LA CONCEPTION COLLEGE

Kaypian Road, corner Quirino St. San Jose del Monte City

Importance of Consumer Finance

Protection and Regulation

In Partial Fulfillment for the Requirement in

Financial Markets

Submitted by:
Kim Michael U. Ocupan
BSAIS 3rd year

Submitted to:
Joven Velarde Billo
Instructor
 AUGUST 2022
Kim Michael Ocupan Ocupan Page |1
Joven Velarde Billo

FIN-MKT

AUGUST 29, 2022

Importance of Consumer Finance

Protection and Regulation

Financial consumer protection encompasses the laws, regulations, and institutional

arrangements that safeguard consumers in the financial marketplace. CFPB says “We aim to

make consumer financial markets work for consumers, responsible providers, and the economy

as a whole. We protect consumers from unfair, deceptive, or abusive practices and take action

against companies that break the law. We arm people with the information, steps, and tools that

they need to make smart financial decisions.”

The Consumer Financial Protection Act aims to increase oversight and clarify the consumer

finance laws governing financial transactions to protect consumers in these transactions. (Ginny

O’Neill, 2015) The Consumer Financial Protection Bureau was established in 2011 according to

the 2010 Consumer Financial Protection Act. The Bureau has the capacity to examine and

enforce laws against

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members of the financial industry who provide consumers with financial goods, as well as to

supervise depository banks with assets of more than $10 billion.

The Act moved lender data gathering obligations under the Home Mortgage Disclosure Act

from the Federal Reserve to the Bureau and provided the Bureau extensive jurisdiction to protect

consumers from unfair, misleading, or abusive activities and practices. The Bureau is also in

charge of enforcing the Real Estate Settlement Procedures Act and the Truth in Lending Act's

disclosure and compliance requirements for mortgage lending and service.

Regulation E is a regulation put forth by the Federal Reserve Board that outlines rules and

procedures for electronic funds transfers (EFTs) and provides guidelines for issuers of electronic

debit cards. The regulation is meant to protect banking customers who use electronic methods to

transfer money. In the context of EFTs, Regulation E offers standards for customers and banks

or other financial institutions. Transfers with automated teller machines (ATMs), point-of-sale

transactions, and Automated Clearing House (ACH) systems are examples. This regulation also

includes rules governing consumer responsibility for illegal card use. When reporting problems,

consumers should ensure that they are complying with federal requirements in order to ensure

that their financial institutions are complying and to avoid responsibility.

Financial institutions should distribute these regulations internally to ensure that they comply

without problem. Regulation E establishes very precise guidelines for compliance by the EFT

service provider, including keeping track of consumer agreements, delivering regular statements,

resolving errors, paying back fees that were incorrectly charged to consumers, granting access to

account information, disclosing a phone number the consumer can use to contact the financial
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institution, and so on. In the event that your debit card is lost or stolen, Regulation E restricts

your liability. If illegal charges are made with your debit card, your maximum liability is reduced

the sooner you report the card as lost or stolen. Your personal culpability may increase if your

debit card is used for illegal charges the longer you wait to report it lost or stolen.

An accessible and effective recourse system that enables consumers to recognize and express

their rights to have their complaints addressed and resolved in a transparent and equitable

manner within a reasonable period is essential to an effective financial consumer protection

framework. For low-income and vulnerable financial consumers, effective and prompt complaint

handling methods can have a significant impact on how much they trust their financial service

provider (FSP) and the financial industry as a whole. Customer adoption and continuous use of

financial services, and subsequently their ability to earn a living, are all influenced by consumer

trust levels. The processes for managing financial consumer complaints are divided into two

stages: internal dispute resolution (IDR), which is handled by FSPs, and external dispute

resolution (EDR), which is an alternative out-of-court option used when internal IDR is not

successful. Principles for the complaint management and resolution processes and procedures

that FSPs must implement may be found in a number of international sources. Drawing from the

World Bank's Good Practices for Financial Consumer Protection, the work of international

organizations like the Group of Twenty (G20)/Organization for Economic Co-operation and

Development (OECD) Task Force on Financial Consumer Protection, as well as selected country

experiences, this Technical Note highlights considerations that aim to provide a methodological

guidance for regulators and FSPs when developing and implementing IDR frameworks to ensure

they achieve the following goals.

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This technical note summarizes the concepts, principles and practices of the IDR mechanism

for financial customers and provides guidance for FSPs to resolve complaints, to collect and

analyze complaints-related data, and to support FSP improvements where necessary. We provide

examples of legal and regulatory requirements to ensure that it is shared. -Performance, industry

market behavior and regulation of market behavior.

In our country, BSP or the Banko Sentral ng Pilipinas promote broad and convenient access

to high quality financial services and consider the interest of the general public, as mandated by

its amended charter. In doing so, the BSP aims to ensure that financial service providers conduct

ethical business practices and do not engage in practices that may cause harm to the consumer in

the conduct of their business. The consumer protection standards of conduct, i.e., disclosure and

transparency, protection of client information, fair treatment, effective recourse mechanism, and

financial education and awareness should be embedded into the corporate culture of the BSFI,

enhancing further its defined governance framework while addressing conflicts that are inimical

to the interests of the financial consumer. This Circular No. 1048 or the BSP Regulations on

Financial Consumer Protection seeks to fundamentally strengthen market conduct practices of

Bangko Sentral ng Pilipinas’ (BSP) supervised financial institutions (BSFIs) by establishing

guidelines that institutionalize consumer protection as an integral component of corporate

governance and culture, as well as risk management.

