EDITORIAL: Consumer protection and the banks
A bank should clarify to consumers the methodology for calculating fees and commissions and the amount of profit earned by the bank for the products and services held by those consumers – Saudi Arabia Monetary Agency, Banking consumer protection Principles 2013.
The recent unilateral increase in fees for services by one of the local commercial banking institutions has brought into high relief the dearth of protection available to the Barbadian banking consumer and the disproportion in bargaining power between the bank and the customer.
Despite a rather formidable level of protection afforded for local consumers generally, including the enactment of statutory guarantees, the establishment of institutions to regulate the contract for supply, and the provision of dispute resolution mechanisms in other business transactions, none of these extends to the banking contract.
The Central Bank of Barbados [CBB] that is the natural supervisor and regulator of banks given the inspectorate function in its parent Act does not now possess a consumer protection mandate. The Fair Trading Commission, while it does possess the authority under the Consumer Protection Act, Cap 326D, to strike down unfair contract terms in a consumer contract, especially where these have not been individually negotiated is limited in that the determination of unfairness there specifically excludes “the adequacy of the price or remuneration as against the… services supplied in exchange”.
The Office of Public Counsel which, in conjunction with the Consumer Claims Tribunal, enforces the guarantees in the Consumer Guarantees Act, Cap 326E, is also constrained by the guarantee that entitles the consumer to pay no more than a reasonable price for a service being applicable only where that price has not already been determined by the contract itself or left to be determined otherwise. This clearly excludes the banking contract where the customer would have agreed to pay the increased fees at least by continuing to avail themselves of the banking services. It may thus be concluded that the Barbadian consumer of banking services falls into a proverbial black hole so far as protection from the increased fees is concerned.
In this context, consumers would have welcomed the even more recent announcement by the Governor of the CBB last week that the Bank is “prepared to act to ensure that [that] Barbadians are not priced out of basic services offered by the commercial banks”, further indicating that the matter was currently receiving its attention.
According to the Governor, “…We don’t want a return to the days of persons putting their money under their mattress. That works for no one…”
Unarguably, any such reform will have to be legislated, given the inequality of bargaining power between the parties to the banking contract of adhesion. For an appropriate template, we may have a look at the G20 High Level Principles on Financial Consumer Protection developed in 2011 by a special task force of the OECD. The Kingdom of Saudi Arabia has formulated some of these principles through the Saudi Arabian Monetary Agency [SAMA}, the regulator and supervisor of licensed financial institutions in the Kingdom. This agency has prescribed a number of rights and responsibilities for consumers of financial services.
Among these are the consumer’s rights to equitable and fair treatment, to financial education and awareness, to protection against fraud and to access to adequate, affordable and effective complaints handling mechanisms. On the other hand, the consumer has a duty to read carefully all information provided by the bank, to apply for only those products and services that meet one’s needs and to ask questions if unclear about anything.
These principles, we suggest, would repay local study.