Consumer Corner -
HKMA’s Work in Relation to Strengthening Financial Consumer Protection
The HKMA is of the view that consumer confidence and trust are the cornerstone for sustainable development of banks, which in turn promotes banking stability. To earn and keep customers’ confidence and trust, banks should treat customers fairly at all stages of their relationship with them. Over the past few years, the HKMA has been engaging the banking industry on various initiatives to promote a stronger corporate culture among banks of treating their consumers fairly. The credit card reform in Hong Kong is one of the initiatives of the HKMA in this regard. This involved the HKMA working with the industry to introduce a set of enhanced credit card practices, with reference to similar developments in the US and the UK. A total of 31 measures were announced by the industry and fully implemented by authorized institutions. These measures aim at promoting fair and responsible business practices by credit card issuers. Some of the measures will reduce cost to the customers while the increased disclosure will enable customers to compare products/services among authorized institutions and make informed decisions. Implementation of the credit card reform in Hong Kong will bring Hong Kong in line with international standards in terms of good credit card practices.
The HKMA has also worked with the industry to develop the Treat Customers Fairly (TCF) Charter (PDF File, 79KB). The Charter incorporates five high-level principles (TCF principles) and is primarily aimed at retail consumers. The Charter has drawn from good practices locally and overseas and from the G20 High-Level Principles on Financial Consumer Protection. All the retail banks in Hong Kong have signed up to the Charter on 28 October 2013, pledging to support and implement the principles. To assist implementation, the HKMA will, after consultation with the industry, provide some generic examples of measures to the banks to promote the TCF principles.
Enhancing Disclosure and Transparency
Authorized institutions should provide consumers with key information that informs the consumers of the fundamental benefits, risks and terms of the products. The Code of Banking Practice (CoBP) (PDF File, 181KB) is intended to increase transparency in the provision of banking services so as to enhance customers’ understanding of the services provided by authorized institutions. Under the CoBP, authorized institutions should make readily available to customers written terms and conditions of a banking service, including fees and charges, penalties and relevant interest rates and the customers’ liabilities and obligations in the use of the banking service. All financial promotional materials should be fair, reasonable and not misleading. The HKMA expects all authorized institutions to comply with the CoBP at all times.
Authorized institutions are required to engage an independent internal party to conduct regular self-assessments on their compliance with the CoBP and report the results to the HKMA. The HKMA also conducts on-site examinations of authorized institutions to monitor their compliance with the CoBP. These monitoring measures are supplemented by the mystery shopping programme undertaken by the HKMA from time to time to assess authorized institutions’ compliance with the CoBP.
Promoting Financial Consumer Education
- The HKMA has been stepping up its efforts in financial consumer education. Recently, the HKMA has launched a Consumer Education Programme to educate the public to be smart and responsible in the use of banking products and services.
- From time to time, the HKMA also publishes inSight articles to enhance consumers’ awareness of their rights and obligations as well as their understanding in the key features and risks of certain financial products.
- The HKMA has worked closely with other relevant stakeholders, such as Hong Kong Association of Banks, Consumer Council, Investor Education Centre * and Education Bureau, to promote financial literacy in Hong Kong.
Strengthening Complaints Handling and Redress Mechanisms
The HKMA would like to ensure that financial consumers have access to adequate complaints handling that are affordable, independent, fair, timely and efficient. The HKMA has a dedicated department responsible for handling customer complaints about banking services and ensuring that authorized institutions have effective systems to handle customer complaints fairly, consistently and promptly.
The HKMA and the Securities and Futures Commission have worked closely with the Government to establish the Financial Dispute Resolution Centre Limited which provides financial consumers with an independent and affordable avenue for mediation and arbitration to resolve monetary disputes with financial institutions.
Enhancing Protection of Consumer Data and Privacy
- The HKMA expects authorized institutions to comply with the Personal Data (Privacy) Ordinance (PDPO) in the collection, use and holding of customer personal data. They should also comply with any relevant codes of practice issued or approved by the Privacy Commissioner for Personal Data giving practical guidance on compliance with the PDPO.
Enhancing Investor Protection
- In light of growing diversity of investment products with varying complexity and risks as well as the special trust in banks by their customers, there is an increasing need to enhance protection for bank customers, especially retail customers who may have limited investment knowledge. Coupled with the growing public expectation for better protection of bank customers, the HKMA has required authorized institutions to implement a number of enhanced measures on top of the measures introduced by other financial regulators (e.g. audio recording of sale process involving complex products or risk-mismatch, physical segregation of investment business from general banking business, and pre-investment cooling-off period for certain investment products). These enhanced measures are mostly targeted at retail customers in order to accord an appropriate level of protection to them. Taking into account the level of sophistication and investment needs of private banking customers and corporate banking customers, the HKMA adopts a more measured approach on conduct regulation while maintaining appropriate investor protection.
- The HKMA formulates policies and issues circulars or guidelines governing authorized institutions’ sale of investment products to customers.
- The HKMA conducts on-site examinations of authorized institutions, mainly focusing on regulatory compliance, internal controls and management supervision. The HKMA also performs off-site surveillance, including analyzing authorized institutions’ regular and ad hoc returns and surveys, and conducting from time to time mystery shopping of authorized institutions’ sale of investment products. The HKMA monitors remedial actions taken by the authorized institutions on issues of supervisory concerns or non-compliance identified in the supervisory process.
Participation in International Forums on Enhancing Financial Consumer Protection
- Following the global financial crisis, international efforts have intensified to enhance financial consumer protection policies. The development of high-level principles on financial consumer protection was in response to a call from the G20 Finance Ministers and Central Bank Governors for the Organisation for Economic Co-operation and Development (OECD), the Financial Stability Board and other relevant international organisations to develop common principles to assist G20 countries and other interested economies to enhance financial consumer protection. The development of these principles is led by the OECD which has formed a task force for this purpose. The HKMA is a member of this task force and has been participating actively in providing comments in the drawing up of these principles. The 10 High-level Principles on Financial Consumer Protection (PDF File, 129KB) have been published by the OECD.
Enhanced Deposit Protection
- The Deposit Protection Scheme (DPS) in Hong Kong was introduced in 2006 under the Deposit Protection Scheme Ordinance for protecting depositors in Hong Kong. It is administered by an independent statutory body - Hong Kong Deposit Protection Board (the Board). The day-to-day operation of the Board is undertaken by the HKMA. Both the Board and the HKMA are financial safety net players in Hong Kong. They share a common objective to promote stability of our banking system.
- All licensed banks, unless exempted by the Board, are required to participate in the DPS and the current compensation limit is HK$500,000 per depositor per member bank. Deposits placed with offices of member banks in Hong Kong, whether denominated in Hong Kong dollar, Renminbi or any other currency, and held by an individual or a company, are protected.
- For further information about the DPS, please visit the website of the Board (http://www.dps.org.hk/) or call the Board’s hotline (852) 1831831.
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