Transcript
CONSUMER, CONSUMER RIGHTS & PROTECTION
Who is a Consumer?
Consumption is basic to human survival and it must be shared, strengthening, socially responsible and sustainable. Therefore, we all are consumers, whether of goods or of services, whether purchased or otherwise, and whether provided by the market or the public sector.
Consumer is somebody who uses a product or service. A consumer may not be the purchaser of a product or service and should be distinguished from a customer, who is the person or organization that purchased the product or service.
Consumer:
One that consumes, especially one that acquires goods or services for direct use or ownership rather than for resale or use in production and manufacturing
One that utilizes economic goods; specifically : an individual who purchases goods for personal use as distinguished from commercial use
Consumer or Citizen
State recognizes people as citizens, whereas markets treat people as consumers and value them as customers. Even markets are located within the States. And people’s status as citizens is more overarching than their status as consumers. Thus people’s rights as consumers are interlinked with their rights as citizens; both need to be pro-actively promoted and protected from predatory factors in the market and the State. In particular, poorer citizen-consumers, who do not have the “dollars” to make the market respond to the “one dollar, one vote” principle, do have the right to make the state – and hence the market respond on the “one person one vote” principle. This standpoint also links up the consumer movement with other human rights movement. In the age of globalization, this realization has become more important than ever before. The former President of Consumers International, Rhoda Karpatkin, said that "Consumer activism is exercising citizenship".
Consumption is basic to human survival and it must be shared, strengthening, socially responsible and sustainable. Therefore, we are all consumers, whether of goods or of services, whether purchased or otherwise, and whether provided by the market or the public sector.
While buying in the marketplace is one important form of consumption, it is not necessary to be a customer to qualify as a consumer. However, the concept has been associated with market so closely that it has assumed a very restrictive meaning. In a country crippled with poverty, where we pay heavily but indirectly for goods and services from our State (including infrastructure development, defense, good governance, and so on), we are citizen-consumers. While the market has at least some level of self-corrective mechanisms to meet the demands of customers, the State in Pakistan does not have the most basic democratic channels to meet the demands of its citizens. Therefore, it is crucial to broaden our understanding about consumers in order to be inclusive of poor citizens and their rights as consumers whom markets can ignore but the State and the consumer movement cannot.
What are Consumer Rights?
Based on the United Nations Guidelines for Consumer Protection, 1985 (to which Pakistan is a signatory), the global umbrella body Consumers International articulated a set of eight, internationally accepted consumer rights that need to be actively protected and promoted.
The Right to Basic Needs means the right to basic goods and services which guarantee survival. It includes adequate food, clothing, shelter, health care, education and sanitation.
The Right to Safety means the right to be protected against products, production processes and services which are hazardous to health or life. It includes concern for consumer long-term interests as well as their immediate requirements.
The Right to Be Informed means the right to be given the facts needed to make an informed choice or decision. Consumers must be provided with adequate information enabling them to act wisely and responsibly. They must also be protected from misleading or inaccurate publicity material, whether included in advertising, labeling, and packaging or by any other means.
The Right to Choose means the right to have access to a variety of products and services at competitive prices and, in the case of monopolies, to have an assurance of satisfactory quality and service at a fair price.
The Right to Be Heard means the right to advocate consumers’ interests with a view to their receiving full and sympathetic consideration in the formulation and execution of economic and other policies. It includes the right of representation in government and other policy-making bodies as well as in the development of products and services before they are produced or set up.
The Right of Redress means the right to a fair settlement of just claims. It includes the right to receive compensation for misrepresentation of shoddy goods or unsatisfactory services and the availability of acceptable forms of legal aid or redress for small claims where necessary.
The Right to Consumer Education means the right to acquire to knowledge and skills to be an informed consumer throughout life. The right to consumer education incorporates the right to the knowledge and skills needed for taking action to influence factors affecting decisions.
The Right to a Healthy Environment means the right to a physical environment that will enhance quality of life. It includes protection against environmental dangers over which the individual has no control. It acknowledges the need to protect and improve the environment for present and future generations.
