Unsafe in Any Currency

By Jean Lukaz MIH

Access to financial services is now considered a basic consumer right but the evils of banking and insurance and the vulnerability of poor consumers have grown beyond borders and continents. In Ghana, where over 80 percent of Ghanaians are financially illiterate, and this amazingly includes highly-educated folks, the financial services sector has been swarmed by predatory lending practices from those businesses pretending to be commercial, to the micro-finance and -insurance service specialists, to the non-commercial quasi-NGO (QUANGOs) social missionaries, to the grey area of new innovative mobile phone banking twists. Consumer naivety in financial services has even become a common financial joke in Ghana where consumers are said to always confuse ‘shares’ with ‘shirts’. The Financial Services sector in Ghana and in Africa seem to be loosely regulated by governments and businesses are just paying lip service to voluntary codes outlined by forums such as the Partnership for Making Finance Work for Africa (MFW4A) and the UN Blue Book on Building Inclusive Financial Sectors for Development that have inherent measures to curtail proliferating cross-border shylocks.

On March 15, World Consumer Rights Day (WCRD) 2010, The Consumer Partnership in collaboration with the Ghana Standards Board (GSB) jointly organized a seminar on the Consumers International global theme ‘Our Money, Our Rights’, where a number of financial consumer protection initiatives by SPEED Ghana and the Ghana Microfinance Institute Network (GHAMFIN) targeted at the illiterate and poor consumers were also discussed. This had been an important step in targeting the non-English speaking population as financial literacy educational road shows and drama were conducted in local languages.

The best consumer protection is self-protection and consumers require consumer education to protect themselves in the market place. There is the need for consumer education on financial services to focus on financial capability, responsible finance, consumer protection, and the conduct of business regulation in Ghana. However, most consumer education efforts by government agencies are ineffective because they are in English only and targeted at the literate population who read one or two major newspapers. This leaves about half the population uninformed and uneducated. Consumer Protection Advocacy must thus border on the need for access to stable, secure and fair financial services, which is important for consumers everywhere, not least in the context of the global financial crisis. Government policy makers have a duty to increase consumer information ( ‘truth in lending’ for example), invest in financial literacy initiatives (i.e., consumer education), insist that the retail financial industry take steps to protect consumers (self-regulatory codes of conduct, for example) and encourage the development of an independent regulatory oversight body responsible for monitoring, reviewing and taking complaints. In order to protect consumers, the Government must ensure that consumers have regular reliable information on what services financial institutions offer at which price and what the risk involved is, so that consumers can make well-informed choices.

In a move to protecting Ghanaian consumers in Financial Services, the Bank of Ghana (BoG) has established a new Investigation and Consumer Reporting Office (ICRO) within the Banking Supervision Department (BSD) as the financial industry watchdog office of the Bank of Ghana (BoG), with responsibility for protecting consumers of financial products and services and educating them on their rights and responsibilities. While this effort is laudable, the government must be moving more towards state sponsorship of regulation instead of state provision since this prevents duplication of mandates as is the case of this new ICRO within the Bank of Ghana that is working with the same mission, laws and regulatory authority in all matters relating to banking and non-banking financial business, that is

• Bank of Ghana Act 2002, Act 612
• Banking Act, 2004 (Act 673)
• Financial Institutions (Non-Bank) Law 1993, PNDC Law 328
• Companies Code Act 179, 1963
• Bank of Ghana Notices /Directives / Circulars / Regulations

Ghana must emulate the example of the US in moving for a new regulatory authority specifically dedicated to the protection of consumers of financial services in the form of the new Consumer Financial Protection Agency (CFPA) that was eventually based on the recognition of the vulnerability of consumers to financial services that are ‘Unsafe at any Rate’ as concluded by Elizabeth Warren in her treatise in a 2007 article in Democracy Journal:
‘It is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house. But it is possible to refinance an existing home with a mortgage that has the same one-in-five chance of putting the family out on the street... Similarly, it’s impossible to change the price on a toaster once it has been purchased. But long after the papers have been signed, it is possible to triple the price of the credit used to finance the purchase of that appliance ... The difference between the two markets is regulation’.

