4 problems with (and 5 answers to) financial consumer protection in Kenya

Michael Okumu from CI member organisation YEN,Kenya, advises consumers to educate themselves about a bank’s products and services before they sign up.

Ignorance is truly a fatal disease that increases consumers’ vulnerability. Uneducated consumers buy products and services that do not meet their expectations and then quietly, or never, complain.

On 15 March, the world celebrated World Consumer Rights Day, a day dedicated to highlighting the importance of consumers exercising their rights and responsibilities.

In Kenya, consumer protection is still non-existent with very few mechanisms of redress and a pervasive lack of knowledge of one’s rights as a consumer. This can be compounded by gaps in service delivery by dishonest service providers.

And banks are no exception. Often, consumers don’t get the best deal from a bank and do not respond effectively when this happens.

Here are some of the biggest problems for financial consumers in Africa:

1. Accessibility

Accessibility is a real problem in Africa as consumers often have to travel long distances from rural areas to get a specific service. The introduction of deposit-taking shops has eased the problem slightly but they do not address all the issues relating to accessibility.

2. Lack of ATMs

ATMs are not available everywhere, denying people access to their money and causing consumers to have to pay additional fees for drawing money from ATMs other than those their bank provides. Banks need to be more innovative to provide affordable services for all, everywhere.

3. Hidden fees

Hidden fees are another problem. Taking out loans or enjoying certain services requires close scrutiny by consumers because, in the long run, the high interest rates add up and many consumers are unaware of this at the onset.

4. Low interest

Low interest on savings is another problem still. Some consumers will question whether it is worth saving in a bank if the interest rates are so minimal. Mobile phone services provide an alternative to saving money in a bank as there are no ledger fees, account opening fees, balance statement fees, etc, but there is also no interest.

Consumers need to empower themselves by seeking information and education on their rights and responsibilities. Consumers International is helping consumer groups in East Africa educate consumers about financial services and products with its financial education counselling handbook.

Here are some tips on how to protect yourself:

1. Court your bank

When choosing a bank, consumers need to have a ‘courtship’ period. Gathering background information about a bank is very important because it gives you an idea about the bank’s character in terms of stability, reputation, social responsibility and potential. All of these are key for consumers not only to make good choices but to protect themselves from any eventualities.

2. Evaluate offers closely

Consumers need to keenly evaluate exciting offers and take them up only if they suit them. Consulting with friends or financial advisors would be an added advantage in ensuring that you pick the best financial product or service.

3. Avoid banks you aren’t sure about

It is also prudent to avoid adversely-named banks that could have evaded taxes or banks with a high turnover of staff as this could signal board wrangles, theft or mistreated staff.

4. Avoid downsizing banks

Also avoid banks that could be reducing their networks. They often do not warn their customers that they are doing this.

5. Ask about the complaints desk

A good bank should have a receptive complaints desk with an elaborate mechanism of redress that is accessible and responsive.

Consumers in Kenya should exercise their rights, keeping in mind that the new constitution provides protection as we wait for the Consumer Protection Bill to be passed which will further harness consumer rights and responsibilities.

And remember—if your bank only looks good in the advertising, then look for an alternative rather than ending up in a relationship that doesn’t work.

Breaking ground in the fight for consumer rights in Asia Pacific and Middle East

Following the success of World Consumer Rights Day, Indrani Thuraisingham, Head of CI Office for Asia Pacific and the Middle East, explains why it’s an exciting time for the region.

 
 

World Consumer Rights Day (WCRD) is a great opportunity to see the strength of our members in the Asia Pacific and Middle East region. This year, WCRD focused on consumer choice in financial services. Members from more than 23 countries in our region participated in events to mark the occasion.

Even the newly-formed, one-month-old consumer organisation in Afghanistan, the Consumer Rights and Services Organization (CRSO), (who is in the process of applying for CI membership) joined in by having the first-ever WCRD celebration in their country.

I travelled to Bangladesh to celebrate WCRD with the Consumers Association of Bangladesh, a CI member. There are more than seven million Bangladeshis working overseas and these workers often face high charges of between 5% and 20% every time they send money home.

We are working on this issue as part of our Global Money Transfers project.

In Bangladesh, if you want a copy of your bank statement urgently, you would need to pay USD10 for it. If you’re willing to wait up to five days, then you would need to pay only USD3. All this for your own bank account statement!

Our Consumers for Fair Financial Services campaign fighting for this to be something everyone should be entitled to for free.

