With increasing demand for credit and more people taking part in financial activities, a watchdog is required to protect consumers, a workshop on protection of finance consumers heard in HCM City on April 26.
Le Thi Kim Xuan, head of the Vietnam Banks Association’s HCM City office, said financial inclusion is a global trend now.
But it does not only mean enhancing access to credit but also protecting consumer rights and improving their finance literacy, she said.
Many countries have implemented plans to enhance the public’s knowledge of finance and set up a regulator to protect their rights, she said.
Though Vietnam adopted a law on consumer rights protection in 2010, which clearly states the responsibilities of relevant stakeholders in case of consumer complaints, violations remain common, she said.
She blamed it on two major factors. Firstly, many consumers remain unaware of their rights due to lack of financial knowledge, and rarely read the contract carefully when borrowing money or signing up for any service, she said.
Secondly, financial providers do not fully disclose information to consumers, who end up signing up for something they are not aware of, she said.
“Therefore, finance education is important and necessary to help consumers access formal financial markets and stay away from loan sharks.”
Speaking to the media on the sidelines of the workshop, James Collan, a financial consumer protection consultant from the International Finance Corporation, said: “Vietnam is facing an increasing indicator of risks due to more citizen participation in financial services, increasing accessibility to credit and more services being offered.”
That is why a financial consumer protection framework should be put in place to mitigate financial risks and the potential for harm done to consumers, he said.
One of the first principles of consumer protection is ‘buyer beware’, meaning consumers need to exercise caution and due diligence but given the level of sophistication, coercion and unethical market conduct displayed by a range of financial institutions nowadays, it is not sufficient to place the responsibility solely on the consumers, he said.
“There needs to be a central body to deal with consumer protection and to build a framework which includes adopting legislation and regulations, and developing education programmes [for consumers].”
The central body would work to ensure consumers are informed about their obligations when borrowing money and help resolve disputes between them and financial institutions, he said.
“It’s unreasonable to think that a consumer can take a financial institution to court and pay for the cost of that. You need an alternative method to resolve the dispute.”
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