A. Regional Financial Integration

Financial integration in the Southeast Asian region has strengthened in recent years, evidenced by the establishment of the ASEAN Economic CommunityFootnote ¹² in late 2015. Deepening ASEAN financial integration is reflected in the ASEAN Banking Integration Framework and similar initiatives towards regional integration of insurance and capital markets.Footnote ¹³ The ASEAN CIS facilitates cross-border offers of collective investment schemes across the participating countries of Thailand, Malaysia and Singapore. More ASEAN countries are anticipated to join the ASEAN CIS over time.Footnote ¹⁴ Cross-border transactions have increased with financial integration in ASEAN, raising the need for a regional financial consumer protection framework and dispute resolution mechanisms.Footnote ¹⁵

Increasing financial integration among countries in the broader Asia-Pacific region is also reflected in the proposed Asia Region Funds Passport (ARFP). The ARFP involves cross-border offerings of collective investment schemes in Australia, Japan, Korea, New Zealand, the Philippines and Thailand.Footnote ¹⁶ Cross-border offerings of collective investment schemes are posited to engender a range of economic benefits such as deeper and more efficient financial markets.Footnote ¹⁷ At the same time, there is a need for measures to ensure that consumers have access to redress in respect of collective investment schemes based in another country. Cross-border offerings of collective investment schemes in ASEAN and the Asia-Pacific region would benefit from a robust financial consumer protection framework and accessible, affordable redress mechanisms.

B. International Best Practices

The World Bank and G20 assert the centrality of effective redress mechanisms to the establishment of strong financial consumer protection regimes.Footnote ¹⁸ Access to affordable, independent dispute resolution facilitates enforcement of consumer protection and strengthens consumer confidence in the regulatory framework. International best practices propose the establishment of designated internal complaints-handling functions within each financial servicesFootnote ¹⁹ provider. In addition, consumers should be given access to external dispute resolution mechanismsFootnote ²⁰ that are independent, affordable, efficient and accountable.Footnote ²¹

Financial services providers’ internal complaints procedures are proposed as the initial avenue for aggrieved financial consumers. International best practices envisage financial services providers maintaining designated complaints-handling functions with clear policies and processes to facilitate timely resolution of consumer complaints.Footnote ²² Complaints received should be acknowledged in writing and consumers should be provided with a contact person responsible for the investigation. It is also essential that consumers be kept informed of the progress of investigations and promptly advised of outcomes.Footnote ²³ Effective internal complaints-handling is thought to potentially strengthen financial services providers’ relationships with consumers and increase consumer confidence.Footnote ²⁴

International best practices emphasize the need for affordable access to independent dispute resolution for consumers who are dissatisfied with the outcome of financial services providers’ handling of complaints.Footnote ²⁵ The cost of litigation is often prohibitive for consumersFootnote ²⁶ and, consequently, alternative dispute resolution mechanisms such as financial ombudsmen have been proposed and implemented in jurisdictions such as Australia.Footnote ²⁷ Independent dispute resolution should be timely, professional and impartial, with decisions binding on financial services providers but not on consumers unless they accept the decisions. Dispute resolution services should also be affordable and accessible to consumers. The publication of aggregate information on complaints and outcomes is posited to facilitate accountability and increase public awareness of financial consumer complaints and available redress.Footnote ²⁸ Industry associations are encouraged to analyze the data to better understand the causes of recurrent complaints. Analysis of the data potentially enables systemic weaknesses to be identified and addressed by regulators and financial services providers.Footnote ²⁹

Effective implementation of regulatory frameworks for financial consumer redress mechanisms may be limited by several factors. Resource and capacity constraints may limit the ability of redress mechanisms to provide effective dispute resolution. Some financial services fall outside the regulatory framework on redress mechanisms, leaving consumers of such financial services potentially without accessible or affordable recourse.Footnote ³⁰ Other limitations such as distance or low literacy levels impede consumer access to formal dispute resolution mechanisms.Footnote ³¹

A. Indonesia

The Financial Services Authority, or Otoritas Jasa Keuangan (OJK), is the regulator responsible for financial consumer protection in relation to banking, capital markets, insurance, pension funds and various non-bank financial services in Indonesia.Footnote ³³ The OJK’s Financial Consumer Protection Regulations (FCP Regulations) require financial services providers to establish internal complaints-handling mechanisms.Footnote ³⁴ Each branch office is required to have an officer for complaints resolution.Footnote ³⁵ The regulations require timely resolution of complaints, specifying a maximum period of twenty working days.Footnote ³⁶ Both conventional and Islamic finance are covered by the FCP Regulations, which extend to banks, financial institutions, pension funds, insurance and reinsurance, investment advisers, pawnshops and guarantee institutions.Footnote ³⁷ If complaints are not satisfactorily resolved by the financial services provider, consumers have recourse to mediation by the OJK and other alternative dispute resolution mechanisms.

The OJK mediates disputes between consumers and financial services providers subject to several conditions. The financial services provider must be supervised by the OJK and the disputed amount must not exceed Rp 500 million (approximately USD 38,000) and in the case of insurance disputes, Rp 750 million (approximately USD 57,000).Footnote ³⁸ Applications for mediation by the OJK must be lodged within sixty working days of the financial services provider’s letter advising of its decision on the complaint.