The following day I was in India where I was one of the guests of honour at CI member Consumers Association of India’s 10^th anniversary international conference on the theme, ‘Is the consumer really the king?’ Here I talked about the need for consumer organisations to use Facebook and other social media tools to raise awareness on consumer rights and responsibilities.

Come and ‘like’ CI’s Facebook pageand see how we are using social media to raise awareness of consumer issues around the globe.

The CI regional meeting for Asia Pacific and the Middle East

Our office for Asia Pacific and the Middle East hosted the regional members’ meeting and conference: ‘Consumers in the Information Society: Access, Fairness and Representation’ in Kuala Lumpur. Fifty-one participants representing 37 organisations from 20 countries attended this meeting.

In-depth discussions were held on CI’s new strategic direction for the next four years and the five priority programmes that CI will focus on: financial services, food, consumers in the digital age, sustainable consumption, and consumer protection and legislation. In addition, our new strategy has a renewed focus on organisational empowerment; where CI helps members to help themselves.

Member organisations were reminded to be in continuous communication with CI on their activities in relation to CI’s priority programmes as well as emerging issues and concerns. This gives us the strength as a unified voice to collectively bring changes in terms of policy as well as corporations’ behaviour and practices.

One of these areas was taken up at the conference by CI's Director General Helen McCallum, who delivered a speech on emerging ICT technologies. The speech considered the networks we use to communicate (such as the Internet); the devices we use to do so (such as smartphones and computers); and the rules that regulate content passing through these devices and networks (such as intellectual property rights and privacy law). All of these are major issues for consumers in our region.

This office will work towards building a CI brand that is synonymous with consumer rights and protection. We will encourage and ensure all members from the region belong to at least one priority programme that is relevant to their work.

It’s an exciting time. We will form partnerships with relevant stakeholders to achieve our objective of bringing change, and look for strategic members to further strengthen our presence as the sole global consumer voice championing consumer rights.

We do this work because CI belongs to its member organisations; organisations that are fighting for consumer rights across the Asia Pacific and Middle East region.

Are portable bank account numbers the answer to the switching conundrum?

 CI's Head of Campaigns, Justin Macmullan, looks at three ways to encourage consumers to change banks

Consumer surveys conducted by several CI members to mark World Consumer Rights Day last month threw up some interesting results. One of which was that allowing consumers to take their bank account number with them should they decide to leave their bank may be the best way to get them to make the switch.

In a nutshell, the surveys revealed that the majority of consumers who have switched banks found the process relatively straightforward and easy, however, of these, a significant minority experienced problems. The perception among consumers who haven’t switched is that it is going to be difficult, risky and time consuming.

My own straw poll of friends and colleagues backed these findings up. One colleague who recently switched bank accounts claimed it was “a doddle” (a not very technical British term for ‘very easy’), but the overwhelming response was a slight frown and, “I’ve been meaning to do that for ages”.

But perhaps the most revealing comment came when I explained the results to a non-switching friend and their response was, “Yes, but I don’t want to be part of that minority that has a problem”.

Of course these surveys were only conducted in a relatively small number of countries, but if we really want to encourage more people to switch there is a message in there for every country.

Basically, three things need to happen.

First, the minority of cases where there are problems needs to become absolutely as small as possible. People are always more likely to hear about failures than successes, and, understandably, one of the last things people want to take any risk with is their bank account.

In many countries there are plenty of recommendations and guidelines for improving the process of switching but banks need to implement them better. See this report from CI’s European sister organisation BEUC for examples.

Second, consumers need some encouragement and advice – see, for example, the online efforts of these CI members in Spain, Italy, Portugal, and Belgium.

Third, the introduction of portable bank account numbers, something a number of CI members are calling for, could make a major difference. This would not only make it easier for the consumer, but it could radically change consumers’ perceptions according to the surveys.

With this system, the consumer would keep a personal number and the banks would be responsible for making all the behind-the-scenes changes and linking their new account to that number. The consumer could then continue to use the same number for all transactions. .

A similar idea has already been introduced in Sweden and, with help from consumer organisations, the concept is gaining ground in other countries too, for instance India. There is even some evidence that banks’ opposition to the idea appears to be weakening somewhat.

What I did find striking in my own straw poll was the number of people who said, “I’ve been meaning to do that” not “I’m happy with my bank”.

In many countries, banks and other financial service providers are the focus of a very high number of complaints. And CI members are regularly highlighting how consumers could get a better deal if they switched, including in the USand Belgiumto name just two.

It certainly appears that many consumers would like to change banks and the act of changing banks would, in turn, encourage better service and lower charges. That’s why portable account numbers are well worth considering.