1 INTRODUCTION

1

INTRODUCTION

1.1. RATIONALE FOR THE TOOLKIT

The complaint handling mechanism plays an important role for a reliable financial system, keeping financial service providers (FSPs) publicly accountable and ensuring continuous development.

Effective complaint handling significantly supports central banks and other regulatory authorities to keep a safe and sound financial system by expanding public confidence over time.1 The Complaint Handling in Central Bank Framework developed by AFI members highlights the relevance of the appropriate feedback mechanisms, allowing consumers to raise their concerns, and make comments and suggestions.

Further insights are available in AFI Complaint

Handling In Central Bank Framework

> View Framework

The framework and the toolkit were developed keeping in mind that most AFI member countries have established an authority responsible for receiving and resolving financial consumer complaints (80%). Although central banks are the competent authorities to resolve financial consumer complaints, due to the institutional arrangement, the scope of complaints is limited only to commercial banks. It is important to highlight that just 14% of countries use the Ombudsman office as an alternative dispute resolution (ADR) mechanism. Reporting statistics on complaints and enforcement action is uncommon among the AFI member countries, as well, as only 38% have an established approach of sharing complaint-related information publicly. Given these statistics, effective complaint handling in central banks can become an important breakthrough in providing necessary protection before establishing other mechanisms.2 Effective complaint handling becomes even more challenging considering extensive digitalization. According to the AFI survey on consumer protection for digital financial services (DFS), 50% of regulators were concerned about the complaints and redress mechanisms in place. Having an effective complaint handling mechanism needs a systematic effort and should not be confused with a mechanism for feedback, queries or products/services information.3

The need to have a proper mechanism of complaint handling in a central bank is core to effective consumer protection. Market conduct regulation and supervision as an important driver for financial inclusion have been addressed by AFI several times. The exponential growth of digitalization should not pose any risks to consumer protection or complaint handling.4

1.2. OBJECTIVES AND TARGET AUDIENCE FOR THE TOOLKIT

This toolkit has been developed to support AFI member institutions in the process of designing and implementing policy measures related to the complaint management process and enforcement actions.

Specifically, the toolkit: > provides practical guidance on the implementation component of the Complaint Handling in Central

Bank Framework by clearly outlining various approaches, models, tools and methods to deal with the financial complaints efficiently > provides clear directions to ensure enforcement of market conduct rules

> presents experiences of AFI member countries in complaint handling mechanisms to support supervision of the market conduct.

This toolkit is intended for policymakers, regulators, local and international organizations, FSPs and other stakeholders interested in the advancement of complaint handling mechanisms. It provides tools and methods, case studies and examples by outlining some critical directions to improve complaint handling practices across the AFI member countries.

1 AFI. 2020. Complaint Handling in Central Bank Framework. 2 AFI Data Portal. 3 AFI. 2021. Consumer Protection for Digital Financial Services: A Survey of the Policy Landscape. 4 AFI. 2020. Policy Model on Consumer Protection for Digital Financial

Services.