Consumer Protection & Financial Education
Case of Credit
Analysis & conclusions set forth in this presentation represent the opinion of the author solely and do not indicate concurrence of the Banque Du Liban, or any other official entity. Mention of any course of action or procedure followed by Banque Du Liban, or any other entity does not constitute an endorsement or criticism to such action or procedure. Context -- Global Cross border aspect of financial services
Variety and complexity of financial products
Rising* consumer debt
Lack of clarity and transparency
Improper risk assessment
Relatively low financial literacy
Changing retirement schemes and ageing populations
Consumer Education & Financial Education: A Credit Case – Ghide 10/20/201 2 Sleiman 0 Stakeholders
Consumer
Facilitator
Embassies Municipalitie Financial s Institution s
Ministries Media Community Educational Intermediaries Bodies (NGOs, Regulator (Schools, Unions, s Universities) Syndicates..)
Consumer Education & Financial Education: A Credit Case – Ghide 10/20/201 4 Sleiman 0 Role of Banque du Liban (BDL) Maintain a Healthy and Stable
Financial System and Economy*
Maintain a balanced free market
Strengthening confidence in the Financial Services Sector/Market as a whole Improve relationship among stakeholders, mainly: Financial Institutions and Consumers
*(art. 70, Law of Money and Credit) Consumer Education & Financial Education: A Credit Case – Ghide 10/20/201 5 Sleiman 0 Required Framework in a Free Market
Redress • Suitable control and appropriate penalty Mechanis • Ombudsman m
Financial Educatio n*
• Information Consumer • Instruction Protection • Advice • Licensing • Suitability of products • Fit and proper employees *OECD publication: Improving • Transparency/Disclosur Financial Literacy. (2005). e Consumer Education & Financial Education: A Credit Case – Ghide 10/20/201 6 Sleiman 0 Transparency Project at BDL
Banks’ Main products Clear, Comprehensive & Not Informed Client Misleading Communication
Credits Real Time Promotion
Rational Deposits Agreements Decisions
Investments Statements
Consumer Education & Financial Education: A Credit Case – Ghide 10/20/201 7 Sleiman 0 Local Example -- Ads Promoting Non-Financial Features of Financial Products In Your Heart …And on Your Card
Photo option Mirror option Consumer Education & Financial Education: A Credit Case – Ghide 10/20/201 8 Sleiman 0 Local Example -- Agreements
Consumer Education & Financial Education: A Credit Case – Ghide 10/20/201 9 Sleiman 0 Local Example -- Agreements
Consumer Education & Financial Education: A Credit Case – Ghide 10/20/201 10 Sleiman 0 Transparency in Credit Directive Reinforced pillars of a clear, comprehensive and not misleading communication Detailed description of Itemisation of Governing Periodic update products and cost structure conditions services
Amount Interest Grace period Variable rates
Fees & Early Currency charges repayment Annual Balances statement Maturity Insurance calculation Payment Periodic Instalments Collaterals allocation statement
Consumer Education & Financial Education: A Credit Case – Ghide 10/20/201 11 Sleiman 0 Transparency in Credit Directive Addressed critical reoccurring issues
No untrue claims: • Guaranteed loan 3-day withdrawal period Validity of information • Pay at your (expiry date if any) to review contract and convenience retreat if inconvenient • No advance payment
Cases of contract Termination of contract: amendments clearly Alleviated restrictions only due to client spelled out, & on choice of insurance breach of contract, and communicated to client provider after sending a warning one month before to client implementation
Consumer Education & Financial Education: A Credit Case – Ghide 10/20/201 12 Sleiman 0 Transparency in Credit Directive Added Standardized Concepts
Annual Percentage Rate • A standard measure which expresses the total charges for credit and that borrowers can use to compare the credit charges of one deal with another Mandatory Risk Statements • Help the client better understand the risks involved when committing to the offered credit product Summary box • Main features of a credit card Single Terminology Across All Types of Communication • Fixing terminologies and concept for client to be able to compare
Consumer Education & Financial Education: A Credit Case – Ghide 10/20/201 13 Sleiman 0 Conclusion
Promote Financially Empowered Individuals
Consumer Education & Financial Education: A Credit Case – Ghide 10/20/201 14 Sleiman 0 Appendix -Financial Awareness Program Outcome
A “Kaddeer” consumer
financially educated and can make financially responsible decisions
bac k 15