Global Consumer Protection With Reference To Banking Sector |
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Consumer protection laws
are designed to ensure fair competition and the free flow of truthful information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over
competitors and may provide additional protection for the weak and those unable to take care of themselves. Consumer Protection laws are a form of government regulation which protects the interests of consumers. Regulatory reform
in the banking sector is facilitating greater competition, particularly in light of the abolition of the last remaining Interest. Increased competition strengthens safety and soundness, but it can also bring disruption and anxiety
to consumers. More attention needs to be paid to the question of banking consumer protection. INTRODUCTION A healthy banking system is essential for any economy striving to achieve good growth and
yet remain stable in an increasingly global business environment. The Indian banking system, with one of the largest banking networks in the world, has witnessed a series of reforms over the past few years like the deregulation of
interest rates, dilution of the government stake in public sector banks, and the increased participation of private sector banks. The growth of the retail financial services sector has been a key development on the market front.
Indian banks (both public and private) have not only been keen to tap the domestic market but also to compete in the global market place. New foreign banks have been equally keen to gain a foothold in the Indian market.
KEYWORDS Banking, Financial services, Retail banking, Technology in banking, Risk mitigation, Reserve Bank of India, , Non performing assets, Foreign direct investment, Public sector banks, Private sector banks, Foreign
banks, State Bank of India, ICICI Bank, Mobile, Reforms, Consumer protection, Banking Codes and Standards Board of India, CONSUMER PROTECTION IN INDIA The Consumer Protection Act, 1986 The Act provides following remedies to an aggrieved consumer: * Removal of defects in goods or deficiency in service. * Replacement of defective goods with new goods of similar
description which shall be free from any defect. * Return of price paid by the consumer. * Payment of compensation for any loss or injury suffered by the consumer.
* Discontinue the restrictive, or unfair trade practice, and not to repeat it. * Withdraw the hazardous goods from being offered for sale and not to offer them for sale.
* Provide for adequate cost to the aggrieved party. During the course of a life time, an individual comes into contact with and carries out business dealings with large corporate, associations of persons, government departments,
service sectors like banks, insurance, hotels, hospitals and other bodies. These are large, impersonal bodies with resources much larger than an individual's. Most developed countries have set up watchdog bodies to
help the individuals in this unequal fight and the individual enjoys an enviable amount of protection from the avarice and indifference of large bodies. Under the Consumer Protection Act, every district has at least
one Consumer Redressal Forum, more commonly called a Consumer Court. Here, consumers can get their grievances heard. Above the district forums are the State Commissions. At the top is the National Consumer Disputes Redressal
Commission in New Delhi. A written complaint to the company is taken as proof that the company has been informed. The complaint must be backed by copies of bills, prescriptions and other relevant documents, and should
set a deadline for the company to respond. Consumers can also complain through a consumer organization. If the company does not respond, consumer can approach the consumer court. Again, this can be done directly or
through a consumer organization. Claims of less than Rs. 5 lakhs should be filed with district forum, claims of Rs. 5-20 lakhs directly with the State commission, and claims of more than Rs.20 lakhs with the National Commission. The set-up of consumer forum is geared to provide relief to both parties, and discourages long litigation. In a process called 'informal adjudication', forum officials mediate between the two parties and urge
compromise. If a defaulter does not appear in court despite notices and reminders, the court may decide the matter in his absence. The forum can sentence them to a maximum of three years' imprisonment and impose a fine of Rs.
10,000. Forums can issue warrants to produce defaulters in court. They can use the police and revenue departments to enforce orders. Please note that consumer courts provide redress only in cases of products or services for
personal use, defects in products used for commercial purposes are not entertained. To file a complaint Complaint is to be filed within two years of buying the product or using the service. Complaint needs
to be in writing, and should be acknowledged. Letters should be sent by registered post or should be hand-delivered against acknowledgement. In the Complaint, consumer should mention clearly the name and address of
the person who is complaining and against whom the complaint is being filed. Copies of relevant documents must be enclosed. The consumer must mention details of the problem and the demand on the company for redressal. This could be
replacement of the product, removal of the defect, refund of money, or compensation for expenses incurred and for physical/mental torture. However, please ensure that the claims are reasonable. Avoid using e-mail, voice mail or
telephone because such communications cannot be proved. The complaint can be in any Indian language, but it is better to use English. Consumer Protection and Banking Sector A healthy banking system is essential for any
economy striving to achieve good growth and yet remain stable in an increasingly global business environment. The Indian banking system, with one of the largest banking networks in the world, has witnessed a series of reforms over
the past few years like the deregulation of interest rates, dilution of the government stake in public sector banks, and the increased participation of private sector banks. The growth of the retail financial services sector has
been a key development on the market front. Indian banks (both public and private) have not only been keen to tap the domestic market but also to compete in the global market place. New foreign banks have been equally keen to gain
a foothold in the Indian market. In the banking sector, greater competition strengthens both individual banks, by forcing them to focus on their own core competence, and the banking system as a whole, by weeding out
inefficiencies. For the consumer, competition promotes choice, quality and efficiency in products and services, and more reasonable costs. But competition, by its very nature, produces winners and losers. It also complicates the
relationship between banks and customers, as services and fee structures become more complex and more sophisticated products proliferate. Consumers also need to react to the changing environment - for example,
through making use of delivery channels such as ATMs, telephone banking or the internet that reduce the cost of using banking services. Cost minimization also provides the incentive for consumers to shop around, and new technology
in the form of the Internet enhances the means of doing so. With the shopping around comes awareness of what else is on offer, and greater expectations on the part of the consumer. Less positively, there has been disruption and
anxiety, which has been reflected in the steadily growing number of complaints and protests, and in the greater political attention being paid to this subject. Banks and third party agent network operators have won, mobile network operators
and the unbanked have lost, while existing banking consumers have got a mixed bag, as a result of RBI's guidelines CONSUMER PROTECTION IN USA
Major Consumer Protection Laws That Govern Financial Institutions and banks in USA The major laws that govern financial institutions and protect individuals in their financial dealings.
