Conference Design & Structure

While India does not have legislation governing consumer protection for financial services, consumers have recourse to the consumer courts set up by the Consumer Protection Act, 1986 and other mechanisms set up by product and services-specific regulators. However some fundamental gaps exist in the current consumer protection landscape in India such as:

~ Lack of mechanisms to deal with conflicts of interest inherent in regulators in their dual                  functions of prudential regulation and consumer protection
~ Increasing inter-regulatory conflicts arising out of a rapidly evolving financial sector
~ Lack of response to a growing body of evidence on consumer behaviour and preferences

In light of this, the conference will aim to take a first principles view on the framework for financial consumer protection in India.

While there are many aspects to a consumer protection framework, there are three stylised approaches that policy makers can choose from:

Approach 1: An Emphasis on Disclosure
Consumers of financial services have less information and sophistication about the financial system and financial services than the financial services providers. The imbalance of information leads to consumers being vulnerable to abusive practices. Disclosure is seen as a way to handle this information gap between the providers and the customers by providing as much information as possible in an understandable way to the customer. This approach believes that well-designed disclosures complemented by effective financial literacy programs enable consumers to make better decisions and improve their financial outcomes.

Approach 2: An Emphasis on Eliminating Conflict of Interest
This approach believes that the root of mis-sale of products and services is the conflict of interest between the manufacturer and distributor of financial services. It attempts to align incentives within a financial service provider or across providers involved in developing and delivering a service. The solution often proposed to contain this conflict is to separate the roles of advisor and agent so that the advisor is compensated only by the consumer and the agent is compensated only by the manufacturer.

Approach 3: An Emphasis on Product Suitability
This approach believes that that mandating increases in information disclosures alone will not lead to improved consumer outcomes in light of innovation in the financial sector and growing product complexity. In such an environment, imbalances in information, expertise and power between the buyer and seller will only increase with time. This approach believes that the most appropriate way to protect the welfare of the consumer would be to put the onus of consumer protection on the seller. The seller must be held accountable for the service provided to the buyer, by ascertaining that the products sold or the advice given is suitable for the buyer considering her needs (as determined by the buyer using its expert judgment).

Conference Structure
There will be sessions dedicated to each approach (disclosure, conflicts of interest and suitability), with each session featuring keynote speaker(s) and group discussions. Each speaker, while addressing their approach, will touch upon the following specific aspects:

1. How does the approach support product innovation and financial access in the financial system?
2. What is the legal base necessary for the approach to be realised?
3. What is the regulatory architecture and environment required for the approach to be realised?
4. How does the approach interact with consumer behaviour?

Given the small and carefully chosen group, the conference is designed to encourage conceptual conversations and free exchange of views. Views expressed at the conference will be strictly confidential. Audio and video extracts of the presentations and discussions will be used for knowledge purposes only with prior consent.

Consumer Protection Blog Series

The Theory of Consumer Protection 
The theoretical underpinnings of consumer protection and its relevance to the provision of financial products and services.

Consumer Protection: Recent Developments on the Regulatory Front in Developing Countries 
Interview with Kate McKee of CGAP.

Suitability & Disclosure: The Case of Australia 
Covers conduct and disclosure obligations of Australian Financial Services (AFS) License holders for provision of advice to retail clients.

Evolution of Consumer Protection Laws in India - Part 1 
The historical evolution of the various sources of consumers’ rights in India today.

Treating Customers Fairly in South Africa 
‘Treating Customers Fairly’ (TCF) initiative which is being implemented in South Africa to ensure stronger market conduct regulation.

To read our complete blog series on Consumer Protection click here