Dissemination Workshop - Romania
ROMANIA: Diagnostic Review of Consumer Protection and Financial Literacy
(October 20, 2009)
Increased Protection for Consumers of Financial Services Ensures Stability and Boosts Confidence
The rapid expansion of credit and other financial services for households has highlighted the need for strong consumer protection and financial literacy in Romania, reveals the latest World Bank report
Contacts: Iolanda Stăniloiu (40 21) 201 03 24
BUCHAREST, October 20, 2009 - Financial services consumer protection improves efficiency of financial intermediation and indirectly reduces risks to financial stability, which has been seriously challenged by the ongoing financial turmoil. The latest World Bank’s study entitled “ROMANIA: Diagnostic Review of Consumer Protection and Financial Literacy” provides an in-depth review of the existing rules and practices in Romania compared to international good practices on consumer protection in financial services.
The key findings of the Romania report were presented today at a workshop inaugurated by Mrs. Arntraud Hartmann, Acting Country Manager of the World Bank office in Romania, Mr. Petru Rares, Executive President and General Director of the Romanian Banking Institute, and Mr. Nicolae Idu, Head of the European Commission Representation in Romania. The event was attended by government officials from Ministry of Finance, Ministry of Economy and Energy, the National Bank of Romania, the financial supervision agencies, National Authority for Consumer Protection, Competition Council, banks and financial institutions.
The report, prepared at the request of Romanian Government, is one of nine country reviews in a World Bank-sponsored pilot program to assess consumer protection in financial services in developing and middle-income countries worldwide. It uses a set of draft good practices prepared by the World Bank based on international approaches to effective and efficient consumer protection in financial services in both developed and developing countries. Similar reviews have been conducted for the Czech Republic, Slovakia, Lithuania, Bulgaria, Croatia, Russia, Latvia and Azerbaijan.
”The most valuable global asset today is trust. Strengthening financial services consumer protection builds public trust in financial systems. The World Bank, as a committed partner, aims to bring up the best of global and European knowledge and best practices to support Romania. Adequate knowledge and protection of consumers is part of the foundation for a sound financial system”, said Arntraud Hartmann, World Bank’s Acting Country Manager for Romania at the official presentation of the report.
Use of consumer financial services has been increasing in Romania dramatically in recent years. Bank loans to Romanian households have risen during last decade from almost nothing to about 20 percent of Gross Domestic Product in 2008. This represents an average annual increase of about 100 percent a year for five years-- the most rapid rise in household lending across Europe. Furthermore, at the end of 2008, almost 60 percent of all household debt was in foreign currency, mostly Euros but also Swiss Francs and other currencies. Also the ratio of household debt service burden relative to disposable income reached over 20 percent at the end of 2008 (compared to 5 percent at the end of 2004). These developments raise the issue of whether the average Romanian household is able to effectively monitor and manage the level of risks it may have been increasingly assuming.
In order to address these challenges, Romania could consider a pragmatic and effective program to strengthen financial consumer protection through:
- Improving consumers’ awareness of their rights (and responsibilities) regarding financial services;
- Strengthening information and disclosure to consumers on financial products;
- Improving the professional competence of sellers of financial products,
- Improving dispute-resolution mechanisms for consumers on financial products;
- Strengthening financial education available to consumers; and
- Conducting financial literacy surveys of consumers.
According to Sue Rutledge, the World Bank’s Regional Consumer Protection Coordinator and one of the main authors of the report, “These six measures are not easy to put in place but all are important. Taken together, they will establish the foundations needed to ensure that Romanian households can make even difficult financial decisions with confidence”. She continues: “The program requires an active role not just by the Romanian government authorities but also by the financial institutions, their professional associations and members of civil society. The result will be empowered financial consumers—and a stronger society—and we hope, a stronger and more stable financial system”.
