Jamus wants more financial protection for consumers.
4 hrs ·
Although the common saying goes that fools and their money are soon parted, scams are especially insidious since they succeed when they fool others into parting with their money. Victims aren’t usually spendthrift or greedy, merely trusting. The OCBC case at the end of last year is a reminder that many innocent victims could lose their life’s savings in the blink of an eye, just by (mis)trusting seemingly innocuous messages sent from an apparently trusted source. We’d like to think that we’re inoculated from such scams, but the truth is, it only takes a careless moment (or even a distracted one) to let something slip through, and the mistake would have monumental effects on our life as we know it.
We’d also like to think that banks have a vested interest in keeping their customers happy. They do, but unless there is some coordinated force to compel them to be more proactive, it’s easy to fall back on passing the buck to the consumer. After all, consumer protection actions are costly, and it’s unclear how much market share one could seize by being a first mover to offer such additional protections (they would be difficult to market). And banks don’t even always adhere to their own self-imposed standards (incidentally, I think deposit insurance, of up to a certain amount, is a different animal. These also require coordination, but have government backing. We have deposit insurance in SG, but the relatively paltry insured sums are a topic for another day).
Regulation appears in order. But our financial sector regulator is overcommitted; MAS is simultaneously the lender of last resort, banker to govt, inflation guardian, exchange rate intervener, financial stability promoter, financial developer, and financial regulator.
One way forward is to have a dedicated consumer financial protection arm, overseen by MAS, but operating independently. It would receive complaints from the public, and be empowered to advocate on behalf of the consumer. MAS has a division doing something like this, but its role appears to be more focused on the oversight of market professionals and sophisticated investors, rather than the common (wo)man. It also faces a longish reporting chain, rather than a direct line to the top.
We can also go further and legislate many of the key principles for financial protection, rather than rely solely on regulation. This leaves the finer details of rules to be decided by the regulator, but enshrines important consumer protection principles into law. This includes a better distribution of losses that have to be absorbed due to scams. There are ongoing discussions on this, under the rubric of the Payments Council. This is well and good, but in my view, still leaves too little end-user representation (MAS heads the Council, which has 5 bank reps, 4 payment provider reps, 5 big business reps, 5 trade association reps, and a clearinghouse rep. These are all business interests, with no direct consumer representation).
Ultimately, whether we choose to enact greater consumer financial protection depends on us. When I lived in the U.S., I remember being surprised by how I was easily able to challenge unrecognized transactions on my credit card bill, and get them written off. Merchants also become more careful about accepting fraudulent transactions, since repeatedly doing so could lead to them losing their ability to use a payments system. The entire system becomes more scam-resistant.
Many advanced nations have explicit consumer financial protection laws, which help ensure that financial institutions don’t just ask their consumers to “practice cyber hygiene,” but also take proactive steps to safeguard their customers. We can choose the same. We can do more to avoid scams like what plagued OCBC customers late last year. We can share financial risks more equally. The time for more consumer financial protection is now.
#makingyourvotecount