Technical Assistance Consultant’s Report Financial Consumer Protection Assessment Report Kingdom of Thailand: TA7998 (THA) - Development of a Strategic Framework for Financial Inclusion in Thailand (Financed by the Japan Fund for Poverty Reduction) October 2013 Prepared by: Robert Hickson and Patamawadee Suzuki Microfinance Services Pty Ltd Gold Coast, Australia For: Fiscal Policy Office Bureau of Financial Inclusion Development Policy This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. CURRENCY EQUIVALENTS US$1.00 = THB 31.36 ABBREVIATIONS A2II Access to Insurance Initiative POS (electronic) Points of Sale ADB Asian Development Bank BIS Bank for International Settlements BAAC Bank of Agriculture and Agricultural Cooperatives BOT Bank of Thailand FIPD Bureau of Financial Inclusion Policy and Development CBFI Community Based Financial Institution CBFI Community Based Financial Institution CBO Community Based Organization CDD Community Development Department (MOI) CODI Community Organizations Development Institute CPD Cooperative Promotion Department (Min. Agriculture & Coops) CAD Cooperatives Audit Department (Min. Agriculture & Cooperatives) CULT Credit Union League of Thailand DPA Deposit Protection Agency Act EA Executing Agency (of Government) FCP Foundation for Consumer Protection FIBA Financial Institutions Business Ac FIDF Financial Institutions Development Fund FSMP Financial Sector Master Plan FPO Fiscal Policy Office FGD Focus Group Discussion GHB Government Housing Bank GSB Government Savings Bank SES Household Socio-Economic Survey of the NSO ICBC Industrial and Commercial Bank of China IAS International Accounting Standard(s) ILO International Labour Organization IMF International Monetary Fund I-Bank Islamic Bank of Thailand KTB Krung Thai Bank KTC Krung Thai Card LGP Local Government Pawnshops Committee LIH Low Income Households MAP Making Access Possible MFI Microfinance Institution MI Microinsurance Min Ag Ministry of Agriculture MOF Ministry of Finance MOI Ministry of Interior MNO Mobile Network Operator NCB National Credit Bureau NESDB National Economic and Social Development Board NSO National Statistics Office NSFI National Strategy for Financial Inclusion NVUCF or Village National Village and Urban Community Fund, or Village Fund Fund NBFI Non-Bank Financial Institution NGO Non-Governmental Organization NPL Non-Performing Loan Page | i OCPB Office of Consumer Protection Board OIC Office of Insurance Commission SGP Savings Groups for Production SEC Securities and Exchange Commission SMEs Small and Medium Enterprises SSO Social Security Office SFI Specialised Financial Institution SEPO State Enterprise Policy Office TA Technical Assistance THB Thai Baht TCRB Thai Credit Retail Bank TDRI Thailand Development Research Institute TMB TMB (formerly Thai Military Bank) DTAC Total Access Communications UNCDF United Nations Capital Development Fund Village Fund Village Fund Page | ii Asian Development Bank Technical Assistance TA 7998: Development of a Strategic Framework for Financial Inclusion (Funded by the Government of Japan through the Japan Fund for Poverty Reduction (JFPR)) The Royal Thai Government (RTG) requested technical assistance from the Asian Development Bank (ADB) in 2010 to support the Government’s initiative to promote financial inclusion in Thailand through a highly consultative process. Approved at the end of 2011 and initiated in early 2012, the process of developing a framework for financial inclusion began with a comprehensive diagnostic of the current state of financial inclusion in the country. The diagnostic was conducted through a collaborative effort with the United Nations Capital Development Fund (UNCDF) using its Making Access Possible (MAP) methodology to support expanding access to financial services for individuals and micro and small businesses. The first part of this diagnostic investigated supply-side and regulatory environment issues including the payments infrastructure. A qualitative and quantitative demand survey was conducted which provided valuable insights on access to finance and client behavior. Other parts of the assessment investigated fields including microinsurance, financial literacy and consumer protection. The final synthesis report brings together the assessment findings and provides key recommendations for going forward. Reports in Thailand Financial Inclusion Series 1. Microfinance Supply Side Assessment Report 2. Microinsurance Assessment Report 3. Qualitative Demand-Side Research Report 4. Microfinance Regulation and Supervision Report 5. Financial Literacy Findings and Recommendations Report 6. Quantitative Demand Research Report – Finscope Thailand* 7. Consumer Protection Assessment Report 8. Full Diagnostic Synthesis Report Reports are available at: http://www.adb.org/projects/45128-001/documents *Finscope Thailand (funded by UNCDF) is available at: http://www.uncdf.org/sites/default/files/download/Thailand%20booklet%20final%2006%20August%202013.pdf Page | iii Contents 1 Executive Summary ................................................................................................................... 1 1.1 Findings .............................................................................................................................. 1 1.2 Recommendations .............................................................................................................. 2 2 Introduction ................................................................................................................................ 4 3 International “Good Practice” in Consumer Protection for Clients of Microfinance and Microinsurance .......................................................................................................................... 5 3.1 Appropriate product design and delivery ............................................................................. 6 3.2 Prevention of over-indebtedness ........................................................................................ 7 3.3 Transparency ...................................................................................................................... 7 3.4 Responsible pricing ............................................................................................................ 8 3.5 Fair and respectful treatment of clients ............................................................................... 9 3.6 Privacy of client data ......................................................................................................... 10 3.7 Mechanisms for complaint resolution ................................................................................ 10 4 Existing Thai Policies and Regulation on Consumer Protection for Customers of Financial Services .................................................................................................................................. 11 4.1 Authorities responsible for financial consumer protection in Thailand ............................... 11 4.2 Legal basis for consumer protection ................................................................................. 13 4.3 Authority responsible for ensuring competition in the financial market place ..................... 15 4.4 Consumer complaint mechanisms .................................................................................... 16 4.4.1 Financial institutions.............................................................................................. 16 4.4.2 Higher level complaint resolution .......................................................................... 16 4.4.3 Monitoring and analysis of complaints received .................................................... 17 4.5 Prevention of over-indebtedness and usury ...................................................................... 17 4.6 Ethical behaviour and debt collection practices ................................................................. 18 4.7 Deposit protection ............................................................................................................. 18 4.8 Privacy of personal information ......................................................................................... 18 4.9 Microinsurance consumer protection ................................................................................ 18 5 Practices used by Different Financial Service Providers that Impact upon Consumer Protection ................................................................................................................................................ 20 5.1 Commercial Banks............................................................................................................ 20 5.2 Specialised Financial Institutions ...................................................................................... 21 5.2.1 GSB ...................................................................................................................... 21 5.2.2 BAAC .................................................................................................................... 22 5.2.3 SME Bank ............................................................................................................. 23 5.2.4 Islamic Bank ......................................................................................................... 24 5.3 Non-Bank Financial Institutions .......................................................................................