Consumer Financial Protection Authority takes off
In the face of the recent debacle of several finance companies, Sri Lanka is set to take more effective financial consumer protection measures to protect local and foreign consumers in the sophisticated and complex financial market at present, a senior Finance Ministry official divulged.
A Consumer Financial Protection Authority (CFPA) will be established to control Non-Bank Finance Institutions (NBFI) including finance companies as this sector has grown 20 percent at present and some of these firms are facing liquidity issues.
At present, Sri Lanka does not have a dedicated authority to protect the interest of the financial customers, promote fairness and transparency for consumer financial products and services.
The 2017 budget proposed to establish a CFPA which will have the capacity to protect the consumers, by improving the financial consumer rights, promote financial literacy, ensure competitiveness in the financial markets and firms thereby enhance integrity of the financial system of the country as a whole.
The establishment of this independent authority will not duplicate the Central Bank’s regulatory functions of Non Bank Financial Institutions, in fact it will facilitate the monetary regulator’s financial inclusion strategy, a top level CB official told the Business Times.
However he noted that modalities of the setting up of this authority are yet to be finalised as it requires cabinet approval and the enactment of necessary legislation in Parliament.
Its job is to stand up for consumer interests and ensure their fair treatment in the consumer financial marketplace and it will not duplicate the regulatory functions of the Central Bank, he added.
The main aim of the proposed authority is to protect the consumers, by improving the financial consumer rights, promote financial literacy, ensure competitiveness in the financial markets and firms thereby enhancing integrity of the financial system, Finance Ministry official said.
It will also help to increases bargaining power of consumers and further regulates banks in terms of marketing financial products.
The availability of information has grown both in quantity and complexity and the pace of change, in terms of new product developments, product innovations, and technological advances, has prompted the Finance Ministry to set up this agency.
Under the present circumstances, it is essential to build and maintain consumer confidence and trust in financial markets while promoting efficiency and stability to create positive outcomes for both financial institutions and their customers, he claimed.
Central Bank reiterated the need for continued strengthening of the existing regulatory framework of non-bank financial institutions to ensure the soundness of the sector and contain its spill-over effects on the whole system.
An independent CFPA would make and enforce clear rules for everyday financial products. It should vigorously enforce those rules; pay real attention to preventing the growth of harmful practices; be accountable to the public; and provide real consumer protection in financial products and services, several leaders of disgruntled depositors associations of failed finance companies said.
| CB’s protection for finance firm customers | |
| As a precursor to the Consumer Financial Protection Authority (CFPA), the Central Bank (CB) has issued directions to all Licensed Finance Companies (LFCs) to ensure the protection of rights and interests of all financial customers. According to these directions issued recently, customers should be given complete, clear, concise and not misleading information about financial products and services, and they should have the right to access and to have fully understood the terms and conditions of such products and services. Employees and appointed agents will have to act professionally with due skill and diligence when dealing with customers. Under this initiative, all customers shall be treated equitably, honestly and fairly at all stages of their relationship with the financial entity. All LFCs have been directed to take necessary steps to protect customer data and privacy. |