Financial Consumer Protection has gained significance all the world over, following the 2007/2008 Global Financial Crisis which exposed gaps in consumer protection mechanisms on the part of regulators as well as regulated institutions.
Central banks have since the crisis accepted consumer protection as one of the tools for ensuring financial stability, and have developed regulatory frameworks that mandate supervisors and regulated institutions to place precedence on practices which guarantee the protection of consumers.
According to the World Bank Group Technical Note, June 2019, an effective financial consumer protection framework should ensure recourse mechanisms that are accessible, efficient and enable consumers to assert their rights; to have their complaints addressed in a transparent and just way; and within a reasonable time-frame.
Section 3(2)(c)(d)(e) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) mandates the BoG to develop appropriate measures that ensure the interests of regulated institutions’ clients are adequately protected. The BoG issues appropriate consumer protection directives, promotes fair market practices and ensures responsible lending and borrowing in the industry.
The Market Conduct Office established by the BoG provides a clear point process and an avenue for customers to report their grievances if regulated institutions are unable to resolve their complaints amicably. Besides resolving complaints, the mechanism fosters confidence-building in the Bank of Ghana.
The Bank of Ghana has so far succeeded in issuing consumer protection directives to address regulatory gaps, promote standardisation in the resolution of complaints, and respond to emerging practices in the industry, comprising:
Consumer Recourse Mechanism Guideline for Financial Service Providers, 2017;
Disclosure and Product Transparency Rules for Credit Products and Services, 2017;
Notice on Abolition of Unfair Fees, Charges and Other Practices in the Banking Sector, 2021;
Notice on Sanctions for the Issuance of Dud Cheques, 2021; and
Unclaimed Balances and Dormant Account Directive, 2021.
These measures indicate the degree of focus on consumer rights and interests. As part of our supervisory functions, the BoG promptly identifies systemic issues in product and service designs, channels, systems and third-party arrangements; and determines consumers’ level of satisfaction and appreciation of their rights in procuring products and services from Financial Service Providers.
As new products and services are introduced onto the market, the BoG ensures they fully address consumer interests and all disclosures are front-loaded.
The BoG embarks on all-year-round financial literacy programmes which target the most vulnerable in society. Additionally, the BoG organises annual workshops for Consumer Reporting and Compliance Officers of banks to assess the root causes of all recurring complaints and proffer directives to limit recurrences.
The Year 2022 Complaints Management Report published by the BoG showed a 15% increase in complaints by consumers of financial services to the Bank of Ghana as compared with 2021. The rise was largely attributed to increased awareness of the public and confidence reposed in the central bank to use its supervisory authority to adjudicate and resolve complaints.
The numbers also suggest that consumers are becoming more assertive of their rights to fair treatment, and will not hesitate to trigger the second-level resolution process if they are not satisfied with the financial service provider’s resolution. Despite the increase in complaints reported to the central bank, it was observed that regulated institutions resolved most of the cases reported by consumers though their Internal Dispute Resolution (IDR) processes – and only referred the complex complaints to the BoG.
The recurring themes for complaints received comprised delays with discounting of investments; variation of loan terms unilaterally by lenders; delays in loan processing; and poor approach to loan recovery. Others included disputed charges on accounts; issues with digital channels such as high downtimes and truncated transactions; and mobile money fraud. It is pertinent to note that the Consumer Recourse Mechanism Guideline for Financial Service Providers (2017) prescribes the three (3) avenues for dispute resolution, namely: 1) the Financial Service Provider; 2) the Bank of Ghana; and 3) the Courts.