The OJK’s Integrated Financial Consumer Care system allows consumers to track the progress of their complaints lodged with the OJK.Footnote ³⁹ The trackable and traceable system is aimed at facilitating timely resolution of complaints. The OJK has observed an increasing number of complaints lodged, attributing this to greater awareness of financial consumer rights and redress.Footnote ⁴⁰ From its inception in 2013 to December 2015, the OJK mediated 3,700 complaints.Footnote ⁴¹ In 2014 alone, the Integrated Financial Consumer Care system received 2,197 complaints.Footnote ⁴² Disputes commonly involve banking, insurance, financial institutions and capital markets,Footnote ⁴³ with about 40 percent involving disputes with banks.Footnote ⁴⁴ Indonesia’s central bank, Bank Indonesia, likewise has a complaints-handling division. Many of the complaints it receives relate to credit cards and involve issues such as compounding interest and debt collection practices.Footnote ⁴⁵

Financial consumers may also seek redress through alternative dispute resolution institutes (ADR institutes), which have recently been established by the OJK in conjunction with industry associations. There are currently seven industry-specific ADR institutes operating in the banking sector, insurance, finance and pawnbroking, venture capital, pension funds, capital markets and credit guarantees.Footnote ⁴⁶ The OJK cited challenges in reaching consensus through OJK’s mediation processes as among the key reasons for the establishment of ADR institutes.Footnote ⁴⁷ The involvement of industry associations is perceived as a means of strengthening the independence of ADR mechanisms.Footnote ⁴⁸ The ADR institutes’ mandate extends to arbitration and adjudication in addition to mediation,Footnote ⁴⁹ and their decisions are binding on financial services providers.Footnote ⁵⁰ Consumers, on the other hand, may either accept the ADR institutes’ decisions or seek legal recourse.Footnote ⁵¹ The regulations require disputes to have been referred to the financial services providers’ internal complaints processes prior to being heard by ADR institutes.Footnote ⁵² The OJK has indicated that following the establishment of the ADR institutes, its current mediation function will be altered to provide pre-mediation clarification and verification services.Footnote ⁵³ Consumers may seek assistance from ADR institutes following financial services providers’ internal complaints processes, without any need for referral to the OJK.

The dispute resolution framework for financial consumer protection in Indonesia is comprised of multiple dispute resolution forums and there are uncertainties over potential overlaps in their jurisdiction.Footnote ⁵⁴ For instance, it is not entirely clear whether following the establishment of OJK’s dispute resolution mechanisms, the Consumer Dispute Resolution Board, or Badan Penyelesaian Sengketa Konsumen (BPSK), continues to have jurisdiction to hear disputes on financial consumer matters.Footnote ⁵⁵ The legislation establishing the OJK refers to other laws on banking and financial services and expressly preserves their operation in so far as they are not inconsistent with OJK regulations.Footnote ⁵⁶ It is likely that BPSK will defer to the ADR institutes established by the OJK and focus on consumer disputes which fall outside the jurisdiction of the financial consumer ADR institutes, in accordance with the principle that specific legal provisions override general provisions.Footnote ⁵⁷ In addition to the industry-specific alternative dispute resolution institutes, financial consumers may seek assistance from the National Syariah Arbitration Board in resolving disputes with providers of Islamic financial services.Footnote ⁵⁸

Differences in the rules of various dispute resolution forums further add to the complexity of the dispute resolution framework. The ADR institutes have individual rules, some of which specify financial thresholds as to whether a matter may proceed to arbitration, adjudication or mediation.Footnote ⁵⁹ Each of the ADR institutes determines the fees payable by consumers for dispute resolution services. Services are usually provided for a minimal fee or free of charge to consumers, particularly when their disputed amounts are below specific thresholds.Footnote ⁶⁰

Financial services that are not regulated by the OJK are not subject to regulations concerning internal complaints-handlingFootnote ⁶¹ or external dispute resolution by the OJK and ADR institutes. Financial cooperatives and small village credit providers are examples of financial services that are not regulated by the OJK.Footnote ⁶² Disputes relating to cooperative and village credit are at times referred to informal mediation or conciliation processes based on musyawarah mufakat, a traditional practice of decision-making premised on dialogue and consensus.Footnote ⁶³ Informal dispute resolution processes are at times facilitated by a religious or community leader.Footnote ⁶⁴ Disputes involving financial services which are not regulated by the OJK may also be referred to the BPSK, which arguably has jurisdiction over financial services.Footnote ⁶⁵ Nevertheless, BPSK is thought to lack resources or capacity to resolve financial consumer disputes, particularly in remote areas.Footnote ⁶⁶

B. Malaysia

Malaysia’s Central Bank’s guidelines specify that financial services providers should have complaints-handling units, including investigation mechanisms that provide consumers with timely responses.Footnote ⁶⁷ All conventional and Islamic commercial banks, insurance companies and card issuers licensed by the Central Bank have established internal complaints-handling units.Footnote ⁶⁸ Media reports indicate that financial institutions have invested substantial resources into strengthening internal complaints-handling mechanisms, attributing this to the competition for customers and the Central Bank’s guidelines on handling complaints.Footnote ⁶⁹ The Central Bank’s guidelines also provide that financial consumers should be advised of external redress mechanisms.

The Financial Mediation Bureau commenced operations in 2005 and is the main external redress mechanism for financial consumers. Its services are provided to consumers free of charge.Footnote ⁷⁰ The Financial Mediation Bureau has jurisdiction to mediate disputes on conventional and Islamic banking products and services involving disputed amounts of RM 100,000 (USD 25,000) or less.Footnote ⁷¹ It also mediates disputes regarding payment instruments, such as credit cards and cheques, for amounts of up to RM 25,000 (USD 6,000), and insurance policies.Footnote ⁷²

Mediators initially facilitate discussions between the consumer and the financial services provider, with a view to reaching an amicable settlement. If parties are unable to agree, mediators then issue decisions after investigating the matter. Mediators’ decision-making processes include consideration of the applicable law, guidelines, market practices and contractual terms.Footnote ⁷³ The mediator’s decision is binding on the financial services provider, but consumers may seek further legal recourse if dissatisfied with the decision.