What are Consumer Responsibilities?
Consumers International also articulated five basic responsibilities of all consumers.
Critical Awareness – the responsibility to be more alert and questioning about the price and quality of goods and services we consume
Action – the responsibility to assert ourselves by acting to ensure that we get a fair deal. As long as we remain passive consumers, we will continue to be exploited and manipulated
Social Concern – the responsibility to consider the impacts of our consumption patterns and lifestyles on other citizens, especially the poor, disadvantaged or powerless consumers, whether they be in the local, national or international community
Environmental Awareness – the responsibility to realize the environmental costs and consequences of our consumption patterns and lifestyles. We should recognize our individual and collective social responsibility conserve natural resources and to preserve earth for present and future generations
Solidarity – the responsibility to come together and organize consumers in order to enhance the strength and influence required to promote and protect our interests
Why Consumer Protection?
Citizens need protection of their consumer rights in three ways:
in the market place against problem goods and services; against bad trade practices; exploitative prices and unethical marketing;
from governments as supplier of basic goods and services for poor and lnerable consumers; as formulators of public polices so that they are just, equitable and protective; and as provider of good governance;
from the State to provide reliable consumer protection structures which ensure safety against weaknesses of the market and its failures and which ensure good government.
The importance for consumer protection has assumed renewed importance today. Globalization and its various instruments have posed new challenges for consumer protection especially in poor countries.
The greatest challenge for consumer movement today is to raise cogent and effective voice for bringing fairness in free market economy at local, national and global levels.
(Note: These are the Opinions/Views/Comments as expressed by The Network for Consumer Protection, Pakistan, a not-for-profit, public interest and independent non-government organization working since 1992.)
Sectoral Challenges Facing Citizen-Consumers in Pakistan
It is well recognized that there is a general lack of awareness among consumers about their legal and civic rights, due to a number of complex and inter-related factors, including a historically unresponsive state, a regularly exploitative private sector and the failure of democratic institutions in addressing consumers day-to-day and policy related problems.
The state has in many cases not protected their right to a healthy life, as guaranteed by Article 9 of the Constitution or various United Nations declarations, including for Consumer Protection, 1985. Likewise, the private sector has proved unresponsive to complaints or to the health concerns of consumers, particularly disadvantaged consumers, making full use of the lack of literacy and awareness in the country. This is further complicated by a weak regulatory structure in the country, plagued by poor implementation of social laws even when they are drafted. In addition, most of the civic sector also does not advocate for consumer rights.
As a consequence, there is little to no demand from citizen-consumers for protection of their rights, and they have had little stake in the systems and mechanisms introduced by the state, choosing by and large not to occupy the opportunities legally offered. For example, at one level there are barely adequate statutes to facilitate redress of consumers’ complaints about products and services (particularly related to government provision of basic services such as water and health) in a transparent, just and timely manner. At another level, the historically weak response to the statutes that exist have left consumers cynical, and they mostly do not appropriately lodge and follow up their complaints, accepting losses and suffering violation of their rights. As above, this affects already disadvantaged consumers the most.
A growing concern for consumers, particularly in the context of a liberalizing economy, is the information inequity in the market. The overwhelming bulk of consumers simply do not have access to independent information about: products and services, government’s performance on protection of their rights, how their rights are being violated by public and private sectors, and what they themselves are already legally empowered to do to protect their rights.
Policy Challenges Facing Consumers in Pakistan:
These sectoral concerns highlight the generic, policy challenges faced by consumers particularly that affect their health.
The role of corporations, especially their lack of responsiveness and ethical behavior coupled with the inability of the state to check their functioning in Pakistan, is problematic. The fundamental issue is one of the accountability of most corporations that are primarily in place to make profits, even at the cost of consumer health. The ways in which corporations are exercising their role is now more complex than ever, not only through directly unethical and in some cases illegal marketing but also through indirectly promoting a consumer culture that values purchases more than health.
