> Sergio Guzmán
In a month, my Center colleague Kelley Mesa and I will be traveling to Colombia to investigate the role that consumer protection plays for microfinance customers and providers there. Turns out the timing of our trip is perfect, as Colombia’s Congress has recently passed a new law that updates the protections for financial consumers. Following are some of the highlights:
First and foremost the law defines a consumer of financial services as: every client, user or potential client of the supervised institutions.
Second, most financial reform laws that I have read while doing research for the Center’s Client Protection Library usually contain transparency articles that are quite vague, however, this law contains a more specific mandate for transparency saying not only that all institutions must provide consumers of financial services with accurate, sufficient and opportune information, but that also institutions must provide for free a detailed list of all charges and costs accrued from the usage of products and services. This includes, maintenance fees, usage of ATMs, credit history checks, insurance, and balance checks among others.
Moreover, it states that institutions must let consumers know the characteristics of the products and services, consumers’ rights and obligations, the fees and prices and how they are determined , the instructions for the safe use of the product or service, and the consequences of failing to honor a contract. The law leaves it up to the Financial Superintendence to set up specific rules and guidelines for financial institutions to comply with the law, which can be a lengthy process. (It took 18 years to properly lay out rules for the Privacy of Information Law “Habeas Data.”)
Third, the law clearly states that institutions must develop financial education campaigns and programs to inform consumers about the different products and services that are made available to them, their rights and obligations, the cost of the products and services provided, and the different mechanisms established for the protection of their rights.
Fourth, the law defines a list of abusive practices that are forbidden (and the Superintendent must determine the pertinent sanctions) such as providing services that the institution is not allowed to provide through third parties or others, renewing services without prior approval from the client, issuing contracts with blank clauses, and including clauses in the contracts whereby the client renounces to his or her rights among others.
Fifth, the law clearly states that institutions, under the supervision of the Financial Superintendence, shall not charge for collections practices (in legalese it says that this can only be done after having appropriately informed clients the cost these entail) and that collections practices must be conducted in a respectful manner and within appropriate time frames .
This leads into our sixth and most important component of the law, the Financial Consumers’ Attention System and its principal enforcer, the “Defensor del Cliente” or Ombudsman. The law states that all financial institutions must have policies and procedures regarding consumer protection with the fundamental objectives of client education, staff training, and raising awareness about the Defensor del Cliente. Furthermore, institutions must have policies in place to comply with the points that have been highlighted above. Also, the institutions must have clear policies for complaints management and mechanisms that keep track of complaints in order to establish opportunities for improvement.
The law carefully outlines the roles and responsibilities of the Defensor, which center around the mediation of client-institution disputes to find common ground but also include representing clients before financial institutions and providing recommendations to improve processes and services. Also, it is the Defensor’s role to propose modifications to the current regulations in order to make improvements that might benefit the protection of consumers’ rights. Most importantly, if the parties cannot reach an amicable resolution of disputes, the decisions taken by the Defensor del Cliente to settle the matter at hand are binding.
All regulated financial institutions must have a Defensor, who will be picked from a select pool of candidates from the Superintendence’s staff (The Defensor will be on the institution’s payroll, but formally they are not part of the institution’s staff). Moreover the person chosen will serve for a period of two years with the possibility of serving several institutions at the same time.
The Colombian Congress and government have acted strongly to protect the rights of consumers of financial services. An important drawback however is that the details of enforcement are left to the Superintendent, and formulating them could take quite some time.
In the meantime, stay posted, because I will share my experiences from the field while interviewing clients and practitioners about their perceptions of consumer protection and the new role of the Defensor del Cliente.