The ineffectiveness of the regulatory role of the Bank of Ghana (BoG) in the financial services sector has been exposed since 2004 when it directed all commercial banks in the country, to abolish and in some instances reduce, what it described as unfair bank charges and fees being charged by the various commercial banks operating in the country. The directive, which employed moral suasion as a regulatory tool, only provided a carte blanche for the commercial banks to further exploit poor Ghanaian consumers through extremely high and unfair interest rates.

The banking population of Ghana is about 20% and many Ghanaian households do not save with the banks because of the low interest on savings resulting in a gap that has gained Ghana the status of the country with the highest lending rate in sub-Saharan Africa.

With Ghana's interest rate currently ranging between 23.5% and 41.6% compared with an average estimated rate of 14% for sub-Saharan African countries and 3.34% for Asia's emerging economies, the present business environment promotes a let the borrower beware [‘caveat emptor’] approach to banking and financial services, which the UN Bluebook on Building Inclusive Financial Sectors for Development (2006) considers as a minimalist option that is purely ‘anti-consumer’. This attitude exploits uninformed and uneducated financial consumers and leaves very little responsibility to the lenders. There is the need for an enforced shift from letting borrowers beware to letting the lenders beware, a ‘caveat venditor’ approach as a first step.

Since the beginning of 2010, it seems that most of the global agencies such as Consumers International (CI), World Bank and the International Organization for Standardization (ISO) Consumer Policy Committee (COPOLCO) have gained a new consciousness on the exposure of African and third world consumers in general to the vicissitudes of the financial sector. CI used financial services as the theme of WCRD 2010 to raise awareness of the issue that cuts across borders not only in Africa but also in Europe and the US as the crises has shown. The World Bank Group is developing a Global Program on Consumer Protection and Financial Literacy to address these questions and help consumers help themselves, using a successful program piloted in Europe and Central Asia, the Global Program will be available to developing countries worldwide. And ISO-COPOLCO has initiated a process to gather information on consumer protection issues related to the provision of financial services, and the growth of new technologies and business models that have evolved in response to consumers' needs in financial services such as ethical practices in the provision of financial information and disclosure, best practices regarding the provision of financial services, appropriate design of information for targeted consumer financial products, questionable business practices (e.g. aggressive marketing practices, unfair contract terms) and liability issues, as well as mechanisms of enforcement and redress.

The global consumer, it appears, is not fully protected and is unsafe in any currency given the present practices in the financial services sector.
Contact:

Jean Lukaz
Executive Director
The Consumer Partnership-Ghana [The COP]
Jytlukaz-AT-gmail.com

http://www.ghanaconsumerwatch.wordpress.com
http://www.ghanaconsumerwatch.blogspot.com
http://www.theconsumerpartnership.wordpress.com

Obama’s Long Arm of Consumer Protection Reaches out to Ghana

By Jean Lukaz MIH

A delegation from the Council for International Consumer Protection of the United States Federal Trade Commission (FTC) met with the Consumer lobby in Accra-Ghana under the auspices of the Ministry of Trade and Industry on Wednesday to deliberate on ways of leveraging the institutional strength of the FTC in establishing enforcement mechanisms to protect Ghanaian consumers.

This was part of the FTC’s second year of consumer education outreach to the African continent in their commitment to working towards consumer protection in a global competitive marketplace that knows few boundaries.

In a workshop themed ‘Empowering Consumers through Education’, the FTC delegates Deon Woods Bell and Shaundra L. Watson delivered presentations with Ghanaian counterparts on key topics that included common consumer protection challenges in the legal frameworks of both Ghana and the US, financial practices, internet fraud, consumer education tools, and dispute resolution and redress mechanisms.

According to Ms Bell, the principal, but not the only, consumer protection agency at the federal level is the United States Federal Trade Commission (FTC). The FTC works alone, but in concert with other federal agencies, to administer a wide variety of consumer protection laws. The overall goal is to afford consumers a deception-free marketplace and provide the highest-quality products at competitive prices.

