World Consumer Rights Day is March 15. To celebrate, this week we’ll be sharing posts that explore the importance of client protection and initiatives that strengthen responsible practices in providing financial services. Given the tremendous growth of mobile phone-based financial services, it’s fitting that the theme of this year’s day is “fix our phone rights.”

While looking at some banking advertisements during a research study we conducted in 2009 on financial consumer protection in Latin America, we found one that used the motto A bank that doesn’t seem like a bank. Curious, right? Why should a bank say that the benefit it offers clients is that it is not like a bank?

In 2007, at the Consumers International Office for Latin America and the Caribbean we drew attention to the need to discuss the problems that consumers face in relation to financial products and services by organizing two workshops in Santiago, Chile and Buenos Aires, Argentina, on consumer protection, debt, and overindebtedness. The issues raised in the workshops convinced us that this was a substantial issue; the 2008 world financial crisis confirmed what we suspected.

We looked at transparency of information, ethical business, financial education for consumers and banks, and responsibility lending. We wanted to show financial institutions that the way they were conducting their business was not aligned with consumer protection in many areas, and that a fair relationship with consumers will bring wins to all.

In 2010, we developed a Monitoring Guide for Banks and Financial Institutions as a tool for consumers and consumer organizations to assess how financial services providers perform in their countries, whether they comply with consumer rights protection, and to compare institutions. Two organizations, ADELCO from Argentina and ODECU from Chile applied the guide and the results showed that financial institutions were, in many aspects, far from ideal.

A number of changes are needed to improve the relationship between consumers and financial institutions. Financial institutions’ policies must address consumers’ needs, ensuring a respect for their rights, and putting in place practices that are aligned with ethics and transparency in business conduct and financial education for consumers.

With these issues in mind, we realized that a new guide was needed specifically for banks. Although many banks implement corporate policies to satisfy the requirements of their current and potential clients and perform surveys on the implementation of these policies, we wanted to give banks a tool that helps them to evaluate themselves from a consumer perspective. The Self Assessment Guide for Banks shows that consumers are not only concerned about interest rates or the accuracy of information, but also about bank policies in areas such as corporate responsibility, the environment, their relation with their workers, and which projects they are financing.

But the heart of the guide is how financial institutions deal with sensitive consumer protection issues. For example, we ask them to evaluate if they give consumers accurate and complete information, whether they are offering products that consumers can’t afford, and if they have policies that offer sales incentives to their employees. These are the concerns that consumers have when approaching a financial institution for their products and services. There is a need for a wider financial inclusion and financial education for consumers. All these issues are what we are advocating for regionally and internationally and they are the core of our work in, for example, the G20/OECD Financial Services Taskforce.

The guide was launched in February 2014 in Buenos Aires, and we are now discussing the application of the guide with financial institutions throughout Latin America. There are positive signals that by the end of the year some will be conducting their own evaluations.

Simply put, we want banks that seem like banks, but banks that also respect consumer rights, are accountable and transparent, and conduct their business with a sense of social responsibility. Only then, we believe, will consumers not fear banks.

Image credit: Consumers International

Have you read?

The Suitability Approach to Client Protection: Comments on the Mor Committee Report

Client Protection is Gaining Ground in Indian Microfinance

A Study of Client Protection Practices in Latin America and the Caribbean

Consumers International doesn’t mince words.

Since the global financial crisis, according to CI, the world has been mired in an “ongoing crisis in financial consumer protection.” This crisis creates a “myriad of problems for consumers around the world,” says CI, a world federation that constitutes the “only independent and authoritative global voice for consumers.”

Consumers International is a federation of consumer groups that up to now has focused mainly on physical products like safe car seats and reliable appliances. It is significant that this year CI is, for the first time, taking up financial services.

Which brings us to today. March 15 is World Consumer Rights Day, and CI has selected financial services as its focus, in keeping with its Consumers for Fair Financial Services campaign. It is urging the G20 to adopt its recommendations on consumer protection in financial services.  This campaign will also be highlighted at CI’s annual forum, to take place in May in Hong Kong. Consumers International largely represents consumers from higher-income countries, and that makes the G20’s financial inclusion effort a relevant focus. 

Here at the Center, we’re glad CI is taking up this issue, even though our focus is on the poor in lower-income countries. We see the fortunes (and follies) of microfinance and other financial service providers to the poor as enmeshed with those of the global financial system — and vice versa. CI’s World Consumer Rights Day theme for 2011 resonates strongly with the Smart Campaign, the primary vehicle by which MFIs worldwide are moving to incorporate Client Protection Principles into the industry’s DNA.

We look forward to working with CI to make sure that the global client protection movement meets the needs not just of credit card users in the US and Europe, but also of low-income people in lower-income countries.

Hence our excitement about this year’s World Consumer Rights Day, which we hope you’ll share.