Tuesday, January 17, 2012

BELARUS: Using Safe and Fair Finance to Reduce Social Dependence

The problems of weak consumer protection and financial literacy are also felt in Belarus, a country of 9.5 million people that lies between Poland at the west and Russia at the east.

As noted on January 5, 2012 in, the National Bank is concerned that recent increases in the refinancing rate that it provides to commercial banks will cause interest rates on consumer loans to rise. Deputy Chairman Sergei Dubkov warned that this increase will “make it impossible for most borrowers to fulfill their obligations to banks."

To soften the blow, the National Bank plans to try to improve consumer protection in financial services. Part of the problem, noted Mr. Dubkov, is that the law on advertising of banking services does not require full disclosure of the total interest rate of a consumer loan. The National Bank has proposed draft amendments to make information on banking services clear, simple and easy to understand.

The National Bank is also looking at international approaches on financial consumer protection. It plans to create a call center for consumer complaints and is working with the banking association to create a financial ombudsman service. The objective of financial ombudsman would be three-fold: (1) resolve consumer disputes with financial institutions (2) improve financial literacy of consumers and (3) promote consumer confidence in the national banking system.

Emphasizing the need for Belarusian consumers to take an active role in managing their personal finances, Mr. Dubkov complained that "ignorance and recklessness" flourish in Belarusian society. He emphasized that households should take responsibility for planning their budget. “Cultivating social dependence is a road to nowhere," exhorted Mr. Dubkov.

Safe and Fair Finance Blog supports the work of the Belarusian authorities to strengthen consumer protection and financial literacy. Finding an effective system of redress of consumer disputes with financial institutions is “where the rubber hits the road” and should be tackled in every country, regardless of the level of financial market development. Requiring that banks make consumer information clear and easy to understand is also important. In addition, the authorities may wish to test (through consumer surveys or focus groups) how easily consumers understand the information in the new disclosure statements issued by banks.
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