Community Reinvestment Act of 1977
Flood Disaster Protection Act of 1973- Requires flood insurance on property in a flood hazard area that falls under the National Flood Insurance Program. Gramm-Leach-Bliley Act (1999)-
Privacy of particularly low- and moderate-income neighborhoods. Consumer Leasing Act of 1976 -Requires that institutions disclose the cost and terms of consumer leases, such as automobile leases.
Electronic Fund Transfer Act (1978)-Establishes the basic rights, liabilities, and responsibilities of (1) consumers who use electronic fund transfer services and (2) financial institutions that offer these services. Covers
transactions conducted at ATMs, at point-of-sale terminals in stores, and through telephone-bill-payment plans and preauthorized transfers to and from a customer's account, such as direct deposit of salary or Social Security
payments. Equal Credit Opportunity Act (1974)-Prohibits discrimination in credit transactions on many grounds, including sex, marital status, age, race, religion, color, national origin, the receipt of public
assistance funds, or the exercise of any right under the Consumer Credit Protection Act. Requires creditors to grant credit to qualified individuals without requiring co-signature by spouses, inform unsuccessful applicants in
writing of the reasons credit was denied, and allow married individuals to have credit histories on jointly held accounts maintained in the names of both spouses. Also entitles a borrower to a copy of an appraisal report. Expedited Funds Availability Act (1987)-
Specifies when depository institutions must make funds deposited by consumers available to them. Requires institutions to disclose to customers their policies on funds availability.
Fair and Accurate Credit Transaction Act of 2003-Enhances consumers' ability to combat identity theft, increases the accuracy of consumer reports, allows consumers to exercise greater control over the type and amount of
marketing solicitations they receive, restricts the use and disclosure of sensitive medical information, and establishes uniform national standards in the regulation of consumer reporting.
Fair Credit and Charge Card Disclosure Act of 1988-Requires that applications for credit cards that are sent through the mail, solicited by telephone, or made available to the public (for example, at counters in retail stores
or through catalogs) contain information about key terms of the account. Fair Credit Billing Act (1974): Specifies how creditors must respond to billing complaints from consumers; imposes requirements to ensure
that creditors handle accounts fairly and promptly. Applies primarily to revolving and credit card accounts (for example, store card and bank card accounts). Fair Credit Reporting Act (1970)-Protects consumers
against inaccurate or misleading information in credit files maintained by credit reporting agencies; requires credit reporting agencies to allow credit applicants to correct erroneous reports.
Fair Debt Collection Practices Act (1977)-Prohibits abusive debt-collection practices. Applies to banks that function as debt collectors for other entities. Fair Housing Act (1968)
-Prohibits discrimination in the extension of housing credit on the basis of race, color, religion, national origin, sex, handicap, or family status. Federal Trade Commission Improvement Act (1980)-Authorizes
the Federal Reserve to identify unfair or deceptive acts or practices by banks and to issue regulations to prohibit them. Using this authority, the Federal Reserve has adopted rules substantially similar to those adopted by the FTC
that restrict certain practices in the collection of delinquent consumer debt (for example, practices related to late charges. Consumer Financial Information. Describes the conditions under which financial institutions may
disclose nonpublic personal information about consumers to nonaffiliated third parties, provides a method for consumers to opt out of information sharing with nonaffiliated third parties, and requires financial institutions to
notify consumers about their privacy policies and practices. Regulation H -- Consumer Protection in Sales of Insurance. Describes conditions for retail sales, solicitations, advertising, or offers of insurance
products or annuities by state member banks or by others at an office of a bank. Prohibits coercion and misrepresentations and requires disclosures in connection with the initial purchase of an insurance product or annuity. Home Equity Loan Consumer Protection Act of 1988
- Requires creditors to provide consumers with detailed information about open-end credit plans secured by the consumer's dwelling, including a brochure describing home equity loans in general. Also regulates advertising of home equity loans and restricts the terms of home equity loan plans.
