Policies to strengthen financial consumer protection will soon be on the way, as Central Bank Governor Jwala Rambarran announced Friday that the bank has completed the first step to creating a proposed policy document aimed at upgrading the existing framework.
At the bank’s annual breakfast meeting for the anniversary of the creation of the Office of the Financial Services Ombudsman (OFSO) at Central Bank Tower, Port of Spain, Rambarran said a report commissioned last year from former chairman of the International Network of FSO Schemes David Thomas on how best to improve Trinidad’s current consumer protection policies in line with international best practice has been completed and accepted by the bank.
This report, titled “Financial Services Ombudsman in Trinidad and Tobago: A Strategy for the Future” will form the basis of the bank’s proposed policy. With this draft policy in hand, the bank intends to meet with all stakeholders in the financial services industry to discuss further, Rambarran said.
The first and most critical legislative proposal relates to changing the voluntary nature of the financial services ombudsman regime to one under-pinned by legislative authority, he said.
2013- $25 billion; 2009- $19 billion.
Mortgage debt rose: 2013- $10 billion; 2009- $7 billion
Credit cards in active circulation: almost 200,000 cards
Consumer credit card debt:
around $2 billion.
Remittances: US$100 million average in the last decade
“Under the present voluntary system, if there is an emerging issue that can only be dealt with by amending the terms of reference agreements, the support of all members has to be sought and received. Experience has shown that this is a difficult feat to accomplish.
The Draft PPD proposes to establish in law a scheme known as the Office of the Financial Services ombudsman (OFSO). The OFSO will be an independent body corporate headed by the financial services ombudsman who will have various powers and duties. The scheme shall be the only alternate dispute resolution scheme approved by the Central Bank for institutions regulated under the Financial Institutions Act and the Insurance Act. In other words, as long as a financial institution is regulated by the Central Bank, it will be mandatory for it to be part of the Scheme. Under a mandatory system enshrined in law, Parliament would be approached in order to effect any change through an amendment to the legislation,” he said.
Governance will be the second critical proposal.
“The OFSO should be independent of consumers and of the financial services industry, whose disputes are being handled. In deciding cases, the ombudsman also needs to be independent of the Central Bank, because the ombudsman is acting as an alternative to the courts. So it is helpful for the ombudsman’s office to have an independent board, with a balanced membership reflecting persons with an understanding of regulation, the financial industry and consumer protection,” Rambarran said.
He said retail consumers operate in a marketplace where imbalances of power, information and resources are on the side of financial institutions; at its heart, consumer protection seeks to address this imbalance.
“Consumer protection should give consumers accurate information in simple, plain and comparable language before they buy a financial service or product. Consumer protection is meant to give consumers access to a fast, inexpensive and efficient mechanism for resolving disputes with financial institutions…and consumer protection seeks to give consumers financial education when they want it and in the form they want it,” he said.