Domestic Consumers of Financial Services - Essay Example

Consider the extent and the ways in which a domestic (private non-business) of a bank is given protection (i) by the consumer credit acts and (ii) by the financial services act 2012. Name Professor Course Date Persons who hold bank accounts or loans with financial institutions are customers to financial services. The customers to financial services have rights that need protection. However, the rights of a consumer of financial services are dependent on the contract agreement between the customer and the financial service provider.1 This agreement between a customer and the financial institution requires both parties to respect it. In case of breach of contract, the law enforces the agreement. This is on condition that the terms of the contract are fair to the consumer. Domestic consumers of financial services need protection against losses. A bank can become bankrupt and this leads to the customers served by the institution suffering loses.2 There is a need for the consumers of financial services to have assurance that such occurrences will not affect them. The policies that are set out to protect them are the Consumer Credit Act and The Financial Service Act Of 2012. These two sets of regulations ensure the maintaining of the interest of domestic banking customers. Domestic consumers of financial services have been victims to several scandals in the banking institutions. This has lead to the customers’ confidence in financial service providers to decline. The domestic customers’ consumption of financial service is essential for the economic development of a nation.3 There is a need to have rule and regulation that will ensure that the service providers undertake their responsibility towards the consumers. The regulations create reforms in the banking sector thus the consumers will be able to enjoy quality services. This is possible if the banks are to provide a competitive environment where they meet the needs of the consumer. The financial service providers should adhere to the set regulations and standards of service provision.4 The Financial Act and Credit Act in their implementation ensure the customer needs get consideration. The Consumer Credit Act protects the credit card purchases that a consumer makes. It safeguards the consumer against paying off debts on goods and services they did not receive. Further, this act has legislation in section seventy five that removes from the consumer the risk of making payment for faulty goods.5 This implies that consumer gets a refund from the credit card provider when such a problem arises. This legislation is critical as it offers protection to the consumers in the use of their credit card. The Consumer Credit Act protects individuals in their credit and hire purchase agreement. The regulation operates for an agreement that involves a sum of £25,000 or less. These regulations ensure that as a customer enters in a credit transaction with the financial provider they get a proper treatment. The credit transactions involve terms of repayment by the consumer. The act provides a fair treatment of the consumer as they make the repayment, and how a penalty would be administered in case of default6. The consumer credit act also offers protection to consumers who enter into transactions that exceed twenty five thousand Euros. The act regulates the provision of credit and hires services. In this, the act concerns in the way in which this services get offered and supplied to the consumers.7 The persons and institutions providing these services have to get the approval of the regulating bodies and operate in compliance with Consumer Credit Act. Therefore, the consumer gets protection from extortionist deals and unfair treatment. The Consumer Credit Act enforcers vet credit advertisement that the financial institutions make. This is to protect the consumer from getting into unfair financial relations. The regulation aims at creation of a common credit market.8 This will bring competition in the offering of credit facilities. It will make the process of customer protection be efficient and easy. Consumer Protection Act empowers consumers to know their rights concerning credit and hire purchases. This move will enable the consumer to exercise their right. The body’s implementing the Consumer Act Ensures that they license those involving in the credit business. This makes it possible to monitor if the business are compliant to the regulation in the consumer act. The licensing of the business makes it easy to deal with complaints from consumers.9 The consumers can report their complaints in the court, and the financial service provider would be apprehended in accordance with the Consumer Service Act. The consumer complaint is valid if it falls within the stipulation of the consumer credit rules. The financial provider has to have a license of operation. The consumer dissatisfaction should be with regard to an act or omission that happened in consumer hire business or credit business. The Credit Act sets out time limit for the dealing with complain. This clear procedure enlightens the consumer of the financial service on how the consumer act protects his rights. The Financial Service Act protects the consumer who participates in financial markets and services. In regard to the domestic consumer, the financial act protection is on the deposits that a consumer makes. The act protects the deposit of the consumer. It also ensures that the contract that a consumer enters with the service provider remains in enforcement. The financial act is an essential act as it encourages the domestic consumer to develop a saving habit. The enforcers of the financial act ensure that the institutions that take deposit get license. The licensing process is a measure to check the credibility of the institutions that take deposits. The institution’s legal statute has to be either a corporate or a partnership. This is to ensure that the consumers take their deposits to organizations that have a legal entity10. These institutions can thus be held liable for any omission in deposit transactions. The location of the institution that takes deposits from the consumer has to be known by the authority. This is a measure to ensure that ghost institutions do not take advantage of the consumer. The authorization of an institution to participate in the deposit taking process is conditional to the resources that the institution owns. An institution must meet the expected level of resources for them to have permission of taking deposits from the public. The Financial Service Act protects the domestic consumer of the baking services as it ensures that the financial institutions are suitable to carry out services to consumers. The regulation gives the consumer confidence that they have protection against fraud.11 Whenever an institution is not complying with the regulation of the financial act their license of operation gets withdrawn. This measure makes financial institution to comply with the standards of regulations. When an institution contravenes the agreement with a consumer, the institution is guilty of an offence. The consumer can make a claim to the authorities. The eligibility of the claim is dependent on whether the activity in question. The consumer right to their deposit gets enforced to ensure that they do not incur any loss.12 The financial act assists in the recovering of individual’s deposits in a case where a financial institution becomes bankrupt. This measure secures the deposits that consumers make. The domestic consumer gets protection when dealing with the financial institutions. However, the acts of consumer protection are not sufficient in themselves. The consumers of the financial services have to make individual initiatives to avoid poor deals. There is a need for the consumer to do a background check of the institutions that they want to transact with financially. Thus, they will involve with credible and regulation abiding institution.13 The consumers of financial services get protection from the Credit Act and Financial Act. However, the acts are not comprehensive to cover all the aspects of the financial transactions that domestic consumers engage.14 These acts do not address the insurance financial transactions that the consumer engages. Thus, such financial aspects of consumer protection remain unaddressed. The consumer, therefore, has his protection limited to those activities described in this acts. The other issue of concern for the consumer protection is about identifying persons authorized to carry out financial services.15 The validity of the consumer protection acts is dependent on the activity that the consumer and the financial institution were carrying out. This means that the consumer can incur a loss of the activity of concern is not eligible for protection under this acts. The consumer needs to educate themselves on what activity and financial transaction they can involve in and enjoy the protection of credit and financial act. The implementation of the protection act is critical in the protection of the consumer. A good policy is viable through its application in the right way. The protection of consumer against financial scandal and unfair treatment restore the confidence of the consumers in the banking industry.16 It is for this reason that the protection acts are put in place. Domestic consumers of banking services will participate more in a financial transaction as they feel that their finances are secure. In conclusion, the consumer credit act and the financial acts, which protect the consumer, are very vital. This is because, without them, the consumer would continue to suffer in the hands of unscrupulous business persons in the financial sector. The persons in charge of enforcing these acts should ensure that there is cooperation between them and the consumer for successful implementation. Read More