Representatives of consumer protection organizations such as the Consumer Partnership (The COP) was in attendance and offered useful suggestions on how to adopt and implement the lessons learned from the FTC cases and consolidate the Consumer Protection Bill in terms of content and the institutional setup of the proposed Consumer Protection Authority (CPA) that will function as a parallel of the FTC. Other consumer NGOs present were Consumers Association of Ghana, Consumer Protection Agency and Consumer Services Association.

Discussing the legal authority of the FTC, Ms Watson indicated that the organisation has enforcement and administrative abilities and has two main goals of protecting consumers by preventing fraud, deception, and unfair business practices in the marketplace and of maintaining competition by preventing anticompetitive business practices. She added that under the FTC Act, the FTC can make victimized consumers whole through restitution and punish wrongdoers through disgorgement of ill-gotten gains. The FTC seeks these remedies when it can objectively determine a clear violation of a law and reasonably calculate the damages payment. The FTC does not have the power to bring criminal charges. Any such federal cases in the consumer protection area would be brought in federal courts by the U.S. Department of Justice.

The Office of International Affairs of the FTC works with competition and consumer protection agencies around the world to promote cooperation and convergence toward best practices and also actively assists developing countries in their transition to market-based economies and their development of competition and consumer protection agencies.

Updating the audience on the status of the Consumer Protection Policy and the long-awaited Consumer Protection Bill, Mr. Ben Peasah, a Director at the Ministry of Trade and Industry, intimated that the Policy is before Cabinet pending approval after which the next steps towards a consultative development of the Bill can commence.

Participants were drawn from various Ministries Departments and Agencies (MDAs) such as Bank of Ghana, Ghana Police Service, Customs Excise and Preventive Services (CEPS), Ghana Law Reform Commission, Judicial Service, Ghana Standards Board (GSB) and Food and Drugs Board (FDB) among others.

Ghana Celebrates World Consumer Rights Day 2010

Consumer Protection is Government’s Duty!

Government has been urged to meet its obligations in the area of consumer protection both as a constitutional mandate and as required by UN guidelines on consumer protection for governments around the world. This statement was made by Jean Lukaz, Executive Director of the Consumer Partnership-Ghana and ISO Expert Trainer on Consumer Participation in Standardization, during a seminar held to mark World Consumer Rights Day (WCRD) 2010, which was hosted by the Ghana Standards Board (GSB) as part of its efforts at supporting consumer protection activities.

‘Ghanaian consumers must make a conscious effort at changing the culture of silence to adopt a culture of complaints’, he said. This enables businesses, government regulatory agencies and consumer protection organizations to respond effectively to rid out shoddy goods and services and thereby protect their rights, he added.

In his presentation, Mr Lukaz highlighted the fact that not only must consumers exercise their rights but also they should be aware of their responsibilities and the impact of their behaviour on business and government. He added that responsibilities always precede rights and that if Ghanaian consumers want their rights recognised, they must first exercise their responsibilities.

In an attempt to define consumer protection, he said Consumer Protection, thus, can be defined as:

‘the responsible ethical behaviour of consumers, producers or service providers in the respective buying and selling of goods or services and the effective control of the marketplace by the government through the enforcement of laws and regulations, the promotion of standards and the dissemination of consumer education.’ (The Consumer Partnership, 2009)

The best consumer protection is self-protection and consumers require consumer education to protect themselves in the market place. However, most consumer education efforts by governmernt agencies are ineffective because they are in English only and targeted at the literate population who read some key newspapers. This leaves about half the population uninformed and uneducated, he concluded.

Speaking on the theme for this year’s WCRD 2010 ‘Our money, Our rights’ as proposed by Consumers International, Mr Lukaz made reference to the fact that 80 percent of Ghanaians are financially illiterate and this amazingly includes educated folk. He urged that the Financial Services sector must adhere to codes outlined by the Partnership for Making Finance Work for Africa (MFW4A) and the UN Blue Book on Building Inclusive Financial Sectors for Development.