Home Mortgage Disclosure Act of 1975
-Requires mortgage lenders to annually disclose to the public data about the geographic distribution of their applications, originations, and purchases of home-purchase and home-improvement loans and refinancings. Requires lenders to report data on the ethnicity, race, sex, and income of applicants and borrowers, as well as pricing data on certain loans. Also directs the Federal Financial Institutions Examination Council, of which the Federal Reserve is a member, to make summaries of the data available to the public.
Home Ownership and Equity Protection Act of 1994-Provides additional disclosure requirements and substantive limitations on home-equity loans with rates or fees above a certain percentage or amount
Homeowners Protection Act of 1998-Establishes rules for automatic termination and borrower cancellation of private mortgage insurance (PMI) on home mortgages. Real Estate Settlement Procedures Act of 1974-
Requires that the nature and costs of real estate settlements be disclosed to borrowers. Also protects borrowers against abusive practices, such as kickbacks, and limits the use of escrow accounts.
Right to Financial Privacy Act of 1978
- Protects bank customers from the unlawful scrutiny of their financial records by federal agencies and specifies procedures that government authorities must follow when they seek information about a customer's records from a financial institution.
Truth in Lending Act (1968)
- Requires uniform methods for computing the cost of credit and for disclosing credit terms. Gives borrowers the right to cancel, within three days, certain loans secured by their residences. Prohibits the unsolicited issuance of credit cards and limits cardholder liability for unauthorized use. Also imposes limitations on home equity loans with rates or fees above a specified threshold.
Truth in Savings Act (1991)
- Requires that depository institutions disclose certain information to depositors about their accounts--including the annual percentage yield, which must be calculated in a uniform manner--and prohibits certain methods of calculating interest. Regulates advertising of savings accounts.
Women's Business Ownership Act of 1988 - Extends to applicants for business credit certain protections afforded consumer credit applicants, such as the right to an explanation for credit denial.
GLOBAL CONSUMER PROTECTION "Consumer protection law" or "consumer law" is considered an area of public law that regulates private law relationships between individual consumers and the
businesses that sell those goods and services. Such laws deal with credit repair, debt repair, product safety, service contracts, bill collector regulation, pricing, utility turnoffs, consolidation,
personal loans that may lead to bankruptcy and much more The Federal Republic of Germany is a member state of the European Union and is bound by the consumer protection directives of the European Union. Thus
a large part of German consumer protection law has been enacted pursuant to European Directives (e.g. the directives on door-to-door sales, consumer credits, distance selling, package tours, product liability, etc.) In 2002, a
large part of this legislation was integrated into the German Civil Code. Republic of China (Taiwan) Consumer Protection Law in the Republic of China is the national special law which specifically
protects the interests and safety of end-user using the products or services provided by business operators. Consumer Protection Commission of Executive Yuan serves as an ombudsman supervising, coordinating, reporting any unsafe
products/services and periodically reviewing the legislation. United Kingdom The United Kingdom, as member state of the European Union, is bound by the consumer protection directives of the EU.
Domestic (UK) laws originated within the ambit of contract and tort but, with the influence of EU law, it is emerging as an independent area of law. In many circumstances, where domestic law is in question, the matter judicially
treated as tort, contract, restitution or even criminal law. In Australia the
corresponding agency is the Australian Competition and Consumer Commission or the individual State Consumer Affairs agencies. In New Zealand, the corresponding agency is the Ministry of Consumer Affairs [3] and the New Zealand
Commerce Commission. United States Consumer protection laws often mandate the posting of notices, such as this one which appears in all automotive repair shops in California Invariably, consumers are a vulnerable lot for exploitation, more so in a
developing country with the prevalence of mass poverty and illiteracy. India too is no exception to it. Instances like overcharging, black marketing, adulteration, profiteering, lack of proper services in trains, telecommunication,
water supply, airlines, etc are not uncommon here. From time to time, the governments have attempted to safeguard consumers' interests through legislations. There are instances where injustice is done to the individual due to
callous and indifferent attitude of certain personnel of these bodies. Individuals often do not have recourse to costly litigation to seek justice and has to, per force, bear such injustice. Such submission to injustice emboldens
the perpetrators and makes them even more brazen. REFERENCES
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Source: E-mail November 11, 2009 |
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Articles No. 1-99 / Articles No. 100-199
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