Consumer empowerment strategies, along with financial literacy, work together to improve financial capability for vulnerable consumers. The aim of consumer empowerment strategies is to build individuals’ financial capabilities in a safe, protective environment, enabling them to become consumer advocates. A vital aspect of consumer empowerment is consumer protection in financial services.
Consumer protection measures include regulatory requirements for responsible lending, disclosure and appropriate redress mechanisms. In recent years, the financial services sector has seen substantial growth, along with increased complexity of financial products, combined with rapid technological advancements. This growth has not been accompanied by the same growth in financial literacy and regulation. Without adequate focus on consumer protection, this increases the risks faced by vulnerable consumers in engaging with financial services without fully understanding the consequences, such as over-indebtedness, loss of savings, repossession and damaged credit history. Global frameworks such as the G20 High-level Principles on Financial Consumer Protection have been developed to assist regulators in this area.
In the Pacific region, financial consumer protection remains nascent, with regulators facing the challenge of adapting global frameworks to meet the needs of developing and emerging countries, in particular to balance the need to protect consumers with creating an enabling environment to allow financial service delivery, as well as regulatory burden.
PFIP is supporting the Alliance for Financial Inclusion (AFI) and Pacific Islands Regional Initiative (PIRI) to strengthen consumer protection frameworks and supervision of market conduct within PIRI member countries, including sponsoring candidates to attend the AFI PIRI training workshop on Consumer Empowerment and Market Conduct, and developing a model PIRI Consumer Protection Regulation. In 2015, PIRI members reaffirmed their commitment in this area in the PIRI Dili Consensus on Financial Inclusion in the Pacific Islands. PFIP will also continue to work with service providers and regulators to ensure that basic consumer protection practices are embedded in service models and providers’ monitoring systems.