Transcript institut finanzdienstleistungen institute for financial services Responsible Lenders and Responsible Consumers Prof. Dr. Udo Reifner institute for financial services (iff), Germany www.iff-hamburg.de Presentation at the 2009 OECD Corporate.

institut finanzdienstleistungen institute
for financial services
Responsible Lenders
and
Responsible Consumers
Prof. Dr. Udo Reifner
institute for financial services (iff), Germany
www.iff-hamburg.de
Presentation at the 2009 OECD Corporate Responsibility Roundtable
“Consumer Empowerment and Responsible Business Conduct”
15 June 2009 (Monday), Paris
Parallel Session 3: Protecting and Educating Consumers in the
Financial Sector
institute for financial services
Theses
• Consumer Power is derived from
– Consumer Rights
• Rules, Access to courts,
– Consumer Cartels
• Public opinion, corporate image, comparison
– Consumer Complaints
• Exit, Voice and Science
• Consumer Information and Education may
help
• CSR can only offer opportunities for more
consumer power
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Coalition for Responsible Credit
Community Reinvestment Coalition
www.responsible-credit.net
•
Further the idea of responsibility in credit & banking and
promote a set of principles for responsible credit & fair
lending.
•
Organise and maintain a continuing dialogue among
consumer & money advice organisations, social welfare
organisations & trade unions, alternative financial
institutions and other NGOs.
•
Influence bank thinking, strategies, products and
services to benefit underserved and excluded groups.
•
Promote the production of research and transparency.
•
Organise conferences and other forums that increase
people’s and NGO understandings and abilities to
promote fair access to lending products and services.
•
Act as a collective voice for underserved people to the
public with respect to financial services.
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institute for financial services
European Coalition for Responsible Lending (ECRC)
Principles for Responsible Lending
P1: Responsible and affordable credit must be provided for all.
–
a. Credit is essential for people to participate fully in society b. Banks should not discriminate and should
provide real access. c. Credit to Consumers and Small Businesses must be supervised.
P2: Credit relations have to be transparent and understandable.
–
a. Competitive transparency requires a standardized mathematically correct form of “one-price” disclosure
(the Annual Percentage Rate of Charge or APRC). b. Social transparency requires a standardized precontractual payment plan.c. Consumers should be provided with adequate time for reflection and with
access to independent advice. d. Consumers should have access to independent financial, credit and debt
advice. e. Both parties in the credit markets have to take part in a mutually productive process of
financial education
P3: Lending has at all times to be cautious, responsible and fair.
–
a. Credit and its servicing must be productive for the borrower b. Responsible lending requires the
provision of all necessary information and advice to consumers and liability for missing and incorrect
information. c. No lender should be allowed to exploit the weakness, need or naivety of borrowers. d.
Early repayment, without penalty, must be possible. e. The conditions under which consumers can
refinance or reschedule their debt should be regulated.
P4: Adaptation should be preferred to credit cancellation and destruction.
–
a. There is a need for effective protection against unfair credit cancellation. b. Default charges should be
adequate to cover losses only.
P5: Protective legislation has to be effective.
–
a. Credit regulation has to cover all non-commercial users. b. Credit regulation has to cover all
commercial forms of credit provision. c. Credit regulation has to cover the whole process of credit
extension as experienced by its users. d. Credit regulation has to encourage efficient social and economic
effects of credit extension.
P6: Overindebtedness should be a public concern.
–
a. Profit-driven systems cannot cope with over-indebtedness. b. Consumers should have a right to
discharge. e. Bankruptcy procedures should lead to rehabilitation and not to retorsion.
P7. Borrowers must have adequate means to defend their rights and be free to voice
their concerns.
–
a. There should be adequate individual as well as collective legal procedures to enforce borrowers’ rights.
b. Critical public awareness is crucial for the development a fair and responsible distribution of credit and
this requires disclosure of bank services and consumer credit lending patterns to disadvantaged
communities.
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Students learn to…
• understand the central functions of financial services
and the most important terms behind financial services,
• recognize the key criteria in choosing financial services,
• know where to get relevant information from, and how
to compare and judge them,
• comprehend one’s own situation and circumstances,
and be able to relate it to offers of financial service,
• know how to deal with financial difficulties,
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Financial education is not about
learning…
• to listen to banks,
• to think and act like a banker,
• to understand economic cycles,
• to get to know the financial alphabet (“financial literacy”),
• to be a good saver,
• to get to know which products do exist on the market.
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institute for financial services
Mutual Learning
• Students learn to ask questions
– learn to critically reflect on offers of financial services
– ask for better conditions
– Ask for good advice and understandable explanations
• Bankers learn to listen
– Learn to answer only if they are asked
– Get to know the conumers problems interests and needs
– Learn to respond to the consumers questions and needs
• Teachers and partners improve their knowledge of
financial services
• Project partners learn about young peoples needs,
interests and requirements concerning financial services
and how to improve financial services to better suit
their needs
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institute for financial services
Didactic
• Independent study in working groups
• From concrete case studies and products
to an applied knowledge through practice
• Working on particular cases that refer to
the problems, needs and interests of the
students
• Real life situations: banks as learning
areas =>Students ask, bankers answer
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