Jean Lukaz criticised the Consumer Movement in Ghana for not being established at grassroot level which has resulted in low levels of impatience and ‘demo-crazyness’. There seems to be more on advocacy than activism but cautioned that the Consumer Movement must desist from statements and activities that will create the perception that it is ‘anti-business’.

Also present were Consumer Protection Agency CEO, Mr Kofi Kapito, who led a discussion on the Ghanaian and quality consciousness and Mr Ken Appenteng of SPEED, who delivered a presentation on financial literacy in Ghana. Representatives from Consumer Focus, Lecturers and students from the University of Ghana Health Science Department were in attendance as well as members of the Public.

The Ghana Standards Board has been supporting consumer protection in Ghana as part of their international mandate from membership to the International Organization for Standardization (ISO) by encouraging consumer participation in standardization through the nomination of Consumer Representatives unto various Technical Committees and the participation of Consumer Organizations in ISO/COPOLCO (Consumer Policy Committee) activities. According to Mrs Adetola, Director of Standards, Jean Lukaz, a consumer representative on a Technical Committee, has been nominated to represent Ghana at the next ISO/COPOLCO Global Workshop on Social Responsibility in Copenhagen, Denmark from 15-21 May 2010.

Mrs Diana Amponsah further explained the activies of COPOLCO and how consumers participate in their activities in a presentation.

The Consumer Partnership-Ghana is advocating for access to stable, secure and fair financial services, which is important for consumers everywhere, not least in the context of the global financial crisis. Government policy makers have a duty to increase consumer information ( ‘truth in lending’ for example), invest in financial literacy initiatives (i.e., consumer education), insist that the retail financial industry take steps to protect consumers (self-regulatory codes of conduct, for example) and encourage the development of an independent regulatory oversight body responsible for monitoring, reviewing and taking complaints.

In a move to protecting Ghanaian consumers in Financial Services, the Bank of Ghana has established a new Investigation and Consumer Reporting Office (ICRO) within the Banking Supervision Department (BSD) as the financial industry watchdog office of the Bank of Ghana (BOG), with responsibility for protecting consumers of financial products/services and educating them on their rights and responsibilities. While this effort is laudable, the Consumer Partnership believes that government should be moving more towards state sponsorship of regulation instead of state provision since this prevents duplication of mandates as is the case of this new ICRO within the Bank of Ghana that is working with the same mission, laws and regulations.

Ghana to host conference on consumer protection in Africa

Ghana is to host an international conference on consumer protection in Africa, coming September 8-9, 2009 in Accra.

More than 250 policy makers, regulators, journalists and representatives from financial institutions and their apex organizations, the education sector, consumer protection agencies, and development partners from over 30 countries will participate in the conference.

The conference would be hosted in collaboration with the Partnership for Making Finance Work for Africa (MFW4A) on the theme “Promoting Financial Capability and Consumer Protection – A step forward towards financial inclusion in Africa.”

A statement from the Ministry of Finance and Economic Planning issued in Accra on Thursday, quoted Dr Kwabena Duffuor, Minister of Finance and Economic Planning saying "Promoting financial capability is about raising awareness, promoting knowledge, building trust, and changing behaviour.”

“And it is not limited to educating consumers and enabling them to take informed decisions on savings, loan and investment products”, he added.

According to him, management and staff of financial institutions need to be trained to become more responsive to the needs of their clients, and supervisors need the capacity to protect consumers against fraud and other bad business practices.

The conference is being organized against the background that low-income households in Africa often have limited access to demand-oriented and affordable financial services.

They include savings, loans, and insurance, which means they have to revert to more expensive and less secure traditional alternatives of saving and borrowing and remain vulnerable to adverse shocks.

Research has shown that in order to strengthen financial institutions in Africa, there is the need to promote financial capability, to empower people to be capable of managing their financial assets and liabilities and to better understand their rights and responsibilities vis-à-vis financial institutions.

However, strengthening the financial capability of the population is not sufficient since governments also have a role to play in protecting consumers by ensuring that financial institutions apply recognized standards and suitable codes of conducts.

In order to create sustainable ‘win-win situations’ in this long-run, it is believed that financial capability measures need to go hand in hand with responsible, transparent and reliable services provided by financial institutions.

