Whitepaper on Consumer Financing Commissioned

October 22, 2007

Consumer Rights Commission of Pakistan (CRCP) has commissioned a study to develop a whitepaper on consumer financing being delivered by local and foreign banks operating in Pakistan. The whitepaper aims to highlight the concerns and problems being faced by consumers of credit cards, auto leasing, house mortgages, personal loans, ATM, and other related products and services. The paper would also bring to the fore the weaknesses and areas of improvement in the legal and regulatory framework that governs consumer financing in Pakistan. The study has been commissioned with the support of The Asia Foundation, Pakistan.

While giving the details, Secretary General CRCP said that the unprecedented growth of the banking sector has given a flip to consumer products but has also raised public concerns. These concerns generally range from misleading information, arbitrary procedures, unjustified tariffs, hidden charges, high differential in interest and profit rates, service inefficiencies, processing delays, unauthorized debits, to violation of agreed terms and conditions. Unfortunately, the number of consumer complaints about credit cards, personal loans and banking procedures is increasing day by day. He said that in the first eight months of the operation of Banking Ombudsman in 2005( the latest available report is of 2005), about 40 per cent complaints filed with the Ombudsman related to consumer products, and among these complaints, 30 per cent were related to credit cards alone.

The whitepaper is envisaged to map the public concerns and consumer grievances vis-à-vis variety of consumer products being offered by the banking sector. Moreover, Whitepaper would focus on the legal and regulatory weaknesses that compromise transparent, just and fair consumer banking in Pakistan. On the basis of background research and survey, the paper is aimed at providing thoroughly researched evidence for designing and implementing strategic and practical interventions to strengthen the regulatory mechanism for addressing the grievances in consumer financing

Mr. Hafeez pointed that the existing banking regulations did not capture the full range of problems being faced by the beneficiaries of consumer financing services. He quoted the example of Credit Worthiness Reports maintained by the Credit Information Bureau. According to the State Bank of Pakistan’s rules, these reports are confidential documents for the borrowers, which amount to denial of the right to one’s own personal information. Such weaknesses in regulations, if not addressed adequately, would continue to harm the interest of the consumers, and affect the potential of banks to serve as a strong base of economy in the longer term, he said.