Rethinking Consumer Protection Policy in Financial Markets

Haim, Liran

doi:10.5195/jlc.2013.58

Cited by 6 publications

(2 citation statements)

References 2 publications

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“…Nowadays, consumers engage in various financial undertakings such as opening salary accounts, obtaining car loans or hire purchase agreements, buying from online retail stores, and owning and operating borderless bank accounts, as well as making remote payment for household bills. These transactions are facilitated deposit-based products, third-party payment systems like PayPal, mainstream means of payment, and other emerging financial products (Haim, 2013). In the past, it was possible to avoid using these financial products, but nowadays, the exclusion of consumers from mainstream financial products would negatively impact their social existence.…”

Section: Research Questions and Methodologymentioning

confidence: 99%

Rethinking the Effectiveness of Consumer Protection Policies and Measures in the Financial Marketplace

Iheme

2022

Juríd.

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This paper aims to identify and challenge the common practice among financial institutions of designing and selling complex financial products to consumers who lack full comprehension, thus preventing them from making informed decisions before consuming such financial products. This deceptive approach leads many consumers to experience financial losses, with significant negative consequences for society as a whole. The paper delves into the motivations behind financial institutions to produce and successfully sell complex financial products; they flourish, mainly because they often take advantage of the inadequate regulatory systems, amongst other things. Furthermore, it explores the enabling environment created by laissez-faire contract, which prioritizes principles like pacta sunt servanda and caveat emptor, resulting in regulators overlooking and undervaluing the abuse faced by financial consumers, leaving them largely responsible for resolving their own challenges. The paper exposes the shortcoming of policy measures aimed at preventing consumer exploitation, including the flawed disclosure rules that place the burden of comprehension on consumers while being manipulated to undermine their full understanding. Additionally, it critiques the use of complicated language and heavy use of financial jargon in financial information booklets, which, although meeting legal disclosure requirements, hinder the comprehension of consumers. To address these issues, the paper proposes a new disclosure rule grounded in the concepts of caveat venditor and contra proferentem. This rule would require financial institutions to present information against their own self-interest and provide an equal number of disadvantages alongside advantages for the products they offer. Furthermore, it suggests that regulators and courts should play a pivotal role in supervising and assessing compliance, issuing annual performance-rated certificates that financial institutions must prominently display in their establishments and incorporate into their product information leaflets. This approach would allow consumers to easily identify consumer-friendly financial institutions

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Section: Research Questions and Methodologymentioning

confidence: 99%

Rethinking the Effectiveness of Consumer Protection Policies and Measures in the Financial Marketplace

Iheme

2022

Juríd.

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“…Therefore, financial institutions have over a long period of time learned to solely communicate the beneficial aspects of the products they sell to their consumers, and allow them to discover the hidden costs and onerous terms at their own expense, usually after they had been exploited for some time. 26 The work of Gabaix and Laibson captures the forgoing discourse: it reveals the inability of most consumers to properly choose financial products based on price and benefits consideration due to the effect of 'shrouding': a situation whereby financial institutions influence upfront the consumption behavior of their consumers by aggressively marketing the appealing sides of products and shrouding or masking the unappealing sides of them such as the backend fees, penalties, surcharges, etc. 27 Based on my personal experience, for example, banks do prepare standard form contracts and present same to potential customers that are desirous of opening bank accounts.…”

Section: What Is the General Plight Of Consumers In The Financial Marketplace And How Do The Realties Of Market Affect Their Lives?mentioning

confidence: 99%

Rethinking the Effectiveness of Consumer Protection Policies and Measures in the Financial Marketplace

Iheme¹

2021

Zaštita Kolektivnih Interesa Potrošača

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Financial Consumer Protection Regime in Malaysia: Assessment of the Legal and Regulatory Framework

Ahmed

Ibrahim²

2018

J Consum Policy

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This paper examines the status of the legal and regulatory framework for consumer protection in Malaysia, an emerging economy. Using leximetrics and notions of incomplete law, the paper explores the financial consumer protection regime in the country by examining two aspects of the legal framework: the legal infrastructure and typology of laws. The Malaysian legal framework for financial consumer protection is assessed in light of the good practices identified in international guidelines issued on the themes by OECD and the World Bank. The results highlight the complementary nature and different roles that laws, regulations, and supporting institutions play in achieving a comprehensive financial consumer protection framework in the country.

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Rethinking Consumer Protection Policy in Financial Markets

Abstract: ABSTRACT

Cited by 6 publications

References 2 publications

Rethinking the Effectiveness of Consumer Protection Policies and Measures in the Financial Marketplace

Rethinking the Effectiveness of Consumer Protection Policies and Measures in the Financial Marketplace

Rethinking the Effectiveness of Consumer Protection Policies and Measures in the Financial Marketplace

Financial Consumer Protection Regime in Malaysia: Assessment of the Legal and Regulatory Framework

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