By Daniel Asher
As the government mulls setting up an integrated commercial centre to offer a broad range of financial services to domestic and international investors and to assert its presence in sub-Saharan Africa’s growing financial services market, there is little groundwork to safeguard consumers of financial services.
The Banking Act and Central Bank Act have inadequate provisions for defending welfare of financial service consumers who continue to bear the consequences of financial sector regulatory capture. Financial consumers are often confronted with the issue of ‘fine print’, relating to the hidden fees and rates that often allow financial institutions to advertise one low price when the real price is much higher.
These non-standardised terms making financial products and services can make it difficult to evaluate rational consumer choices and lack of a pre-defined standard of recourse. Financial service providers sometimes seem to ride on this illiteracy of consumers with no regard to choices for their money.
The country needs sound regulations blended with precise and comprehensive financial consumer protection legislations; education; a standardised recourse process to all consumers against unscrupulous financial service providers; legislation on confidentiality of financial consumer’s information and full disclosure on interest rates and services fees; and policy reforms to enhance public trust towards the financial system.
Others are legislations on disclosure of information on terms of deposits offered, rates, and communications with depositors; legislations on consumer credit, terms and conditions of the loan, mode of communication to consumers on changes to the terms of the contract, rights and obligations, provisions on monthly loan account statements and the period under which consumers can refuse to take a loan after signing the contract….
The reappointment of the central bank governor should herald sweeping changes on the way the financial services sector is regulated, and the way financial products are delivered to consumers, Building consumers’ confidence that banks, credit institutions and investment firms are not ripping them off and pushing thee consumer credit market towards transparency and comprehensibility with consumer credit contracts should be top on his priorities at the helm of the institution.
Mr. Asher is the Programme Officer, Consumer unity and Trust Society (CUTS- Africa Resource Centre, Nairobi).