The Financial Supervisory Commission (FSC) plans to create an independent ombudsman body to settle disputes between consumers and businesses providing financial services, according to a consumer financial protection draft released yesterday.
The draft, designed to make financial firms and professionals more accountable when selling goods and services, suggests setting up a legal agency like the Financial Ombudsman Service in the UK, commission Vice Chairman Wu Tang-chieh (吳當傑) told a public hearing.
The proposed body would have its own board as well as a review panel staffed with nine to 21 members to address disputes arising from purchases of financial products and services excluding securities and futures transactions, the draft states.
“The draft is aimed at providing a legal basis for consumer financial protection,” Wu said. “Toward that end, it would grant authorities the power to better regulate financial institutions and impose penalties, if necessary.”
The draft states that financial institutions should try to know their customers better by conducting risk preference analyses, for instance, to make sure the products and services they promote suit the needs of prospective clients.
Over the years, consumers have complained about financial institutions selling them products that promise a higher commission, whether they meet their financial needs or not. Indiscriminate promotions led to the credit-card debt storm in 2004 and 2005 and escalated at the height of the global financial crisis in 2008, when investors incurred heavy losses for purchasing structured notes without being told their risks beforehand.
Wu attributed the phenomenon to an information imbalance on the part of consumers and the draft is intended to address this.
Under the draft, consumers with financial grievances may seek recourse with the watchdog if the financial institutions fail to respond one month after the purchase of goods and services.
Consumers may still take their cases to the review panel if they find the settlements unsatisfactory, the draft states. The panel, however, would not process complaints if consumers fail to act within 60 days of receiving the settlements, according to the draft.
The draft would empower the FSC to fine financial institutions, remove company officials from posts and suspend operations if they fail to comply with the ruling of the ombudsman agency.
Industry representatives welcomed the planned legislation, but said there was a need for clearer definitions.
Justin Lee (李懿哲), director of legal counsel at Citibank Taiwan Ltd, said only disputes involving financial losses should merit the ombudsman service.
“Petty complaints about fees and other matters would cause needless social burdens,” Lee said.
Ted Liang (梁正德), executive vice president of Taiwan Insurance Institute, said proper screening is necessary for the proposed agency to function effectively.
Ombudsman members must possess a professional background and obtain approval from the FSC before being appointed to the three-year term posts, the draft states.
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