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AMFA – Investors Fair Good Practices for Consumer Protection in Financial Services Baku, 7 October 2009

AMFA – Investors Fair Good Practices for Consumer Protection in Financial Services Baku, 7 October 2009. Juan Carlos Izaguirre Consultant Consumer Protection & Financial Literacy World Bank jizaguirre@worldbank.org. Limited Access to Finance Worldwide. Expansion of Household Credit.

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AMFA – Investors Fair Good Practices for Consumer Protection in Financial Services Baku, 7 October 2009

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  1. AMFA – Investors FairGood Practices for Consumer Protection in Financial ServicesBaku, 7 October 2009 Juan Carlos Izaguirre Consultant Consumer Protection & Financial Literacy World Bank jizaguirre@worldbank.org

  2. Limited Access to Finance Worldwide

  3. Expansion of Household Credit Source: European Credit Research Institute, Central Bank of Azerbaijan Source: Unicredit

  4. Consumer Protection & Financial Literacy expand Financial Sector • Consumer protection increases legal protection for financial consumers & helps build consumer confidence. • Financial literacy helps consumers understand financial products & services, rights & obligations. • Consumer protection & financial literacy promote efficiency & transparency of financial markets, and help financial firms in facing risks.

  5. Effective Financial Consumer Protection Framework • Transparency: Full, clear, comparable & understandable information • Choice: Fair, non-coercive advertising, selling & collection practices • Redress: Inexpensive and speedy mechanisms to address complaints and resolve disputes • Privacy: Control over access to personal financial information • Access to financial education: Initiatives to develop financial capability of consumers

  6. Diagnostic Reviews in 9 Countries

  7. Good Practices: Diagnostic Tool • Good Practices released as Consultative Draft • Prepared for 4 segments: • banking • securities • insurance • non-bank credit institutions • Other areas: • private pensions • credit reporting systems • financial capability September 2009 Available at: www.worldbank.org/eca/consumerprotection

  8. Good Practices cover 7 key areas • Consumer protection institutions • Disclosure and sales practices • Customer account handling and maintenance • Privacy and data protection • Dispute resolution mechanisms • Guarantee and compensation schemes • Consumer empowerment and financial capability

  9. 1. Consumer Protection Institutions • Clear consumer protection rules & necessary institutional arrangements • Balance between prudential supervision and consumer protection • Licensing and supervision of legal entities that collect funds or lend funds to the public • Judicial system, media and consumer associations

  10. 2. Disclosure and Sales Practices • Key Facts Statements • Standardized contractual provisions • Written copy of terms and conditions • Codes of conduct for financial institutions • Financial firms to know their customers • Cooling-off periods for products with savings components • Free choice of providers of financial products and services • Training of financial institutions staff

  11. 3. Customer Account Handling and Maintenance • Monthly account statements • Notification of changes in interest rates, fees and charges • Maintenance of up-to-date customer records and provide ready and free access to customers to their records • Prohibition of abusive debt collection practices against consumers

  12. 4. Privacy and Data Protection • Clear rules for sharing customers’ information • Basic consumer rights regarding information sharing, access and rectification • Free access to credit reports • Protection of confidentiality & security of customer data

  13. 5. Dispute Resolution Mechanisms • Each financial institution should have a complaints department • Consumers should have access to affordable, efficient & independent mechanism for resolution of disputes • Recourse mechanism to act impartially • Statistics of customer complaints should be analyzed and published

  14. 6. Guarantee Schemes and Insolvency • Regulator to have authority to take prompt corrective action in event of distress at a financial firm • Effective and timely payout mechanism if financial firm is insolvent • High priority of depositors in liquidation of a financial firm

  15. 7. Consumer Empowerment • National financial capability programme • Financial education in schools • Use of mass media • Financial regulators to publish independent information for consumers • Role of non-governmental organizations • Conduction of financial capability surveys

  16. AMFA – Investors FairGood Practices for Consumer Protection in Financial ServicesBaku, 7 October 2009 Juan Carlos Izaguirre Consultant Consumer Protection & Financial Literacy World Bank jizaguirre@worldbank.org

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