VUZF University Open Seminar on Financial Consumer Protection Lessons Learned from Designing and...
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Transcript of VUZF University Open Seminar on Financial Consumer Protection Lessons Learned from Designing and...
![Page 1: VUZF University Open Seminar on Financial Consumer Protection Lessons Learned from Designing and Implementing FCP Reforms Tomáš Prouza, the World Bank.](https://reader035.fdocuments.us/reader035/viewer/2022072013/56649e595503460f94b52870/html5/thumbnails/1.jpg)
VUZF UniversityOpen Seminar on Financial Consumer Protection
Lessons Learned from Designing and Implementing FCP Reforms
Tomáš Prouza, the World Bank
December 18, 2012
![Page 2: VUZF University Open Seminar on Financial Consumer Protection Lessons Learned from Designing and Implementing FCP Reforms Tomáš Prouza, the World Bank.](https://reader035.fdocuments.us/reader035/viewer/2022072013/56649e595503460f94b52870/html5/thumbnails/2.jpg)
Key issues to remember in Central and Eastern Europe:
o all modern financial products available
o limited customer experience and no history of using complex financial products
o especially in Central Europe life insurance, partly investment & mortgage intermediation dominated by multi-level agents with commission-driven sales model
o often fragmented market supervision with limited coordination
o self-regulation works only sporadically
o growing number of complaints (high prices & misselling)
Setting the scene
2www.worldbank.org/consumerprotection
![Page 3: VUZF University Open Seminar on Financial Consumer Protection Lessons Learned from Designing and Implementing FCP Reforms Tomáš Prouza, the World Bank.](https://reader035.fdocuments.us/reader035/viewer/2022072013/56649e595503460f94b52870/html5/thumbnails/3.jpg)
Possible policy reactions to growing public demands for a solution:
o price regulation – easy to proclaim and politically popular
o focus on real solutions even if they take timeo transparency (know what you pay)
o comparability (choose the best easily)
o migration (lower switching barriers)
o understanding & education (know what you do and why, understand your rights)
o redress (easy-to-use and quick recourse mechanism)
Political options
3www.worldbank.org/consumerprotection
![Page 4: VUZF University Open Seminar on Financial Consumer Protection Lessons Learned from Designing and Implementing FCP Reforms Tomáš Prouza, the World Bank.](https://reader035.fdocuments.us/reader035/viewer/2022072013/56649e595503460f94b52870/html5/thumbnails/4.jpg)
Trying to introduce a consumer protection policy meets with objections from some stakeholders:
o there's no need to change as everything is fine (counter with surveys, price comparisons, foreign experience)
o let the market work, things will solve themselves (does not work without counterbalance of strong and active consumers)
o only prudential supervision and market stability matter
o financial education is sufficient
o we do not know your ideas will work, so let's not do anything
Key objections
4www.worldbank.org/consumerprotection
![Page 5: VUZF University Open Seminar on Financial Consumer Protection Lessons Learned from Designing and Implementing FCP Reforms Tomáš Prouza, the World Bank.](https://reader035.fdocuments.us/reader035/viewer/2022072013/56649e595503460f94b52870/html5/thumbnails/5.jpg)
All consumer protection legislation must be market-relevant, so invest into understanding the market:
o quantitative national surveys to understand major trends (and monitor changes)
o qualitative focus groups to understand the thinking of the people and to test the existing and proposed disclosure
o analyze complaints to the industry and supervisors
o involve NGOs and use modern technologies to collect market intelligence from the whole country
o cooperate with the media and the police to get an early warning of new issues
Key lessons: understand your market
5www.worldbank.org/consumerprotection
![Page 6: VUZF University Open Seminar on Financial Consumer Protection Lessons Learned from Designing and Implementing FCP Reforms Tomáš Prouza, the World Bank.](https://reader035.fdocuments.us/reader035/viewer/2022072013/56649e595503460f94b52870/html5/thumbnails/6.jpg)
If badly communicated, consumer protection activities may create many enemies:
o from the industry as you make their life harder and you will be touching their image (and profits)
o from the public who may expect you will take financial decisions for them and provide 100% protection
o from the media who will be disappointed things do not change overnight
o from politicians as the financial industry is usually an effective lobbyist
Key lessons: communicate your goals
6www.worldbank.org/consumerprotection
![Page 7: VUZF University Open Seminar on Financial Consumer Protection Lessons Learned from Designing and Implementing FCP Reforms Tomáš Prouza, the World Bank.](https://reader035.fdocuments.us/reader035/viewer/2022072013/56649e595503460f94b52870/html5/thumbnails/7.jpg)
Regulations may look nice on paper but:
o ensure disclosure has not become a compliance function
o implement rigorous accessibility testing
o use mystery shopping to verify how the rules are implemented (potential involvement of NGOs)
o define measurable goals (improved measures of public confidence, lower number of complaints, etc.)
o when drafting regulations, define your expectations through regulatory impact assesments, regularly revisit your goals and verify them
Key lessons: verify effectiveness
7www.worldbank.org/consumerprotection
![Page 8: VUZF University Open Seminar on Financial Consumer Protection Lessons Learned from Designing and Implementing FCP Reforms Tomáš Prouza, the World Bank.](https://reader035.fdocuments.us/reader035/viewer/2022072013/56649e595503460f94b52870/html5/thumbnails/8.jpg)
The government should be unified on the issues:
o financial sector regulators and supervisors should agree on the actions needed and implement them jointly
o empower the regulators to react quickly to new issues
o loopholes in sector regulations and regulatory arbitrage are very dangerous for effective consumer protection (do not rely solely on EU directives with sectoral approach)
o some of the consumer protection issues can be dealt with through other regulators:
o competition authority (pricing collusion, tying and bundling)
o data protection authority (sharing and tranfering of personal data to third parties)
Key lessons: unified stand needed
8www.worldbank.org/consumerprotection