DIAGNOSTIC REVIEW OF CONSUMER PROTECTION
AND FINANCIAL LITERACY
Romania: Diagnostic Review of Consumer Protection and Financial Literacy
Volume I: Key Findings and Recommendations (pdf, 532 kb)
Volume II: Comparison against Good Practices (pdf, 830 kb)
(October 20, 2009)
|Location: Romanian Banking Institute|
Aula "Costin Murgescu", Entrance A
3 Negru Voda Street, Sector 3, Bucharest, Romania
|08:30|| ||Registration of participants|
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|09:00|| ||Welcome remarks|
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Mr. Petru Rareş, Executive President and General Director of Romanian Banking Institute
Mrs. Anna Hartmann, Acting Country Manager for Romania, The World Bank
Mr. Nicolae Idu, Head of European Commission Representation in Romania
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|10:00|| ||EU Priorities and Strategies on Consumer Protection and Financial Education|
Mr. Nicolae Idu, Head of European Commission Representation in Romania
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| || ||Diagnostic Review of Consumer Protection and Financial Literacy in Romania|
| || ||Ms. Sue Rutledge, Regional Consumer Protection Coordinator, The World Bank|
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"How to Improve Consumer Financial/Banking Education and Information? What are Good Business Practices?"
(Institutional structure, consumer disclosure and strengthening the business practices of financial/banking institutions vis-à-vis consumers)
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Ms. Sue Rutledge, Regional Consumer Protection Coordinator, The World Bank
Mr. Florin Georgescu, First Deputy Governor, National Bank of Romania
Mr. Bogdan Drăgoi, Secretary of State, Ministry of Public Finance
Mr. Radu Graţian Gheţea, President, Romanian Banking Association
Mrs. Gabriela Anghelache, President, Financial Supervision Commission
Mrs. Adriana Ahciarliu, Secretary General, Financial Companies Association in Romania
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|12:15|| ||Panel II:|
"How to Strengthen Financial Literacy and Consumer Protection? Where and How to Resolve Disputes?"
(Mechanisms to address consumer complaints and disputes and access to useful and timely financial education)
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Mrs. Gabriela Tudor, Deputy General Director, Romanian Banking Institute
Mr. Bogdan Marcel Pandelică, Secretary of State, President of National Authority for Consumer Protection
Mr. Mircea Oancea, President, Private Pension System Supervisory Commission
Mrs. Angela Toncescu, President, Insurance Supervisory Commission Council
Mr. Sorin Mierlea, President, National Association for Consumer Protection and Promotion of Programs and Strategies from Romania
Mr. Radu Soviani, Chief Editor, Business Standard publication; Scorer, Editor and Presenter, The Money Channel TV
Mr. Sorin Pâslaru, Editor in Chief, Financial Newspaper ("Ziarul Financiar")
Mr. Alin Iacob, Editor in Chief, "Conso.ro"
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Improving Protection in Financial Services for Romanian Consumers
Sue Rutledge (Regional Consumer Protection Coordinator, The World Bank)
Arabela Aprahamian (Senior Operations Officer, World Bank Office Romania)
Over the last decade, households across Europe, North America, Latin America and Asia have discovered a new commodity—consumer credit. From western reaches of the European Union to eastern shores of Central Asia, households have taken on debt to pay for housing, cars and just getting by. Romania has been no exemption.
Bank loans to Romanian households have dramatically increased during this decade, from almost nothing to about 20 percent of Gross Domestic Product in 2008. This represents an average annual increase of about 100 percent a year for five years-- the most rapid rise in household lending across Europe. Furthermore, at the end of 2008, almost 60 percent of all household debt was in foreign currency, mostly Euros but also Swiss Francs and other currencies. Also the ratio of household debt service burden relative to disposable income reached over 20 percent at the end of 2008 (compared to 5 percent at the end of 2004). These developments raise the issue of whether the average Romanian household is able to effectively monitor and manage the level of risks it may have been increasingly assuming.
Despite the rapid expansion of consumer credit in recent years, a large number of Romanians are still not part of the financial system. Only about a quarter of the population has bank accounts and there are only 43 loan accounts per 100 adults on average. The private credit bureau only covers information of a quarter of the adult population. Even more, less than half percent of the population invests in mutual funds.