BSP promise in their client that financial consumers have the right to expect that their

financial transactions, as well as relevant personal information disclosed in the course of a

transaction, are kept confidential and are secured. Towards this end, BSFIs must ensure that they

have well-articulated information security guidelines, well-defined protocols, a secure database,

and periodically re-validated procedures in handling the personal information of their financial
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consumers. This should be an end-to-end process that should cover, among others, the array of

information that will be pre-identified and collected, the purpose and manner of gathering each

information, the Information Technology (IT)-security infrastructure of the BSFI, and the

protocols for disclosure, both within the BSFI and especially to third parties

In being fair , BSP has a fair treatment in their clients and this principle ensures that financial

consumers are treated fairly, honestly, and professionally at all stages of its relationship with the

BSFI. BSFIs shall adopt mechanisms to safeguard the interest of their consumers which shall

include rules regarding ethical staff behavior, acceptable selling practices, fair and equitable

terms and conditions, provision of products and services appropriate to the capacity and risk

appetite of the consumers, among others, and incorporate the same in their policies and

procedures, control functions and agreements with outsourced third parties.

Financial education initiatives give consumers the knowledge, skills, and confidence to

understand and evaluate the information they receive and empower them to make informed

financial decisions. Because BSFIs deal directly with financial consumers, they have the reach,

expertise, and established relationships ideal to deliver financial education, distinct and separate

from information about their products. BSFIs should provide basic information on consumers’

and the BSFI’s rights and responsibilities.

BSFIs should demonstrate efforts at financial education, which may include digital literacy

for products offered electronically, with the presence of programs whether as specific initiatives

or as aspects embedded in their regular interface with consumers.

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According to UNCTAD easy access to bank accounts and consumer credit is becoming

increasingly important in the modern economy as more of the world's population uses financial

services for essential transactions and savings in a process fueled by online commerce. has

become These innovations, especially easier access to consumer finance, will increase individual

purchasing power, increase consumer well-being and reduce poverty if used responsibly.

However, the rapid development of credit products and the surge in use of financial services,

especially in emerging markets, has led to an increase in irresponsible lending practices and

consumer over-indebtedness. Effective consumer protection is necessary to promote financial

stability, as demonstrated in the 2008 financial crisis and caused by the housing bubble driven by

over-lending. As a result, new reforms have been introduced at both national and international

levels, and a number of high-level principles and best practices have been developed to improve

consumer protection in the financial sector. International principles provide a basic framework

for consumer protection, but remain abstract, general and non-binding in practice. This raises the

question of how national legal systems can be influenced, especially in emerging and developing

countries where consumer economic protection is important. They may be exposed to change

(such as a dramatic increase in the penetration of financial services), and their users are the most

vulnerable because they generally lack experience and understanding of financial products. On

the other hand, regulators often struggle to keep up with new developments in financial markets

and may be reluctant to intervene because credit is seen as beneficial to the economy.
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(Loi M Bakani ,2015) Financial consumer protection and equity (equity) in the microfinance

industry is a global financial challenge. People working in the informal sector, and microfinance

clients in general, are often at the bottom of society's socioeconomic ladder. These people are

vulnerable to economic shocks and can hardly afford new risks. They often lack financial

literacy, lacking knowledge about financial opportunities, products and services, and consumer

power in general. Microfinance clients often have gaps in information and insufficient legal

remedies available. Recently, the importance of financial consumer protection has increased as

the financial inclusion agenda has grown in importance and microfinance institutions have

become one of the means used to provide financial services to this segment of the population. To

partner with this customer base by providing customer-centric financial services and financial

literacy training with staff who understand the importance of financial consumer protection for

microfinance institutions wishing to achieve and sustain sustainability. is the basis. Financially

literate customers who know the financial services available and how to use them, and who

understand the process of remedial mechanisms that apply when equity issues arise are more

likely to be long-term customers of microfinance institutions. More likely to continue. Inform,

protect and satisfy our customers. In a highly competitive environment in which this segment of

the financial sector competes with world-class financial institutions, processes and efforts to

protect the rights and fairness of our customers are critical to ensuring customer retention.
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Referencess;

De Souza Neves Lopes,Ligia, Iravantchi,Sheirin (2019). Complaints Handling within Financial

Service Providers : Principles, Practices, and Regulatory Approaches – Technical Note

(English)

https://documents.worldbank.org/en/publication/documents-reports/documentdetail/

773561567617284450/complaints-handling-within-financial-service-providers-principles-

practices-and-regulatory-approaches-technical-note

WILL KENTON (2022) Regulation E

https://www.investopedia.com/terms/r/regulation-e.asp

ADAM HAYES (2021) Consumer Financial Protection Act

https://www.investopedia.com/terms/c/consumer-financial-protection-act.asp

https://www.oecd.org/daf/competition/sectors/financialconsumerprotection.htm

The BSP Financial Consumer Protection Framework Circular no. 1048 (2019) Sec. 1 p. 1

Sec. 2 p. 6 – p. 7 & p. 10.

https://www.bsp.gov.ph/Regulations/Issuances/2019/c1048.pdf

https://www.bsp.gov.ph/Pages/InclusiveFinance/FinancialConsumerProtectionNetwork.aspx

Elizabeth Gachuiri & Dr Iris Benohr (2020) Financial Consumer Protection in the Banking
Sector: A Comparative and Empirical Approach
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https://unctad.org/Topic/Competition-and-Consumer-Protection/Research-Partnership-

Platform/Financial-Consumer-Protection

Loi M Bakani (2015), Governor of the Bank of Papua New Guinea, at the CEFI Equity

Workshop "Smart Campaign Client Protection Principles Training", Port Moresby, 21 October

2015.

https://www.bis.org/review/r160118b.htm