The Financial Mediation Bureau heard 2,721 cases in 2014, 64.7 percent of which were insurance and takaful (Islamic insurance) cases while 35.3 percent of cases were banking disputes.Footnote ⁷⁴ The Bureau received a total of 13,190 enquiries and complaints during the year, registering as formal disputes 1,691 cases that came within its jurisdiction.Footnote ⁷⁵ Enquiries may be made by telephone or online and complaints may be lodged with the Bureau by post, fax or in person. Complaints must be lodged within six months of the financial services providers’ decision.Footnote ⁷⁶

The Central Bank similarly maintains several customer service channels that consumers may access through telephone, fax, mail, email or SMS, in addition to walk-in centres at Central Bank offices.Footnote ⁷⁷ Known as BNMLINK and BNMTELELINK, consumers may seek information and advice, or lodge complaints, in relation to conventional and Islamic banking, insurance and other issues within the Central Bank’s supervision.Footnote ⁷⁸

Initiatives have been taken to establish a Financial Ombudsman Scheme (FOS) based on the existing Financial Mediation Bureau.Footnote ⁷⁹ The Financial Services (Financial Ombudsman Scheme) Regulations 2015 (FOS Regulations) came into effect on 14 September 2015. While the FOS terms of reference have yet to be released, the Central Bank’s concept paper indicates that the FOS is anticipated to have jurisdiction over disputes involving conventional banking, insurance, payment instruments, financial advisers and insurance brokers.Footnote ⁸⁰ Likewise, the FOS jurisdiction extends to Islamic banking, takaful (Islamic insurance), Islamic payment instruments, takaful brokers and Islamic financial advisers. Providers of these financial services that deal directly with consumers are required to be members of the FOS. The anticipated monetary thresholds for the FOS are higher than the current thresholds for the Financial Mediation Bureau, with disputes on banking and insurance up to RM 250,000 (AUD 80,000) falling within the jurisdiction of the FOS.

The FOS Regulations allow the ombudsman to grant awards to a maximum value of RM 250,000 (USD 64,000) for financial services and products.Footnote ⁸¹ Disputes that involve amounts above these limits may be referred to the ombudsman if the parties agree. The FOS is subject to independent reviewFootnote ⁸² and the regulations provide for the publication of information on FOS’ decisions, including grounds for decisions, subject to confidentiality in relation to the identity of the parties to the dispute.Footnote ⁸³

Consumers may refer disputes relating to capital market products or services to the Securities Industry Dispute Resolution Centre (SIDREC). SIDREC provides mediation and adjudication services free of charge to investors whose disputes with a capital market intermediary involve claims of RM 100,000 (USD 25,000) or less.Footnote ⁸⁴ SIDREC endeavours to resolve disputes through mediation initially. If parties are unable to agree, the mediator issues a decision that is binding on the capital market intermediary.Footnote ⁸⁵ Financial consumers may seek legal recourse if dissatisfied with the mediator’s decision. SIDREC seeks to resolve disputes within ninety days.Footnote ⁸⁶

Financial services provided by smaller financial cooperatives and NGO microfinance providers are not regulated by the Central Bank.Footnote ⁸⁷ Likewise, hire-purchase, retail credit, money lending and pawn broking are not supervised by the Central Bank and lack the specific protections aimed at safeguarding financial consumers.Footnote ⁸⁸ Consumers of financial services that are not within the Central Bank’s jurisdiction do not have access to the FOS. They may seek redress through the National Consumer Complaints Centre which provides advice and facilitates negotiations towards the settlement of disputes.Footnote ⁸⁹ Where disputed amounts are RM 25,000 (USD 6,400) or less, disputes may be referred to the Tribunal for Consumer Claims.Footnote ⁹⁰ The Tribunal’s decisions are binding on all of the parties.Footnote ⁹¹

Small and medium enterprises comprise a significant part of business enterprise in Malaysia.Footnote ⁹² Nonetheless, small businesses frequently have difficulty obtaining funding from licensed financial institutions due to challenges in proving their track record and providing collateral for loans.Footnote ⁹³ Consequently, many small businesses and microenterprises source funding from alternative sources, some of which are unlicensed, lacking safeguards for consumers or redress mechanisms. Unlicensed moneylenders are known to impose high interest rates and resort to violence to recover payments owed.Footnote ⁹⁴ Efforts are being made to facilitate microfinancing by financial institutions licensed by the Central Bank to small enterprises and microenterprises.

While the regulatory framework provides consumers of financial services that are regulated by the Central Bank or the Securities Commission with access to affordable redress mechanisms, consumers of financial services that are not within the regulators’ supervision lack regulatory safeguards and have limited access to affordable, independent redress mechanisms. Low income earners are thought to be among the consumers most affected by the gaps in the regulatory framework.Footnote ⁹⁵

C. Philippines

Bangko Sentral ng Pilipinas (BSP)’s Regulations on Financial Consumer Protection provide that financial institutions supervised by BSP should have complaints-handling mechanisms.Footnote ⁹⁶ Financial services providers that fall within BSP’s supervision include ‘banks, quasi-banks, pawnshops, foreign exchange dealers, money changers, remittance agents, electronic money issuers, non-stock savings and loan associations’.Footnote ⁹⁷ The regulations specify that there should a minimum of one trained consumer assistance officer at every branch or office. Consumers may lodge complaints by telephone, email, the internet, mail or in person. Financial services providers are required to acknowledge complaints within two days, and to communicate the outcome within nine days for simple matters and within forty-seven days for complex matters.Footnote ⁹⁸ Decisions on complaints must be written in clear and simple language, informing consumers of further avenues of redress.

