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Good Practices for Financial Consumer Protection by Financial Service

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Good Practices for Financial Consumer Protection by Financial Service Public Disclosure Authorized Good Practices for Financial Consumer Public Disclosure Authorized Protection Public Disclosure Authorized The World Bank Financial Inclusion Practice Public Disclosure Authorized Financial and Private Sector Network June 2012 The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Acknowledgements Good Practices for Financial Consumer Protection was prepared by a team led by Susan L. Rutledge, Senior Private Sector Development Specialist at the World Bank. The core team consisted of Nagavalli Annamalai (Lead Counsel), Rodney Lester (Senior Advisor, Retired), and Richard L. Symonds (Senior Counsel, Retired), all from the World Bank. They were joined by Eric Haythorne (Lead Counsel, Retired) and Juan Carlos Izaguirre Araujo (Consultant) also from the World Bank. Also joining the team was Nicola Jentzsch, then Senior Research Fellow, Technische Universität Berlin. In addition, valuable contributions were made by Milton Cartwright, Manager Pensions and Investment Policy of United Kingdom’s Financial Services Authority and David Stallibrass of the Office of Fair Trading of the United Kingdom. Special thanks also go to Shaun Mundy, international consultant on financial literacy and former Head of Financial Capability Department of the United Kingdom’s Financial Services Authority, Rosamund Grady, Conjoint Professor and Chief Executive Officer at the Sydney-based Centre for International Finance and Regulation, John Pyne, Associate Director of Insurance Supervision at the Qatar Financial Centre Regulatory Authority, and Patrick McAllister, Director of Housing Finance in Asia/Pacific at Habitat for Humanity International. Editorial support was kindly provided by Marga O. De Loayza and Snigdha Verma. Valuable comments were received from Zoran Anusic, Giuliana Cane, Deepa Chakrapani, Martin Cihak, Massimo Cirasino, Charles Michael Grist, Orsalia Kalantzopoulos, Claire McGuire, Nataliya Mylenko, Antony Randle, Consolate Rusagara and Vijay Srinivas Tata (all World Bank), as well as Denise Dias, Tilman Ehrbeck, Katharine McKee, Timothy Lyman and Rafael Mazer (all from the Consultative Group to Assist the Poor). Thanks also to Marie-Renee Bakker, Marsha Olive, Fernando Montes-Negret and Sophie Sirtaine (all from the World Bank’s Europe and Central Asia Region) who supported the early development of the work financial consumer protection. External peer review comments were gratefully received from Tomáš Prouza, Chairman of the Board of the Association of Financial Advisers of the Czech Republic and former Deputy Finance Minister of the Czech Republic, William Knight, Chairman of the International Financial Consumer Protection Network (FinCoNet) and Former Commissioner of the Financial Consumer Agency of Canada. For comments on an early draft, thanks to Sarah Lynch of the European Commission, Jane Rooney, Director of Financial Literacy and Consumer Education at the Financial Consumer Agency of Canada, and Lewis Mandell, Professor and Dean Emeritus, University at Buffalo - The State University of New York and Senior Fellow at the Aspen Institute's Initiative on Financial Security. Comments were also gratefully received from ACCION International, Alliance for Financial Inclusion, Analistas Financieros Internacionales S.A., Banco de México, Banco de Portugal, Bank of Uganda, Superintendencia de Bancos of Guatemala, Consumers International, International Association of Pension Supervisors, International Network of Financial Ombudsmen, Organisation for Economic Co-operation and Development, Palestine Monetary Authority, Pension Fund Regulatory and Development Authority of India, Polish Financial Supervision Authority, Retirement Commission of the Government of New Zealand, Superintendencia de Banca, Seguros y Administradoras Privadas de Fondos de Pensiones of Peru, Superintendencia de Bancos of Paraguay, Swiss Financial Market Supervisory Authority, TD Bank, UK Financial Ombudsman Service, US Federal Deposit Insurance Corporation, US Federal i Reserve Board, (US) National Association of Insurance Commissioners, and World Savings Banks Institute. Thank you all for your valuable insights and suggestions. In addition to World Bank funding, financial support for the work of country diagnostics and implementation programs has been generously provided by the (World) Bank Netherlands Partnership Program (BNPP), the Japan Population and Human Resources Development Program (PHRD), the Financial Sector Reform and Strengthening (FIRST) Initiative, the Swiss State Secretariat for Economic Affairs (SECO), the United Kingdom Department for International Development (DFID) and the United States Agency for International Development (USAID). Acronyms & Abbreviations AML Anti-money laundering ANEC European Association for the Co-ordination of Consumer Representation in Standardization APEC Asia Pacific Economic Cooperation API Arab Payments Initiative APY Annual percentage yield ASBA Asociación de Supervisores Bancarios de las Américas (Association of Supervisors of Banks of the Americas) B2C Business to Consumer BEUC Bureau Européen des Unions des Consommateurs (European Consumers’ Organisation) BIS Bank for International Settlements BNPP (World) Bank Netherlands Partnership Program CEMLA Centro de Estudios Monetarios Latinoamericanos CESR Committee of European Securities Regulators CFT Combating the financing of terrorism CGAP Consultative Group to Assist the Poor CISPI Commonwealth of Independent States Initiative CIU Collective Investment Undertaking COE Council of Europe CPSS Committee on Payment and Settlement Systems DFID United Kingdom Department for International Development EC European Commission ECJ European Court of Justice ERISA US Employee Retirement Income Security Act ESIS European Standardized Information Sheet ETS European Treaty Series FIMM Federation of Investment Managers Malaysia EU European Union FATF Financial Action Task Force FCAC Financial Consumer Agency of Canada FDIC US Federal Deposit Insurance Corporation FinCoNet International Financial Consumer Protection Network FINRA US Financial Industry Regulatory Authority FIRST Financial Sector Reform and Strengthening Initiative FSA UK Financial Services Authority FSAP Financial Sector Assessment Program ii FSB Financial Stability Board FTC US Federal Trade Commission G20 Group of Twenty GDP Gross domestic product IADB Inter-American Development Bank IAIS International Association of Insurance Supervisors ICO UK Information Commissioner's Office ICP Insurance Core Principle IDD Initial disclosure document IEFP Institut pour l'Education Financière du Public IFC International Finance Corporation IFRS International Financial Reporting Standards IOPS International Organisation of Pensions Supervisors IOSCO International Organization of Securities Commissions ISO International Organization for Standardization KYC Know Your Customer LIBOR London Inter-bank Offered Rate MAS Monetary Authority of Singapore MiFID Markets in Financial Instruments Directive MSME Micro, Small and Medium Enterprises NAIC US National Association of Insurance Commissioners NASD US National Association of Securities Dealers NGO Non-government organization NPS National Payments System OECD Organisation for Economic Co-operation and Development OTC Over-the-Counter PIN Personal identification number PHRD Japan Population and Human Resources Development Program SADC Southern African Development Community SAPI South Asia Payments Initiative SEC US Securities and Exchange Commission SECCI Standard European Consumer Credit Information SECO Swiss State Secretariat for Economic Affairs SEEP Small Enterprise Education and Promotion Network SEPA Single Euro Payments Area SFC Securities and Futures Commission of Hong Kong SME Small and medium enterprises SRO Self-regulatory organization TILA US Truth in Lending Act UCITS Undertakings for Collective Investment in Transferable Securities UK United Kingdom UN United Nations US United States of America USAID United States Agency for International Development USC United States Code WBG World Bank Group WHCRI Western Hemisphere Credit and Loan Reporting Initiative iii Table of Contents Acknowledgements ...................................................................................................................... i Acronyms & Abbreviations ......................................................................................................... ii Chapter 1: Introduction ............................................................................................................... 1 Chapter 2: Common Good Practices for Financial ..................................................................... 6 Consumer Protection .................................................................................................................. 6 Chapter 3: Good Practices for Financial Consumer Protection by Financial Service .............. 10 I. Banking Sector ................................................................................................................. 10 A. Consumer Protection Institutions ..................................................................................... 10 B. Disclosure and Sales Practices ........................................................................................
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