This week, the World Bank is publicly releasing its Diagnostic Review of Consumer Protection and Financial Literacy for Romania.* The report considers that the foundations for consumer protection and financial literacy in Romania are in place, but there is need for further support in six key areas:
1. Improving consumers’ awareness of their rights (and responsibilities) regarding financial services;
2. Strengthening information and disclosure to consumers on financial products;
3. Improving the professional competence of sellers of financial products,
4. Improving dispute-resolution mechanisms for consumers on financial products;
5. Strengthening financial education available to consumers; and
6. Conducting financial literacy surveys of consumers.
First, consumers’ awareness of their rights (and responsibilities) regarding financial services should be improved. For this matter, the review recommends that in the short term the institutional capacity of the National Authority for Consumers' Protection be strengthened. A separate unit or department should be established within the Authority to specialize in financial services issues. Over the long term, consideration should be given to establishing a special financial consumer protection agency. A nationwide program of consumer communications and awareness of financial issues should be developed by the consumer protection authority, in collaboration with the professional associations for the financial sector, and the consumer associations. The program should use different distribution channels including mass media. The professional associations should also be encouraged to develop consumer protection codes, which would help consumers be aware of their rights and responsibilities.
Second, financial institutions should provide easy to read, accurate and complete information to existing and prospective customers. Basic information regarding financial products should be presented in a simple format, such as a Key Facts Statement which is used in Australia and elsewhere. Basic provisions of consumer contracts could be standardized. The financial supervisory agencies should encourage professional associations to develop both Key Facts Statements and standard contract provisions, with the suggestion that all member financial institutions follow the formats. Misleading advertising as well as abusive and deceptive sales practices regarding financial products should be prohibited. Cooling-off periods, when consumers can change their mind for a few days after signing a contract, also make sense for long-term financial contracts (such as residential mortgages or insurance contracts with long-term savings components).
Third, the professional competence of sellers of financial products should be improved. A three-tiered system for the training and certification of intermediaries and other sellers of financial products would be useful. Consideration should also be given to improving the licensing requirements for financial advisors and credit/insurance brokers, for example, by creating the institution of a certified financial advisor.
Fourth, the mechanisms for dispute resolution should be strengthened. Each financial institution should be obliged to set clear procedures for handling and tracking customer complaints, and to provide consumers with information on how to seek a remedy for problems arising with the financial institution or any of its intermediaries. Consumer complaints about financial services should be consolidated by one central location, which should publish statistics on the number and status of complaints at least annually, and analyze the trends in the different types of complaints. Over the long term, consideration should be given to establishing a form of financial ombudsman—an institution with specialized staff to whom consumers could send their complaints when the financial institutions cannot resolve them. As a first step, a voluntary ombudsman could be established under each professional association. If the voluntary ombudsmen prove to be insufficient in providing fair and speedy resolution to customer disputes, an independent statutory ombudsman should be considered.
Fifth, a national strategy to develop financial education to consumers should be in place. Consumers should have easy access to financial education so that they can learn about their financial services—not just the terms of service but also the risks and rewards of different personal financial strategies. Financial education should be provided to consumers at “teachable moments” when they are searching for information about financial services and financial planning. Programs for teaching children in primary and secondary schools should also be considered. The financial supervisory agencies should play a role in educating consumers and alerting them to illegal practices in the financial sector, for example through a "Consumer Affairs" page on their websites.
Sixth, regular nationwide surveys of financial consumers should be conducted. An initial survey should be conducted as a baseline analysis with follow-up surveys every three to five years. The surveys should cover consumer spending habits and financial well-being, as well as levels of financial literacy and understanding. The results of the surveys should be used to define the national programs of consumer awareness and financial education, and later evaluate their effectiveness and determine what further modifications may be needed.
These six measures are not easy to put in place but all are important. Taken together, they will establish the foundations needed to ensure that Romanian households can make even difficult financial decisions with confidence—whether it is to buy a new house, pay for car repairs or just find a way to save a little between pay checks. The program requires an active role not just by the Romanian government authorities but also by the financial institutions, their professional associations and members of civil society. The result will be empowered financial consumers—and a stronger society.