The regulations also state that data concerning complaints and their resolution should be collected and analyzed, and measures should be taken to address recurrent complaints.Footnote ⁹⁹ Regular reports on complaints-handling are also to be submitted to BSP. Prior to the issuance of BSP’s regulations, the Banking Code for Consumer Protection, formulated by industry associations under the stewardship of the Bank Marketing Association of the Philippines, set out procedures for internal complaints-handling.Footnote ¹⁰⁰ The World Bank’s diagnostic report observed that all the banks they surveyed had internal complaints-handling mechanisms.Footnote ¹⁰¹ A circular issued by the Insurance Commission requires insurance providers to have accessible internal complaints-handling mechanisms.Footnote ¹⁰² However, there are minimal specifications on complaints-handling processes.

BSP provides external dispute resolution services to financial consumers through the Financial Consumer Affairs Group (FCAG).Footnote ¹⁰³ FCAG investigates and mediates disputes between consumers and BSP-supervised financial services providers. Consumers may lodge complaints by post, email, fax or in person.Footnote ¹⁰⁴ The response timeframe is ten banking days, or for complex cases thirty days.Footnote ¹⁰⁵ Although FCAG lacks authority to issue binding decisions, in practice banks usually comply with FCAG’s decisions on a voluntary basis.Footnote ¹⁰⁶ Most of the complaints lodged with the FCAG concern credit cards, and issues such as unfair debt collection practices.Footnote ¹⁰⁷ Analysis of complaints lodged with FCAG has enabled BSP to identify systemic issues with credit card regulations and informed policy responses.Footnote ¹⁰⁸ Monitoring of trends in complaints has also enabled BSP to gauge the regulations’ effectiveness and issue advisories educating consumers on their rights.Footnote ¹⁰⁹

External dispute resolution is also available in relation to insurance disputes. The Insurance Commission adjudicates insurance complaints that involve amounts of PHP 100,000 (USD 2,000) or less.Footnote ¹¹⁰ Complaints are resolved within ten working days.Footnote ¹¹¹ The Insurance Commission investigates administrative complaints in addition to consumer complaints. Detailed data on complaints filed with the FCAG or Insurance Commission does not appear to be publicly available.Footnote ¹¹² Complaints concerning capital markets and pre-need,Footnote ¹¹³ which include pension funds, may be made to the Securities and Exchange Commission.Footnote ¹¹⁴ Decisions on complaints are to be made within thirty days.Footnote ¹¹⁵ The fee for complaints filing is approximately PHP 2,000 (USD 43).Footnote ¹¹⁶

While there are internal and external dispute resolution mechanisms for insurance and financial services supervised by BSP, some consumers arguably face challenges in accessing formal redress mechanisms. The Consultative Group to Assist the Poor (CGAP) observes that consumers with low literacy levels may have difficulties with complaints processes which depend largely on written correspondence.Footnote ¹¹⁷ The distance to complaints centres located in cities is a deterrent to consumers located in rural areas. The need to adhere to procedures such as accessing internal complaints-handling prior to external redress may also be a disincentive to consumers who lack experience with financial services. This is ameliorated to an extent by FCAG’s assistance in tracking complaints-handling processes on behalf of consumers.Footnote ¹¹⁸ CGAP has also observed Filipino microfinance consumers’ preference for informal dispute resolution by local community leaders who are more accessible to rural consumers.Footnote ¹¹⁹

D. Singapore

The Monetary Authority of Singapore’s guidelines require financial institutions to have complaints-handling processes that investigate complaints and resolve them fairly and consistently.Footnote ¹²⁰ The guidelines state that financial institutions should acknowledge complaints, interview customers and complete reviews in a timely manner. Similar provisions are contained in the General Insurance Code of Practice Footnote ¹²¹ and regulations for financial advisers.Footnote ¹²²

Singapore’s Financial Industry Disputes Resolution Centre (FIDReC) provides mediation and adjudication services for financial consumers. FIDReC’s dispute resolution services extend to a wide range of financial services including banking, insurance, capital markets and financial advice. Over 530 financial services providers have submitted to its jurisdiction in adjudicating disputes with consumers.Footnote ¹²³ These include banks and finance companies, insurers, capital markets services licensees, insurance intermediaries and financial advisers. However, hire purchase and moneylending fall outside FIDReC’s jurisdiction. Consumers may seek the assistance of the Consumer Association of Singapore, which provides mediation services for hire purchase disputes,Footnote ¹²⁴ while moneylending disputes may be referred to the Small Claims Tribunal.Footnote ¹²⁵

Consumers may seek FIDReC’s assistance in resolving disputes involving insurance claims of SGD 100,000 (USD 74,000) or less, while for banking, capital markets and other disputes the threshold is SGD 50,000 (USD 37,000).Footnote ¹²⁶ FIDReC also assists in resolving disputes where the amounts claimed exceed the specified thresholds subject to parties agreeing to submit to FIDReC’s jurisdiction.Footnote ¹²⁷ Complaints may be lodged by post, email, fax or in person.Footnote ¹²⁸

Most of the disputes referred to FIDReC are settled through mediation,Footnote ¹²⁹ which is the first step of the dispute resolution process. Mediation services are free of charge. Where parties are unable to agree, the matter is decided by an adjudicator or panel of adjudicators.Footnote ¹³⁰ Consumers pay an adjudication fee of SGD 50 (USD 37). Adjudicators’ decisions are binding on financial services providers but consumers may opt to reject the award and seek legal recourse. FIDReC has a track record of timely resolution of disputes, with over 80 percent of claims resolved within six months and more than 42 percent resolved within three months.Footnote ¹³¹ Some of the common claims concern market conduct, such as inappropriate advice or disclosure, and misrepresentation in banking and insurance matters.Footnote ¹³² Disputes on liability and amounts awarded are also common in relation to insurance.