In moderated regional and national working groups, participants will have the chance to develop ideas and proposals as to what they think should be done in their country or region to improve financial capability.

A panel on social marketing will show films and discuss which marketing channels can be used best to address the different target groups of financial capability campaigns.

The Government of Ghana, together with the Ghana Microfinance Institutions Network (GHAMFIN), will hold as a prelude to the conference, a day’s Pre-Conference on “Promoting Financial Capability and Consumer Protection in Ghana” on September 7, 2009.

According to Mr Seth Terkper, Deputy Minister of Finance and Economic Planning, “Financial capability is very high on the political agenda of the Government.”

He said “Ghana is one of the first countries in Africa that have developed and started to implement a National Strategy for Financial Literacy and Consumer Protection in the Microfinance Sector”.

Over the past two years, “financial literacy road shows” have been carried out in all 10 regions of Ghana, easy-to-understand educational materials have been developed and distributed, high school quizzes have been organized, and radio programs on saving and responsible borrowing as well as television sitcoms on insurance have been telecast.

All activities will culminate at the Ghana Financial Literacy Week, which will take place from 28 September 28 to October 3, 2009.

Against this background, over 150 Ghanaian and international financial sector champions from the public sector and the financial sector as well as representatives from academia, consumer protection agencies, non-governmental organizations and development partners will discuss and evaluate whether “Ghana is on track and set the right priorities in financial capability and consumer protection”.

Additionally, innovative topics such as “Integrating Financial Capability into High Schools” and “Promoting Financial Capability through Mass Media” will be addressed.


Source: GNA

Towards A Consumer Protection Policy In Ghana

The Constitution of any country spells out the rights of citizens and the state policy defines the remedies. These are then reflected in the legislations, enforcement mechanisms and the administrative structures. So, one needs a clear policy statement from the government, before legislations can be enacted.

Businesses have always found ingenious ways of ripping consumers off and governments have managed to intervene by enacting laws to protect consumers. Laws to control, and punish businesses indulging in, adulteration and short weighing have existed in nearly all ancient civilisations: China, Mesopotamia, etc.

Economics propositioned that ‘the sole and end purpose of all production is consumption’ (Adam Smith). National economic planning policies, thus, aim at allocating scarce resources, as far as possible, to the satisfaction of consumers’ basic needs.

Then there is considerable logical, moral and political force in the proposition that the right person to make the decision about the allocation of resources to his or her own needs is the consumer himself or herself. In earlier times, limited choices made transactions much simpler through the barter system. Trade and the monetisation of societies and their economies were accompanied by innovation and the development of new products and their distribution channels. International trade in modern times is far from bringing perfection and fairness in the market.

Consumers’ Interest as National Interest

American President John F Kennedy moved the consumers’ bill of rights in 1962 in the US Congress saying.. “If a consumer is offered inferior products, if prices are exorbitant, if drugs are unsafe or worthless, if the consumer is unable to choose on an informed basis, then his dollar is wasted, his health and safety may be threatened and national interest suffers.”

Kennedy equated consumers’ interest with national Interest. His speech delivered on 15 March 1962 is what generated the global consumer rights. This date, 15^th March, is now observed as the World Consumer Rights Day, as well as the national consumers’ day in several countries by the global consumer protection movement.

The UN Guidelines for Consumer Protection

The United Nations Guidelines for Consumer Protection adopted by the UN General Assembly of April 1985 call upon governments to develop, strengthen and maintain a consumer policy, and provide for enhanced protection of consumers by communicating it through various means on seven major themes: 1. Physical Safety, 2. Economic Interests, 3. Standards, 4. Essential Goods and Services, 5. Redress, 6. Education and Information, and 7. Health. Implicitly it spells out what governments need to do to buttress the eight rights of consumers.

Guidelines set out and codify the main elements of consumer protection, and create an international framework within which national consumer protection policies can be worked out. They give consumer policy a clear set of objectives and provide a checklist against which governments can measure their own policies. Being guidelines, they are meant to be adopted and reviewed according to changing times, innovations and new developments such as sustainable consumption.

