Protecting and Educating Consumers in the Financial Sector

Protecting and Educating Consumers in the Financial SectorOECD ParisJune 15, 2009

OECD ParisJune 15, 2009

Brian Branch Executive Vice President & Chief Operating Officer

World Council of Credit Unions

Consumer Protection and Education (CPE)

• Safeguarding of Consumer Interests in Terms of Quality, Price and Safety

or …

• Providing Financial Services in Ways that Improve and do not Harm the Economic Well-being and Prosperity of the Consumer

What Will Drive This?

1. Public Pressure

2. Public Policy

3. Corporate Social Responsibility

4. Institutional Mission

5. Competitive Pressure

Push or Pull?

PUSH

1. Public Pressure

2. Public Policy

PULL

3. Corporate Social Responsibility

4. Institutional Mission

5. Competitive Pressure

1. Public Pressure

Growing Demand for more Responsible Financial Institution Corporate Behavior

• Global Trends in Transparency of Financial Sector

• Greater Immediate Information Access via Internet

• Reputational Risks

2. Public Policy

1. Increased Legislation / Regulation for Transparency – Mandatory Standardized Disclosure & Reporting

Requirements

2. Client Confidentiality – Data Protection

3. Ombudsman

4. Credit Bureau

5. Legislation / Regulation Limiting Application of Interest Rate and Fee Changes

6. Mechanisms for Redress

7. Interest Rate Caps

2. Public Policy (cont.)

3. Corporate Social Responsibility

How will Corporate Social Responsibility Evolve in the Financial Services Sector

Post 2008-2009?

• Previously, Focused on Climate Change and Greening, Financial Access/Inclusion and Financial Literacy

• Now, Discussions Emphasize Responsible Lending, Consumer Protection and Financial Literacy

• From Corporate Social Responsibility To Consumer Protection & Education

4. Institutional Mission

Degree of Acceptance will Vary whether Financial Institution is Mission or Shareholder Value-Driven

• Credit Union Objectives of Financial Empowerment…to advance financial and economic well-being of their members

• Micro Finance Institution Objectives of Financial Inclusion

• CPE driven by mission and business model… contributes to stakeholder mission and value

International Credit Union Consumer Protection Principles

• Disclosure of Rates and Fees• Periodic Statements• Honest and Non-Deceptive Promotions • Fair Credit Practices • Dignified Collection Practices • Member’s Consent to Share Information • Dispute Resolution Services • Provide Education about Thrift and Wise

Use of Credit Provide Education about Thrift and Wise Use of Credit

• Fair and Forthright Conversions

5. Competitive Pressures

Is there a Competitive Advantage for Financial Institution in CPE?

• Minimizing Credit Risk

• Reputation for Business Conduct Becomes a Differentiating Brand Presence

• Builds Stronger Relationship with Clients / Members over Long Term

How Deep Will This Go?

Charitable Exercise / Add-on or Business Strategy / Market Opportunity?

• Giving Money Away and Volunteering in the Community (CRA)

• Or Way of Contributing to the Bottom Line

Business Case for CPE

Will Improved Practices, Industry Standards, Best Practices Become Established, Sustainable?

• Will Financial Institutions Establish Policy and Management Systems to Embed These into Their Operations and Report on Performance?

• Is There a Strategic Approach to Become a Business Opportunity?

Push or Pull?

PUSH

1. Public Pressure

2. Public Policy

PULL

3. Corporate Social Responsibility

4. Institutional Mission

5. Competitive Pressure

Thank youThank you

Brian Branch Chief Operating Officer & Executive Vice President

World Council of Credit Unions