E. Thailand

The Bank of Thailand regulates financial institutions, including commercial banks and finance companies. The Bank of Thailand also regulates non-bank financial institutions that provide services such as hire purchase, credit cards and personal loans.Footnote ¹³³ Financial institutions regulated by the Bank of Thailand are required to establish internal complaints-handling facilities that include a complaints hotline.Footnote ¹³⁴ An Asian Development Bank report observes that Thai commercial banks have accessible complaints-handling processes.Footnote ¹³⁵ Competition for customers has incentivized banks to provide expedient complaints resolution mechanisms. Toll-free telephone numbers are provided and bank policies frequently require complaints to be resolved within one month. Data on complaints is compiled and analyzed to identify measures that address systemic weaknesses. Large non-bank financial institutions, such as AEON which provides hire purchase, credit card and personal loan facilities, have established complaints-handling functions that facilitate customer complaints through social media, email, telephone, mail and fax.Footnote ¹³⁶

Specialized financial institutions (SFIs) are regulated by the Ministry of Finance, although some supervision of SFIs is delegated to the Bank of Thailand.Footnote ¹³⁷ SFIs include the Government Savings Bank, the Bank of Agriculture and Agricultural Cooperatives, the Islamic Bank of Thailand and the Small and Medium Enterprise Development Bank of Thailand. SFIs are state-owned and have been established for developmental purposes, providing credit guarantee, microfinance and banking services particularly to lower income consumers and small enterprises.Footnote ¹³⁸ The Ministry of Finance requires SFIs to have complaints-handling functions.

There are several avenues for external redress for financial consumers, although these fall short of the financial ombudsman or its equivalent envisaged by international best practices. The Bank of Thailand has established the Financial Consumer Protection Centre (FCC). Financial consumers may seek FCC’s assistance in resolving grievances with financial institutions regulated by the Bank of Thailand.Footnote ¹³⁹ Complaints may be lodged in person or by telephone, fax or email. The FCC has offices in Bangkok and regional centres in Chiang Mai, Songkhla, and Khon Kaen.Footnote ¹⁴⁰ The FCC’s response time is fifteen to thirty days for simpler matters such as problems with ATM withdrawals or debt collection practices, and three months or more for more complex issues such as debt restructuring.Footnote ¹⁴¹

Many of the complaints received by the FCC in 2012 and 2013 concerned lending services and were lodged by consumers from Bangkok. Among the most common complaints were difficulties meeting credit card or loan repayments. In addition to debt restructuring, the FCC assisted in complaints regarding cross-selling of financial products, which involves consumers being diverted to debit cards and insurance instead of ATM cards.Footnote ¹⁴² Complaints-handling is one of several functions of the FCC whose mandate includes financial education.Footnote ¹⁴³ SFI customers may approach the Ministry of Finance, which provides a call centre for complaints. However, few complaints are made to the Ministry of Finance. This may possibly be attributed to a lack of public awareness of avenues for complaints.Footnote ¹⁴⁴

Consumers may lodge complaints concerning capital markets with the Securities and Exchange Commission online, by mail or telephone.Footnote ¹⁴⁵ Insurance complaints may be directed to the Office of the Insurance Commission (OIC). The OIC investigates complaints received from insurance customers through the internet, post, email or telephone. Considerable efforts have been made to publicize the OIC’s hotline number through advertisements in the media and billboards. Consumers of financial services that do not fall within the Bank of Thailand, Ministry of Finance, Securities and Exchange Commission and OIC’s jurisdiction may seek redress through the Office of the Consumer Protection Board. The Board has a broader mandate on consumer protection, which includes policy and product testing,Footnote ¹⁴⁶ and refers complaints-handling on financial services to the OIC.Footnote ¹⁴⁷

Limitations to financial consumer redress mechanisms include the lack of affordable external redress mechanisms with authority to make binding decisions. Further, the available redress mechanisms appear to be underused. Finscope’s 2013 study indicated that 44 percent of consumers did not seek redress for grievances relating to financial services.Footnote ¹⁴⁸ Some financial services such as village fundsFootnote ¹⁴⁹ and cooperativesFootnote ¹⁵⁰ are not regulated by the Bank of Thailand and lack consumer redress mechanisms.

F. Analysis of ASEAN 5 Countries’ Financial Consumer Redress Mechanisms

The ASEAN 5 countries appear to comply substantially with international best practices on internal complaints-handling functions for financial consumer redress.Footnote ¹⁵¹ The regulatory frameworks of all ASEAN 5 countries require or recommend that financial services providers under the supervision of their respective central banks or financial services authorities should have internal complaints-handling functions. Malaysia’s Central Bank and the Monetary Authority of Singapore have issued guidelines to financial services providers under their supervision on the establishment of complaints-handling,Footnote ¹⁵² while regulations in Indonesia and the Philippines stipulate mandatory requirements on internal complaints-handling processes.Footnote ¹⁵³ Reports indicate that internal complaints-handling functions are well-established in most ASEAN 5 countries, and financial institutions are incentivized to improve complaints-handling in order to remain competitive.Footnote ¹⁵⁴

The differences among the ASEAN 5 countries are more apparent in relation to external dispute resolution mechanisms. Each of the ASEAN 5 countries provides affordable dispute resolution services to consumers of financial services supervised by their respective central bank or financial services authority. However, they differ in the financial services covered and in their capacity to provide binding decisions. Singapore’s FIDReC is the most established financial ombudsman service in the ASEAN region, providing streamlined dispute resolution services across most of Singapore’s financial services sector.Footnote ¹⁵⁵ Singapore’s FIDReC resonates most closely with the international best practices as outlined above in Part 1. There are wider gaps in the coverage of financial services in other ASEAN 5 countries’ external redress mechanisms, leaving some consumers without affordable and effective redress. A notable feature of redress mechanisms is the exclusion of pension funds in Singapore, Malaysia and Thailand. Pension funds in these countries are predominantly state-run.Footnote ¹⁵⁶ Indonesia, on the other hand, maintains a combination of public and private pension funds,Footnote ¹⁵⁷ and has a designated ADR institute for pension funds.