This culture is instilled in consumers from school onwards, and the role of the media itself commercialized in this regard also goes largely unchecked. The corporatization of the mind has begun in earnest in Pakistan and consumers, particularly lower middle class consumers, are increasingly under threat. While calls for corporate social responsibility abound, these have resulted in little more than “greenwash” in the country; there are no independent organizations holding corporations accountable.
However, while the problem of corporations is at one level fundamentally problematic, this is a global phenomenon which many international campaigns are targeting in different arenas. The problem is made more intense in Pakistan due to the poor state of regulation. The double whammy facing consumers in Pakistan, as above, comprises absence of appropriately motivated legislation and regulation, and poor implementation of laws where they do exist. The state of implementation of social laws has been much commented upon, and while numerous policy initiatives have been announced, none has made much
difference to the fact that such regulation remains weak while at the same time there are little to no problems in implementing defense, foreign policy, or macro-finance laws. For consumer health, this situation is complicated even more because of the intensive role of the State in the provision of social services, such as drinking water, above, and justice.
This last is the final determinant of consumer welfare, since the justice system is intended to provide an independent recourse to consumers. When court procedures are lengthy and costly, and justice is neither accessible nor expected, as in most cases across the country, consumers are left to their own, weak, devices. In sum, the State problems amount to an issue of social justice.
This issue of social justice is one of democracy, in particular the absence of democratic norms in the country. From a direct consumer perspective, social justice is neither ensured nor evident in the policy processes of the country. Meaningful citizen participation in policy processes is negligible, policy processes (including implementation) are opaque, and policy makers largely unaccountable. In effect, consumers have little to no forums for raising an effective voice in matters determining their lives. They have, thus, no demand as above.
The matter of democracy is directly related to consumer rights. While Pakistan is a signatory to the UN Guidelines for Consumer Protection, 1985, it has yet to submit any report on its compliance with the Guidelines, or to be held accountable. A basic tenet of the Guidelines is that consumer rights are just that: rights, not privileges. And, therefore, the State has a basic obligation to ensure that those rights beginning with the right to satisfaction of basic needs, and moving through the right to redress. A consumer, most importantly, is not just a customer in the marketplace, but a citizen who uses goods and services not directly paid for in the marketplace.
While the Guidelines, and subsequent development of a framework by the umbrella body Consumers International, require the State to ensure these rights, they also recognize that it is unrealistic to expect the State to intervene in every case. Even a strong judicial system can act better as a deterrent that actual litigation in every matter, which would cause its own problem. In the final analysis, as understood by advocates of functional democracy, it is the demand raised by citizens themselves; in this case as consumers, that determines the efficacy of systems of protection. And for this, consumers need to be critically informed. Doubtless low literacy levels hamper mass awareness to an extent, but this barrier is neither insurmountable (given developments in electronic media) nor a deterrent to the awareness of the literate sections of the population. However, consumers in Pakistan remain unaware both of their rights, and of the increasingly insidious ways in which those rights are being violated.
These issues reflect a changed landscape since The Network last strategize its future in 1999: the previous government, the events of 9/11 and their aftermath, a vastly enhanced recognition of NGOs, a further multiplication of NGOs and donor funds, three new civil society organizations also advocating for consumer rights, growing levels of “policy advocacy”, and recognition of the role of NGOs “on the table” with government but repression of a “hard” advocacy role. The Network has been a part of these trends, and derives its re-strategization from its examination of the context.
Consumer Financial Protection Agency (CFPA) of USA (Proposed)
The Consumer Financial Protection Agency, or CFPA, is a newly proposed (in Aug 2009) independent federal agency that would, if established, have single, primary authority to protect consumers with respect to financial products and services, other than investment products. It would have supervisory, examination and enforcement authority for protecting consumers with respect to credit, savings, payment and other financial products and services.