Even when the Guidelines were being debated in the ECOSOC during 1983-85, sections of the business community lobbied against the adoption by the UN of any Guidelines at all, as well as against specific provisions. Consequently, there were attempts by some governments to remove whole sections. The main argument put forward by business interests against the Guidelines were that they favour an interventionist approach to economic management, were hostile to private enterprise, and that the UN has no role to play in what is essentially an area of national policy.

The US government expressed reservations about the Guidelines and some of its specific provisions on Transnational Corporations (TNCs). The US successfully lobbied for the deletion of specific references to TNCs from the final text. This met the criticism of the former Soviet Union that said that the consumer protection work of the UN was “... justified only if and when it promotes the .... protection of the interests of developing countries in the realm of international economic relations and also the protection of the broad working masses in the world against the dictates of transnational corporations.”

The Guidelines were passed in April 1985 and further reviewed in 1995 after 10 years. The present Consumers International (formerly IOCU) fought for this inclusion of certain elements that protected the poor in the Third World during the review.

Consumer Rights as Human Rights

Every welfare state seeks to provide the protection of the Right to Basic Needs of consumers particularly for the have-nots. The right to basic needs is not just a consumer right, but a human right as well. Article 25 of the UN Declaration of Human Rights says: “Everyone has the right to a standard of living adequate for the health and well-being of himself and his family, including food, clothing, housing and medical care and necessary social services.” But this right has not found a place in legislations yet.

Former centrally planned economies had this as well the right to work enshrined in their constitutions, and did succeed to a large extent through appropriate state interventions. In the bargain their economies suffered through high deficits and indebtedness. Rather than create enabling mechanisms for a consumer to create opportunities for acquiring the means, the state relied on price controls and heavy subsidies. With capitalism, the poor are becoming poorer, and more needs to be done to alleviate poverty. It has, therefore, become increasingly important for the State to intervene in the demand and supply markets.

Aims of A Consumer Protection Policy

Governments are urged in the UN Guidelines to give special attention to the needs of disadvantaged consumers, in both rural and urban areas, including low-income consumers, and those with very low levels of literacy. But in addressing the basic needs of consumers it covers only three areas: pharmaceuticals, food standards and drinking water. It also addresses policies that ensure the distribution of essential goods and services, but not the entirety of basic survival needs of the ordinary consumer: food, clothing, shelter, education, health care and sanitation.

Energy and transportation are the two other areas of basic needs are not ordinarily basic to the Third World rural consumer. In several developing countries, government policies focus on ensuring food security through an effective public distribution system. In Ghana, where over 30% of the population live below the poverty line, there are no consumer policies to ensure the survival of the poor. A consumer policy and law for Ghana must ensure the survival and protection of the poor from unscrupulous businessmen who exploit their ignorance to sell them expired and hazardous food and substances.

Many countries now have a number of legislations concerning consumer issues. A Consumer Ombudsman in the form of a central body oversees all consumer protections issues with the support of consumer protection laws. It encourages complainants to use its free services for dispute resolution rather than going to a civil court.

Protecting consumers’ economic interests is as important as regulation to ensure that the goods and services are available at a reasonable price and are safe. There is a consumer dimension to almost every state policy and therefore there is a need to take consumer interest into account in all policy decisions through public consultation. Consumer policy is not only about legislation governing consumer interest nor restricted to redressing consumer complaints.

Conclusion

A Consumer policy generally is “To inform the consumer of goods and services in such a way that his purchasing decisions contribute to the functioning of competitive markets, and to protect him where his position in the market is not strong enough to allow him to play this role”. In most developing countries, problems of consumers are more related to the provision of essential services such as drinking water, sanitation, education and health care, than the market-related ones. There is sufficient political, economic, social and legal rationale for governments to adopt an integrated and holistic consumer protection policy that will guide all Ministries, Departments and Agencies (MDAs) towards genuine consumer welfare.

 

Published in Public Agenda on 4th September 2006: www.ghanaweb.com/public_agenda 

Http://www.theconsumerpartnership.org