When assessed against the international best practices, several areas for potential improvement common to a number of ASEAN 5 countries become apparent. The first is a lack of accessible, affordable and professional redress mechanisms for financial services that fall outside the central banks’ or financial services authorities’ supervision. Village funds and cooperatives in Indonesia, Malaysia and Thailand are examples of such consumer credit that lack affordable, professional redress mechanisms. Second, the authority to make decisions that are binding on financial services providers would arguably strengthen external redress mechanisms in Thailand and the Philippines. Third, while Singapore and Malaysia currently publish information on financial consumer complaints and dispute resolution outcomes, similar initiatives in each of the ASEAN 5 countries would be beneficial for financial consumers. Fourth, analysis of the complaints data could be improved in ASEAN 5 countries, although data analysis leading to the identification of systemic weaknesses and policy responses has been conducted in the Philippines.

G. The ASEAN CIS and Challenges Arising from the Existing Frameworks on Cross-border Transactions

While ASEAN’s regional consumer protection framework is still in the initial stages of development, the ASEAN CIS is currently operational. Gaps in the existing framework impede access to effective financial consumer redress in several ways. First, the absence of express requirements that CIS operators submit to the jurisdiction of host ADR mechanisms potentially leaves consumers with challenges in accessing affordable ADR in cross-border disputes. Second, the ASEAN CIS framework lacks provisions on cross-border cooperation, although information-sharing and cooperation on enforcement are essential. Third, ASEAN’s existing framework for consumer redress focuses on generic consumer goods and services. These are largely irrelevant to financial consumers for whom most ASEAN 5 countries have designated financial consumer ADR mechanisms.

Under existing frameworks, financial consumers may have to seek redress with ADR mechanisms in another country when disputes relating to cross-border transactions arise. Current ASEAN CIS and ARFP frameworks contain minimal provisions for cross-border financial consumer dispute resolution. The ASEAN CIS framework requires ASEAN CIS operators to submit to the jurisdiction of the host country’s courts, but operators are not required to submit to the jurisdiction of host ADR mechanisms.Footnote ¹⁵⁸ The ARFP framework states that the host country’s laws apply to consumer complaints.Footnote ¹⁵⁹ Publicly available documents do not discuss any requirements that operators should submit to the jurisdiction of host ADR mechanisms.

The Australian FOS has proposed several measures in the context of the ARFP to address the gaps in the existing frameworks.Footnote ¹⁶⁰ Consumer access to redress would be improved if consumers can have disputes resolved by a single ADR scheme in consumers’ countries. One way of achieving this is by requiring operators to submit to the full jurisdiction of the host country’s ADR scheme.Footnote ¹⁶¹ There are currently three ASEAN countries participating in the ASEAN CIS. Two of them, namely Singapore and Malaysia, have ADR mechanisms for financial consumers which largely incorporate international best practices. Singapore’s FIDReC has more than 530 financial services providers that have submitted to its jurisdiction.Footnote ¹⁶² There appear to be no obvious impediments to ASEAN CIS operators from other participating countries submitting to FIDReC’s jurisdiction,Footnote ¹⁶³ particularly where the Monetary Authority of Singapore has given the necessary approvals for the ASEAN CIS operators’ offer of funds to retail investors in Singapore. Likewise, ASEAN CIS operators that have been approved by the Securities Commission of Malaysia are likely to be able to submit to the jurisdiction of SIDREC, the ADR mechanism for financial consumers of capital markets services.Footnote ¹⁶⁴ As submission to host country ADR mechanisms is beneficial to host country financial consumers, host country regulators have considerable incentives to encourage this.

The FOS also highlights the need for host dispute resolution schemes to be familiar with the laws of other countries involved in the ARFP.Footnote ¹⁶⁵ Both the ASEAN CIS and the ARFP are governed by a combination of home country and host country laws.Footnote ¹⁶⁶ In disputes involving home country laws, information and assistance from home regulators on the applicable home country laws would enable more efficient dispute resolution by the host country’s ADR mechanism. There is also a need for measures that provide passport operators with incentives to comply with the ADR scheme’s decisions, or sanctions for non-compliance. Sanctions may take the form of host regulators revoking the passport fund operator’s permission and home regulators taking the operators’ non-compliance into account when assessing the operator’s good standing.Footnote ¹⁶⁷ Cross-border cooperation would arguably strengthen supervision and passport operators’ compliance with the decisions of host ADR mechanisms.

At present, the ASEAN CIS framework lacks specific provisions on cross-border cooperation. Participants in the ASEAN CIS are members of the International Organization of Securities Commissions (IOSCO) and signatories to its Multilateral Memorandum of Understanding (MMOU), which makes provision for information exchange and cross-border cooperation.Footnote ¹⁶⁸ The ARFP framework cites the need for ‘heightened cooperation, consultation, exchange of information and mutual assistance’ among regulators.Footnote ¹⁶⁹ However, details of such cooperation are left to passport economy regulators to determine between themselves, presumably through mutual arrangements. The ARFP framework also requires participants to be signatories to IOSCO’s MMOU and to have implemented IOSCO principles on enforcement, cooperation and collective investment schemes.Footnote ¹⁷⁰

ASEAN’s infrastructure for consumer protection includes the ASEAN Committee on Consumer Protection (ACCP). The ACCP website provides links to consumer redress in ASEAN Member States.Footnote ¹⁷¹ The links are currently limited to generic consumer complaints forums, which are of little assistance to financial consumers who require access to financial consumer ADR entities in ASEAN Member States. ASEAN has issued guidelines on the selection and implementation of complaints and redress mechanisms and a handbook setting out the various complaints and redress mechanism in ASEAN Member States.Footnote ¹⁷² While the initiatives cover generic consumer goods and services, minimal focus has been given to the specific needs of financial consumers. The guidelines canvass various complaints forums for non-financial goods and services, including regulators and government departments. There are minimal references to financial consumer ADR mechanisms.