The current consumer financial protection is based on disclosure regime and is policed through supervisory feedback, enforcement actions, and occasionally prohibitions on terms, products, and practices that are deemed inherently unfair and deceptive. On the federal level, consumer protection in financial services is divided among a number of agencies. Some of these agencies have the ability to promulgate regulations, some also exercise supervisory authority over financial institutions, and some may only enforce existing regulations. Sometimes authority is over a class of institutions, and sometimes it is over a particular type of product. There are four main structural criticisms of the current regulatory structure: that consumer
protection is a so-called “orphan” mission; that consumer protection conflicts with, and is subordinated to, safety-and-soundness concerns; that no agency has developed an expertise in consumer protection in financial services, and; that regulatory arbitrage of the current system fuels a regulatory race-to-the-bottom.
Consolidation of consumer financial services protection authority could: place all financial services companies, regardless of the form of their charter, under a single regulator, thus ending its orphan status; separate consumer protection from safety-and-soundness regulation, thus ending subordination; encourage the development of a deep bench of regulatory expertise and knowledge, and; end the opportunity for regulatory arbitrage and any potential race to the bottom.
There are several potential concerns about a CFPA: conflicts with prudential regulators; ambiguity with respect to Consumer Reinvestment Act authority, and; potential overregulation resulting in higher costs of financial products, less product availability, and discouragement of innovation. Still, there are compelling reasons to believe that the present regulatory architecture cannot produce the optimal consumer protection regime and will continue to fail in its task, resulting in unfair treatment of consumers and a potentially significant source of systemic risk. To this extent, consideration of a CFPA should strive to distinguish between the basic thrust of the legislation—a consolidation of the regulatory authority of—and the proposed new substantive powers granted to the agency.
CFPA Mandate is to ensure that consumers of financial products:
Have the information they need to make wise financial decisions
Are protected from abuse, discrimination, and unfair and deceptive practices
Have access to financial services
Ensure the financial services market operates fairly and efficiently
Significance of the CFPA
Given the scope and ambition of this proposal, this is a game changer for the financial services industry
The proposal says: consumer protection is a high priority for the federal government, and it will work in coordination with other agencies and the states to ensure that financial products that are fair, transparent, and suitable for the consumer
Success will depend upon dedicated staff, resources, and enormous coordination throughout the federal government and the states
The Need for CFPA
The old rules to protect consumers don’t work
Financial products are too complex
The terms and conditions, even the disclosures, are far from clear and transparent
The incentives of the provider and the consumer’s needs may be misaligned
Consumer often doesn’t have the experience or knowledge to know where to go to get the information needed to navigate the array of product options
CFPA Authority Will
Require that all product disclosures and communications be reasonable, balanced, and clear and conspicuous - and this would be based on significant consumer research and analysis
Define standards for “plain vanilla” products, such as mortgages, bank accounts, and credit cards. These products would have straight forward pricing
Have authority to place tailored restrictions on product terms and provider practices
Enforce fair lending laws and to ensure underserved communities and consumers have access to prudent financial services
Some of the products CFPA will focus on:
Mortgages
Consumers face an array of mortgage options that come with wide variations in rates, terms, penalties, and conditions
In year’s past, mortgages were originated by banks. But as of late, the majority of mortgages are sold by mortgage brokers
These companies have existed largely outside of the banking regulatory system with respect to consumer protections
Compounding the issue for the consumer is the fact that mortgage brokers have incentives -the yield spread premium -to sell the consumer a product that isn’t necessarily the most suitable or lowest cost for them
To successfully navigate this maze, consumers not only need to figure out the product options that suits their need, but also who is selling the product, what motivates that seller, and whether there are rules to ensure the seller is offering a product that is fair and non- deceptive
Bank Accounts
Even basic bank accounts are commonly fraught with unexpected costs, in the form of surcharges at ATMs, under balance fees, and the big one, overdraft charges, which cost are on average about $35 per check
As overdrafts currently work, an accountholder is automatically over drafted, with the payment completed and the account debited for the overdraft charge
These kinds of charges which can rack up to hundreds of dollars in the course of a month can tip a family that’s just making it into serious financial hardship
