Responsible Finance Forum

Good Practices for Financial Consumer Protection

01 June 2012
Source:  International Bank for Reconstruction and Development
 
 The World Bank

This publication can also be found on the World Bank website.

Until the financial crisis of 2007-09, the global economy was adding an estimated 150 million new consumers of financial services each year. Rates of increase have since slowed but growth continues apace. The financial crisis highlighted the importance of financial consumer protection for the long-term stability of the global financial system. At the same time, rapid increases in the use of financial services have pointed to the need for strengthened financial regulation and consumer education to protect and empower consumers. In the absence of strong financial consumer protection, the growth-enhancing benefits of expanded financial inclusion may be lost or severely undermined.

Financial consumer protection sets clear rules of conduct for financial firms regarding their retail customers.It aims to ensure that consumers: (1) receive information to allow them to make informed decisions,(2) are not subject to unfair or deceptive practices and(3) have access to recourse mechanisms to resolve disputes.Complementary financial literacy initiatives are aimed at giving consumers the knowledge and skills to understand the risks and rewards of using financial products and services—and their legal rights and obligations in using them. Clear rules of conduct for financial institutions, combined with programs of financial education for consumers, will increase consumer trust in financial markets and will support the development of these markets.