The gaps in the existing ASEAN framework underscore the need for further measures to enable better access to financial consumer redress for cross-border transactions. As noted above, cross-border cooperation is important for the effective resolution of cross-border disputes,Footnote ¹⁷³ in areas such as information-sharing, where a combination of home and host countries’ laws are applicable, and in measures to ensure that ASEAN CIS operators comply with the decisions of host ADR mechanisms. In seeking to strengthen existing frameworks, reference to the EU’s experience provides useful insights. The analysis below draws from the EU’s framework for cross-border cooperation and measures to facilitate consumers’ access to dispute resolution in other Member States.

A. Key Features of an ASEAN Framework for Financial Consumer Redress

The discussion in Part II indicates that internal and external financial consumer dispute resolution mechanisms have been established in ASEAN 5 Member States, although the degree to which they reflect international standards varies across countries. The development of redress mechanisms has at times been precipitated by mandatory regulations. Market forces and voluntary compliance with non-binding guidelines contribute to practices consistent with international best practices. As financial consumer dispute resolution frameworks are considerably developed among ASEAN 5 Member States, existing national frameworks provide a basis for the development of a harmonized framework for the broader ASEAN region. Development and growth in the financial services sectors of other ASEAN Member States suggests that countries such as Cambodia, Lao PDR, Myanmar and Vietnam would also benefit from the strengthening of financial consumer protection frameworks.Footnote ¹⁸²

As previously noted, international best practices emphasize the need for financial consumers to have accessible, affordable, timely, professional and impartial dispute resolution.Footnote ¹⁸³ Decisions should be binding on financial services providers.Footnote ¹⁸⁴ Publication of data on complaints and outcomes promotes transparency, while analysis of the data assists in the identification of systemic weaknesses.

The importance of negotiations between consumers and financial services providers in seeking to resolve disputes is reflected in the emphasis on timely internal complaints-handling processes. All ASEAN 5 countries have taken steps to establish internal complaints-handling processes that respond to complaints in a timely manner. Competition for customers has been instrumental in the establishment of quality internal complaints-handling.

International best practices highlight the need for external redress when disputes are not resolved through internal complaints procedures. Singapore and Malaysia have adopted the financial ombudsman model while Indonesia’s seven industry-specific ADR institutes provide dispute resolution for financial consumers in areas of banking, insurance, finance, venture capital, pension funds, capital market and guarantees. All three countries’ ADR mechanisms issue decisions that are binding on financial services providers while consumers have the option to seek further legal recourse.Footnote ¹⁸⁵ External redress mechanisms in Thailand and the Philippines lack the authority to make binding decisions recommended by the World Bank. This is ameliorated in the Philippines by banks’ voluntary compliance with FCAG’s decisions.Footnote ¹⁸⁶

There are noticeable gaps in the financial services covered by the dispute resolution mechanisms in ASEAN 5 countries. Financial consumer ADR mechanisms are usually limited to financial services supervised by central banks or financial services authorities. For instance, Malaysian consumers have limited recourse to affordable external redress in relation to hire-purchase, retail credit, money lending, pawn broking, financial cooperatives or NGO microfinance. In Indonesia, village credit and financial cooperatives are not regulated by the OJK. Singapore’s FIDReC covers the broadest range of financial services among ASEAN 5 countries. The establishment of a single dispute resolution entity that covers a broad range of financial services arguably promotes accessibility by simplifying identification of the relevant ADR entity.

An ASEAN framework should ensure that financial consumer ADR is accessible and affordable. Financial consumer redress mechanisms in all ASEAN 5 countries provide free or low cost services to consumers. Complaints may be lodged in person or by post or fax in several countries, facilitating access to redress mechanisms. The FCAG in the Philippines and Singapore’s FIDReC also accept complaints lodged by email. ADR mechanisms commonly specify procedural rules that limit access to external redress, such as time limits for lodging disputes or reasonable monetary thresholds.

International standards emphasize the need for ADR mechanisms to be professional, independent and transparent. Malaysia’s SIDREC and Singapore’s FIDReC have sought to satisfy these requirements by appointing adjudicators with professional qualifications and industry experience.Footnote ¹⁸⁷ Adjudicators’ profiles are published and the dispute resolution entities are chaired by retired senior judges of their respective countries’ apex courts.Footnote ¹⁸⁸ Transparency is facilitated through regular publication of data on disputes heard. These include case studies on various disputes and their outcomes, contributing to consumer education.

There is some evidence of data analysis and identification of systemic weaknesses in the Philippines. However, other ASEAN 5 countries could improve in this respect. Australia’s Financial Ombudsman Service (FOS) provides an example of data analysis and identification of systemic issues.Footnote ¹⁸⁹ The Australian FOS further liaises with financial services providers and regulators to address systemic problems.Footnote ¹⁹⁰

B. Cross-border Issues

Part II.G highlighted the need for cross-border cooperation and measures to promote consumer access to redress in cross-border disputes. Gaps in the existing framework potentially leave financial consumers with difficulties in accessing redress mechanisms in cross-border disputes. In order to address this, ASEAN’s framework should ensure that CIS operators submit to the jurisdiction of host country ADR mechanisms. This would provide financial consumers who subscribe to ASEAN CIS schemes better access to financial consumer ADR in their own countries.

