington, DC, 2010-02)As financial markets develop and deepen, one of the key issues for a fair, open and efficient market is effective consumer protection and financial literacy. The European Union takes the approach that an effective regime of financial consumer protection should allow consumers to have access to: sufficient information to make informed decisions about their financial choices; cost-effective recourse mechanisms to redress violations of financial service contracts; and programs of consumer education and financial literacy that empower them to understand their financial rights and obligations. This review has found that the quality of consumer protection in financial services in Croatia has improved in recent years. In particular, the approval of the 2007 Consumer Protection Act incorporated many of the EU Directives related to financial consumer protection. In addition, the National Council on Consumer Protection was established in 2008 to advise the Government on its national strategy for consumer protection in the coming years. A nation-wide baseline survey of financial literacy would provide useful information in designing programs in financial education and consumer awareness. As pioneered in the United Kingdom, financial literacy surveys can identify which part of the population is most vulnerable to financial abuse. The baseline survey should be segmented by age, gender, geographic area, household income, and formal education. After a period of three to five years, a follow-up survey could be done to evaluate the effectiveness of the programs of financial education and consumer awareness.Publication Slovakia : Technical Note on Consumer Protection in Financial Services, Volume 1. Main Report(Washington, DC, 2007-07)As financial markets develop and deepen, one of the key issues for the fair, open and efficient operation of the markets is the protection of consumers rights in financial services. Be they bank depositors or borrowers or investors in insurance policies, securities or investment or pension funds, financial consumers need the ability to accurately understand the terms and conditions of their contracts and take action if the terms of contracts have been violated. The Note is the second report in a pilot program to analyze consumer protection in financialservices.The objectives of the Note are three-fold, to: (1) present a set of draft good practices for assessing consumer protection in financial services; (2) conduct a review of the existing rules and practices in Slovakia compared to the draft practices; and (3) provide recommendations on ways to improve consumer protection in financial services in Slovakia. The Technical Note wasprepared at the request of the Slovak Ministry of Finance, with the valuable support of the National Bank of Slovakia and other government agencies, ministries, and non-government organizations. In the past the World Bank has also prepared governance reviews of the Slovak financial sector for banking and private pension funds. Few guidelines are available for consumer protection in financial services. Consumer protection in financial services remains a new and developing area for which no consensus has developed on the broad parameters against which a specific country might be analyzed. This Note relied on the EU Directives related to consumer protection and the reports of European financialregulatory and supervisory agencies. Other sources were also used. In the United States, the Federal Trade Commission, the Securities and Exchange Commission and other state, federal and self-regulatory agencies have developed laws, rules and guidelines to protect financial consumers. In addition, the 2003 OECD Guidelines for Protecting Consumers from Fraudulent and DeceptiveCommercial Practices across Borders and the 1999 United Nations Guidelines for Consumer Protection served as useful reference points for general consumer protection not related to the financial sector. The recommendations in the Note go beyond the provisions of the EU Directives currently in force. As described in the EU Consumer Protection strategy announced in March 2007 and the April 2007 Green Paper on Retail Financial Services, European financial consumers wouldbenefit from stronger legal and institutional protections than are currently in place. Both in Europe and elsewhere, contemporary thinking on consumer protection is rapidly evolving. The Technical Note takes into account the international discussion on financial consumer protection and evolving good practices in financial consumer protection. Thus, the Note presents recommendations that are applicable to the Slovak financial sector, but in some cases go beyondthe minimum requirements set by EU legislation.Publication Czech Republic : Technical Note on Consumer Protection in Financial Services(Washington, DC, 2007-06)This Technical Note has been prepared by the World Bank at the request of the Ministry of Finance of the Czech Republic and is the first in a pilot series of financial consumer protection assessments focus on consumer protection in several parts of the financial sector including banking, consumer finance, insurance, private pensions and collective investment funds. The assessments attempt to identify key components of strong consumer protection in financial services and stimulate debate on what reforms may be needed.
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