* World Bank, Romania: Diagnostic Review of Consumer Protection and Financial Literacy, Revised Draft, July 2009
Sase Masuri pentru Protectia Consumatorilor din Industria Financiara
Sue Rutledge (Coordonator Regional pentru Protectia Consumatorilor, Banca Mondiala)
Arabela Aprahamian (Senior Operation Officer, reprezentanta Bancii Mondiale in Romania)
In ultimul deceniu, populatia din Europa, America de Nord, America Latina si Asia a descoperit un nou articol de comert creditul de consum. De la granitele apusene ale Uniunii Europene la tarmurile rasaritene ale Asiei Centrale, oamenii au inceput sa se imprumute pentru a plati locuinte, masini sau doar pentru a trai de la o zi la alta.
Imprumuturile bancare catre populatia Romaniei au crescut dramatic in acest deceniu, de la aproape zero la aproximativ 20 de procente din produsul intern brut in 2008. Aceasta reprezinta o crestere medie anuala de aproximativ 100 de procente pe an, in decurs de cinci ani cresterea cea mai rapida din Europa la imprumuturile pentru populatie. Mai mult decat atat, la sfarsitul anului 2008 aproape 60 de procente din intreaga datorie a populatiei erau in valuta, in principal euro, dar si franci elvetieni si alte valute. De asemenea, raportul dintre povara serviciului datoriei populatiei si venitul disponibil a ajuns la peste 20 de procente la sfarsitul anului 2008 (comparativ cu 5 procente la sfarsitul anului 2004). Aceasta evolutie ridica intrebarea daca gospodaria romaneasca medie este capabila sa monitorizeze si sa tina sub control in mod eficace nivelul de risc pe care este posibil sa si-l fi asumat intr-o masura tot mai mare.
In ciuda expansiunii rapide a creditului de consum in ultimii ani, mare parte dintre romani nu fac parte inca din sistemul financiar. Numai aproximativ un sfert din populatie are conturi bancare si exista, in medie, doar 43 de conturi de imprumuturi la 100 de adulti. Biroul de credit privat acopera informatii numai pentru un sfert din populatia adulta. Mai mult decat atat, mai putin de jumatate de procent din populatie investeste in fonduri mutuale. In aceasta saptamana, Banca Mondiala lanseaza "Analiza-diagnostic a protectiei si educatiei consumatorilor de produse si servicii financiare in Romania".* Raportul considera ca bazele pentru protectia consumatorilor si cultura financiara in Romania exista, dar ca este in continuare nevoie de sprijin in sase domenii-cheie.
In primul rand, ar trebui imbunatatita constientizarea consumatorilor cu privire la drepturile (si responsabilitatile) lor referitoare la serviciile financiare. Analiza recomanda consolidarea institutionala a Autoritatii Nationale pentru Protectia Consumatorilor si infiintarea unui departament specializat in probleme de servicii financiare in cadrul acesteia, iar pe termen lung, chiar a unei agentii de profil. Autoritatea de protectie a consumatorilor, impreuna cu asociatiile profesionale pentru sectorul financiar si cu asociatiile consumatorilor, ar trebui sa initieze un program national de comunicare cu consumatorul si constientizarea acestuia cu privire la problemele financiare, prin diverse canale de distributie, inclusiv mass-media. Asociatiile profesionale ar trebui incurajate, de asemenea, sa elaboreze coduri de protectie a consumatorilor, care i-ar ajuta pe acestia sa fie constienti de drepturile si responsabilitatile lor.
In al doilea rand, institutiile financiare ar trebui sa furnizeze consumatorilor existenti si potentiali informatii usor de citit, exacte si complete. Informatiile de baza referitoare la produsele financiare ar trebui prezentate intr-o forma simpla, cum ar fi documentul Key Facts Statement ("Informatii importante"), utilizat in Australia si in alte parti. Prevederile de baza ale contractelor pentru consumatori ar putea fi standardizate. Ar trebui interzisa reclama inselatoare, precum si practicile de vanzari abuzive si inselatoare cu privire la produsele financiare. De asemenea, sunt utile niste perioade de gandire de cateva zile, in care consumatorii sa se poata razgandi dupa semnarea unui contract, in cazul contractelor financiare pe termen lung (cum este cazul ipotecilor pentru locuinta sau al contractelor de asigurari cu componente de economisire pe termen lung).