The EU’s single market and its experience with cross-border cooperation in the resolution of financial consumer disputes provide a valuable reference point for ASEAN’s burgeoning single market. EU regulations facilitate regular exchanges of best practices among ADR entities on the resolution of cross-border disputes.Footnote ¹⁹¹ The regulations likewise envisage the mutual exchange of information among national authorities on recurrent complaints and the provision of technical assistance on complaints-handling.Footnote ¹⁹² As with the EU, cross-border cooperation that enables information exchange among consumer ADR mechanisms and regulators is essential in ASEAN. In resolving cross-border disputes involving home and host country laws, ADR processes would be more effective with assistance, in the form of information exchange, from foreign counterparts on the applicable law. Cross-border cooperation on enforcement and measures to address recurrent problems would further support the efficient functioning of ASEAN’S integrated markets.

The ASEAN Committee on Consumer Protection (ACCP), with its contact points in each Member State, provides a platform for cross-border cooperation among ASEAN regulators and ADR mechanisms. Such cooperation would ideally involve information exchange and cooperation in resolving cross-border disputes and enforcement of ADR decisions. Likewise, cross-border cooperation in addressing systemic problems and the sharing of best practices would contribute to the efficient functioning of ASEAN’s markets. ACCP’s functions could be extended to enable contact points to assist consumers in lodging complaints in other Member States, along the lines of FIN-NET and ECC in the EU. FIN-NET, a network of financial consumer ADR schemes in the EU, maintains a website that provides information to consumers on ADR schemes. Consumers who have disputes with financial services providers in other EU countries are directed to the relevant ADR entities.Footnote ¹⁹³ Complaints lodgement is also made easier through FIN-NET, as consumers may lodge complaints with FIN-NET, which then forwards the complaints to the responsible ADR entity. Similarly, the European Consumer Centres (ECC) assist consumers with information and advice on complaints relating to cross-border transactions. The ECC-Net directs consumers to the appropriate ADR entity and provides assistance in 23 EU languages.Footnote ¹⁹⁴

ACCP promotes cross-border redress through its website. As noted in Part II.G above, at present, the website only provides links to generic consumer redress mechanisms. Despite the existence of designated ADR entities for financial consumers, the ACCP’s website does not provide information on financial consumer redress mechanisms. Development of links on the website to financial consumer ADR mechanisms in ASEAN Member States would be beneficial to financial consumers. In addition, the website could enable the lodgement of consumer complaints with the relevant ADR mechanism. Consumer access to ADR in cross-border disputes may be strengthened through cooperation among consumer associations. An example of such cooperation is seen in the memorandum of understanding entered into by Singaporean and Malaysian consumer associations. The arrangements provide for information exchange and envisage the possibility of mutual cooperation in assisting consumers to access redress in the counterpart’s country.Footnote ¹⁹⁵

The ASEAN Economic Community Blueprint 2025 recognizes that e-commerce has an important role in strengthening regional economic integration.Footnote ¹⁹⁶ Online transactions are anticipated to facilitate growth of ASEAN’s integrated markets, including the market for cross-border financial products and services. The Blueprint highlights the importance of redress mechanisms for e-commerce and proposes the development of a regional legal framework for online dispute resolution (ODR).Footnote ¹⁹⁷ The EU’s framework for ODR may be of assistance to ASEAN in this regard.Footnote ¹⁹⁸ Designated contact points in each Member State assist consumers with the submission of complaints and provide information such as procedural rules and other redress options.Footnote ¹⁹⁹ The network of ODR contact points meets at least twice a year to exchange information and best practices, and discuss recurrent problems in the ODR platform.

C. Equitable Access to Financial Consumer Redress

While recent developments have improved access to consumer redress mechanisms across ASEAN 5 countries, the developments appear to have benefitted some consumers more than others. Rural, low-income and less educated consumers arguably face greater challenges in accessing redress mechanisms. Formal procedures such as written documents present challenges to consumers with low literacy levels.Footnote ²⁰⁰ Distance from dispute resolution centres and the costs associated with complaints resolution may be disincentives. Consumers who are less familiar with formal financial services may lack awareness of their rights and avenues of redress.

The lack of access to affordable formal redress is compounded when consumers engage with financial services that fall outside the supervision of central banks. Pawnshops,Footnote ²⁰¹ village credit and, to some extent, credit cooperatives commonly fall outside financial consumer protection frameworks. These are often used by low-income consumers, who have difficulty accessing bank financing,Footnote ²⁰² or rural consumers. Approximately a quarter of Malaysia’s population, and close to half of Indonesia, the Philippines and Thailand’s populations, are rural.Footnote ²⁰³ Thailand’s FCC observed that most of the complaints it received came from consumers in Bangkok.Footnote ²⁰⁴ Available redress mechanisms in Thailand are also thought to be underused.Footnote ²⁰⁵

ASEAN’s consumer protection framework will need to address these issues in order to promote equitable access to financial consumer protection and redress. Linguistic diversity in ASEAN poses further challenges, with over a thousand languages spoken in the region.Footnote ²⁰⁶ A large proportion of ASEAN’s population is not proficient in English, which is ASEAN’s working language. In addition, the majority of ASEAN countries do not share common indigenous languages.Footnote ²⁰⁷ Language differences arguably impede access to cross-border dispute resolution mechanisms, particularly for non-English speaking consumers.Footnote ²⁰⁸ A possible measure that assists in bridging language barriers is for ACCP to assist with translation, as is practised in the EU by ECC-Net.

A final observation relates to the preference for traditional informal dispute resolution through community leaders, especially among some rural and low-income communities.Footnote ²⁰⁹ This may be indicative of the accessibility of informal dispute resolution in comparison with formal redress mechanisms. In seeking to promote equitable access to redress mechanisms, it may be worth considering whether existing informal dispute resolution mechanisms may be developed to provide assistance to financial consumers in accessing formal redress.