Transcript The Client Protection Principles

The Smart Campaign –
Evolution of Client
Protection Principles
Isabelle Barres,
Director, the Smart Campaign
Center for Financial Inclusion at ACCION
April 19, 2011
Timeline of the Development of Principles
2010
2008 & 2009
2008
2004
• ACCION adopts
a statement of
principles developed by
the MicroFinance Network
(MFN)
• Pocantico
Declaration from
microfinance
leaders
emphasizes client
protection failures
• The Smart
Campaign defines
six client protection
principles
• Center for Financial
Inclusion’s Beyond
Codes project and
dialogue groups
produce learning on
client protection
2011: Discussions on how principles should be
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refined and/or
broadened are ongoing
The Client Protection Principles
Revised (Proposed)
1. Appropriate Product Design
Prevention of overindebtedness becomes a lead
issue under credit
Original
1. Avoidance of Overindebtedness
This principle was initially appropriate product
design (though generally cited as avoiding
overindebtedness)
Products and delivery channels will be designed with the intent to
provide value to clients. Providers will analyze the appropriateness of
products and channels with a high expectation that responsible use will
not cause clients harm, and in particular will not lead to overindebtedness.
Core elements include: suitability; simplicity; affordability; suitable
product delivery; no waivers of client rights; and minimum changes.
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The Client Protection Principles
Revised (Proposed)
2. Transparency
Original
2. Transparent and Responsible Pricing
Separated in order to highlight the importance
of transparency as a basic principle while
retaining the focus on responsible pricing.
Providers will communicate clear, sufficient and timely information in a
manner that clients can understand, so that clients can make informed
decisions. The need for transparent information on pricing, terms and
conditions of products is highlighted.
Core elements include: clear use of language; complete cost
information; timely provision of information; advising clients of their
rights; and transparency issues when using banking agents.
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The Client Protection Principles
Revised (Proposed)
3. Responsible Pricing
Original
Separated from Transparent Pricing.
Pricing, terms and conditions will be set in a way that is affordable to
clients while allowing for financial institutions to be sustainable.
Providers will strive to provide positive real returns on deposits.
Core elements include: price-setting process, fees and setting returns
on deposits.
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The Client Protection Principles
Revised (Proposed)
4. Responsible Treatment of Clients
Collections practices are highlighted
Ethical staff behavior is included here
Introduces a new item: non-discrimination
Original
3. Appropriate Collections Practices
This is credit-focused and so needed to be
subordinated to a more inclusive item.
4. Ethical Staff Behavior
Moved to Responsible treatment of clients
Financial service providers and their agents will treat their clients fairly
and respectfully. They will not discriminate. Providers will ensure that
adequate safeguards are in place to detect and correct corruption as
well as aggressive or abusive treatment by their staff and agents,
particularly during the loan sales and debt collection processes.
Core elements include: commitment to a code of ethics; nondiscrimination; appropriate sales techniques and staff incentive
structure; preventing corruption; and client feedback.
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The Client Protection Principles
Revised (Proposed)
5. Effective Complaint Resolution
Unchanged except for new name
Original
5. Redress of Grievances
Providers will have in place timely and responsive mechanisms for
complaints and problem resolution for their clients and will use these
mechanisms both to resolve individual problems and to improve their
products and services.
Core elements include: complete policy and procedures for managing
complaints; ensuring effectiveness; and advising clients of their rights.
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The Client Protection Principles
Revised (Proposed)
6. Privacy of Client Data
Unchanged
Original
6. Privacy of Client Data
The privacy of individual client data will be respected in accordance
with the laws and regulations of individual jurisdictions. Such data will
only be used for the purposes specified at the time the information is
collected or as permitted by law, unless otherwise agreed with the
client.
Core elements include: information security; information provided to
clients about their rights and responsibilities; waivers of privacy rights;
data that could be used for discriminatory purposes; and sharing client
data.
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The Client Protection Principles – Summary
Revised (Proposed)
1. Appropriate Product Design
Prevention of overindebtedness becomes a lead
issue under credit
2. Transparency
Original
1. Avoidance of Overindebtedness
This principle was initially appropriate product
design (though generally cited as avoiding
overindebtedness)
2. Transparent and Responsible Pricing
Separated in order to highlight the importance
of transparency as a basic principle while
retaining the focus on responsible pricing.
3. Responsible Pricing
4. Responsible Treatment of Clients
Collections practices are highlighted
Ethical staff behavior is included here
Introduces a new item: non-discrimination
5. Effective Complaint Resolution
Unchanged except for new name
6. Privacy of Client Data
Unchanged
3. Appropriate Collections Practices
This is credit-focused and so needed to be
subordinated to a more inclusive item.
4. Ethical Staff Behavior
Moved to Responsible treatment of clients
5. Redress of Grievances
6. Privacy of Client Data
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What’s next?
• April 2011: public
comment period
• May 2011: incorporate
feedback
• June 2011: present to
Smart Campaign Steering
Committee
• July – December 2011:
develop roll-out plan for
new principles; add
indicators
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Thank you!
To comment on the proposed principles, go to:
www.smartcampaign.org > “What’s happening”
> Download Revised 2-page CPP Document
Please let the Smart Campaign know if you agree with
these revisions by April 30, 2011, by sending an email to
[email protected]
> Download CPP Guidance Document
If you wish to comment on or contribute to this
document, please send an email to
[email protected]
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