In al treilea rand, ar trebui perfectionata competenta profesionala a vanzatorilor de produse financiare. Ar fi util un sistem cu trei componente pentru instruirea si autorizarea intermediarilor si a altor vanzatori de produse financiare. De asemenea, ar trebui sa se acorde atentie imbunatatirii cerintelor de acordare a licentei pentru consultantii financiari si brokerii de credit/asigurari, de exemplu prin crearea functiei de consultant financiar autorizat.
In al patrulea rand, ar trebui consolidate mecanismele de solutionare a disputelor. Fiecare institutie financiara ar trebui sa fie obligata sa stabileasca proceduri clare de tratare si urmarire a reclamatiilor clientilor si sa ofere informatii despre modul in care sa caute remedii pentru problemele cu institutia financiara sau cu oricare dintre intermediarii acesteia. Reclamatiile consumatorilor cu privire la serviciile financiare ar trebui centralizate, pentru a facilita realizarea si publicarea cel putin anual a unor statistici despre numarul si situatia reclamatiilor, precum si analiza tendintelor diverselor tipuri de reclamatii. Pe termen lung, ar trebui sa se aiba in vedere stabilirea unei forme de ombudsman financiar - o institutie cu personal specializat la care consumatorii ar putea trimite reclamatiile atunci cand institutiile financiare nu le pot rezolva. Ca prim pas, ar putea fi infiintat un ombudsman voluntar in cadrul fiecarei asociatii profesionale. Daca ombudsman-ii voluntari se dovedesc a fi insuficienti in asigurarea de rezolvari rapide si corecte ale disputelor cu consumatorii, ar trebui avut in vedere un ombudsman statutar independent.
In al cincilea rand, ar trebui sa existe o strategie nationala de dezvoltare a educatiei financiare a consumatorilor. Consumatorii ar trebui sa aiba acces facil la educatia financiara, astfel incat sa poata afla informatii despre serviciile lor financiare, nu doar despre conditiile serviciului, ci si despre riscurile si recompensele diverselor strategii financiare personale. Educatia financiara ar trebui oferita consumatorilor in "momente in care sunt dispusi sa se lase invatati", si anume atunci cand sunt in cautare de informatii privitoare la serviciile financiare si la planificarea financiara. De asemenea, ar trebui luate in considerare programele pentru educarea copiilor din scoala primara si gimnaziala. Agentiile de supraveghere financiara ar trebui sa joace un rol in educarea consumatorilor si in alertarea lor cu privire la practicile ilegale din sectorul financiar, de pilda printr-o pagina intitulata "Pentru consumatori" pe site-ul web.
In al saselea rand, ar trebui efectuate anchete regulate la nivel national in randul consumatorilor financiari. Ar trebui efectuata o ancheta initiala ca analiza de baza, cu anchete de urmarire la fiecare trei-cinci ani. Anchetele ar trebui sa acopere obiceiurile de cheltuire si bunastarea financiara ale consumatorilor, precum si nivelurile de cultura si pricepere financiara. Rezultatele anchetelor ar trebui folosite pentru a defini programele nationale de constientizare si educatie financiara a consumatorilor, iar mai tarziu pentru a le evalua eficacitatea si a stabili ce modificari sunt necesare in continuare.
Aceste sase masuri nu sunt usor de implementat, dar toate sunt importante. Luate laolalta, ele vor pune bazele necesare pentru a asigura populatia din Romania ca poate lua cu incredere chiar si decizii financiare dificile fie ca este vorba de cumpararea unei case noi, de plata reparatiilor masinii sau doar de a gasi o cale de a economisi cate ceva de la un salariu la altul. Programul necesita un rol activ nu numai din partea autoritatilor guvernamentale romanesti, ci si a institutiilor financiare, a asociatiilor lor profesionale si a membrilor societatii civile. Rezultatul va consta in consumatori financiari mai puternici si intr-o societate mai puternica.
* Banca Mondiala, Romania: Analiza-diagnostic a Protectiei Consumatorilor si a Culturii Financiare, Proiect Revizuit, Iulie 2009