Financial Consumer Protection-Existing and Proposed as per FSLRC- Priyanka Singla, MIB, DSE Abstract
Financial consumer protection is one thing that everybody is vouching for. The laws pertaining to financial consumer protection were made in 1930s. So the time has come to pay a some attention to the old laws and modify them taking into account the problems and grievances of financial consumers of today’s era. This paper is an analysis of existing financial consumer protection and the proposed structure for consumer protection as per FSLRC. 1. Introduction
Forgery, cheating, misrepresentation by the intermediaries; False promise of loan, pension, free gifts like gold coins; Free look cancellation, Changes in policy terms and conditions, changes in conditions involved in joint account handling, internet banking related misuse/abuse, ATM related service deficiencies, loss of credit/debit cards and extent of card holders‟ liability in such an event, these are some of the problems that a consumer faces while dealing with the financial, basically banking or insurance sector of the economy. Apart from this, there are other problems faced by a lot of investors in mutual funds and stock market; the securities scam of 1992 and 2001 has not yet faded (commonly referred to as Harshad Mehta & Ketan Parekh scam). The instances of general public losing money to chit funds, NBFCs, Nidhi companies etc are occurring even today, recent example being Sharda companies financial fiasco. These instances have eroded customer confidence to such an extent that it will take a lot of effort from the regulator’s side to fully repose the confidence back. This is true in global context also where the greed for huge gains drove financial engineers to innovate and sell complex financial products to unsophisticated investors. All these problems are hinting towards one thing- “Financial consumer protection”. To ensure that financial consumer protection is in place we first need to look into two important aspects-“Financial inclusion and financial literacy.” From the perspective of policy makers, including the Reserve Bank of India and other financial regulators, financial literacy, financial inclusion and consumer protection is a must to gauge the needs of the population and financial institutions, so that financial resources can be translated into higher economic growth while minimising the financial stability risks. For any kind of stability, whether financial, economic, political or social, inclusive growth is an essential prerequisite. Inclusive growth, in turn, is largely driven by financial inclusion and an inclusive financial system. An inclusive financial system will not only include inclusion in the banking system but inclusion in insurance sector, securities
market and pension funds as well. While the goal of providing effective customer service has been long recognised, we cannot say that objective has been successfully met. Global financial crisis gives the proof of inability of banks to understand their customers and their requirements and not rendering services properly. Prior to the crisis, consumer protection was viewed through a narrow prism of safety and soundness of the financial entities. If the financial institutions could remain solvent, consumer protection could be ensured. This only reflected a very constricted view of what constitutes consumer protection and how the financial market players should conduct themselves. 2. Internal Grievance Redressal Mechanism
Internal grievance redressal machineries in the institutions take care of the consumer protection at the level of financial service provider and it also helps to reduce the burden of complaints at the ombudsman level. Here we will discuss grievance redressal machinery at various financial service providers.
Insurance companies have a well established system of receiving, registering and disposing of grievances in each of...
Bibliography: 1. Remarks by Dr. K. C. Chakrabarty, Deputy Governor, Reserve Bank of India in a Panel Discussion on Financial Literacy and Consumer Protection, Washington, DC, on April 22, 2012.
2. Inaugural address by Dr K. C. Chakrabarty, Deputy Governor, RBI at The Annual Conference of Principal Code Compliance Officers in Mumbai on Feb 24, 2012.
3. Report of the committee on customer service in banks
4. Banking Ombudsman Scheme, 2006
5. Insurance Ombudsman Scheme
6. Securities Ombudsman Scheme
7. Report by Financial Sector Legislative Reforms Commision, Volume I, Volume II
Comparison of different grievance redressal machineries:
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