FRA Issues a Consumer Protection Gu

As part of its comprehensive five-year strategy to develop the non-banking financial (“NBF”) sector, particularly in terms of governance, supervision, and consumer protection, the Financial Regulatory Authority (“FRA”) recently published on its website its Chairman Decision No. 446 of 2019 (the “Decision”)[1] issuing a guide for the protection of consumers in the NBF sector (the “Guide”). The Decision requires companies and institutions operating in the NBF activities to comply with the Guide’s principles and regulations and to publicize it in addition to raising their clients’ awareness of their rights and responsibilities as provided in the Guide. The Decision is yet to be published in the Egyptian Gazette, following which it goes into effect within a day.

Consumer Protection Principles

Although the Decision refers to a “guide” in the singular form, its accompanying documents on the FRA’s website number ten. There is one general detailed Guide on the protection of consumers in the NBF sector in Egypt as a whole, encompassing principles that are specific to each of the main areas regulated by the FRA in the sector ((i) Capital Market, (ii) Insurance, (iii) Private Insurance Funds, and (iv) Financing (especially microfinance, mortgage financing, financial leasing, and factoring)). Area-specific guides are then extracted from this general Guide – perhaps for practicality and user-friendliness – which are further rendered into abridged infographics that are all uploaded and available through the FRA’s website. As a whole, the Guide (and its area-specific versions) aims to set up consumer protection systems comprising preventive measures in addition to conflict resolution mechanisms. The incorporated principles are grouped under the main categories of disclosure and transparency; professionalism; fairness and non-discrimination; confidentiality; conflict resolution and complaint settlement; and guarantees and compensation. They affect capital market companies, insurance companies, private insurance funds, mortgage finance companies, financial leasing companies, factoring companies, and microfinance companies and NGOs, as well as categories A and B microfinance associations with microfinance portfolios of at least EGP 10 million.[2] The following table summarizes some of the general principles, which are interconnected and overlapping: In addition to the obligations of NBF companies and institutions, the Guide also outlines some of the obligations and responsibilities of the consumers themselves, such as providing complete and accurate information when filling forms, disclosing important and material information, periodically updating their information, carefully reading all information about their obligations as provided by the companies/institutions and inquiring in cases of confusion or lack of clarity, reporting violating procedures to the company/institution, and avoiding products and/or services with risks that are incompatible with their financial status. Accordingly, the principles incorporated in the Guide are envisioned to not only protect NBF consumers but to also have an effect on the entire financial system.

Circulation of the Guide

The Decision requires NBF companies and institutions to permanently feature the Guide on the home page of their websites in addition to circulating it on their social media platforms (if existing). The companies and institutions must also add a provision in documents relating to a financial service that clarifies how to obtain the Guide. Clients must also receive a printed copy of the infographics when they receive any financial, insurance-related, or finance-related products. Additionally, NBF companies and institutions must place explanation boards, in accordance with FRA’s requirements, with the most important consumer protection principles at their branches and other venues where they offer services.

Conclusion

Situated within worldwide efforts towards consumer protection in increasingly complicated and challenging financial markets (partly due to the rise in the usage of financial technology), the Guide complements – rather than replaces – a series of FRA decisions and instructions that were issued throughout recent years on consumer protection. It cites and incorporates best practices and international standards propagated by the World Bank, the Organization for Economic Co-operation and Development (OECD), and the United Nations Conference on Trade and Development (UNCTAD) while adapting them to the Egyptian context, as stated throughout its pages. The Guide also highlights the dynamic nature of the NBF sector on the ground, pointing to the possibility and expectation of future updated versions of the Guide. The Guide also foregrounds the application of relevant laws in cases where there are discrepancies between a principle incorporated in the Guide and a law. Throughout its Guide, the FRA directs all actors in financial markets towards the mutually reinforcing objectives of consumer protection and financial literacy/education, which are two main steps towards financial inclusion. According to recent statistics, only 27% of adults in Egypt are financially literate.[3] However, there have been continual efforts by the government at implementing initiatives that help raise financial inclusion in Egypt as a whole, with particular emphasis given to financial literacy and consumer protection, both in the banking and non-banking sectors, and the Guide is an addition to these.   [1] FRA Chairman Decision No. 446/2019 issuing a guide for the protection of consumers in the non-banking financial sector, available through this link (in Arabic). [2] FRA Board of Directors Decision No. 31/2015 classifies microfinance associations and NGOs into three categories: (1) category A, with microfinance portfolios of at least EGP 50 million; (2) category B, with microfinance portfolios between EGP 10 million and EGP 50 million; and (3) category C, with microfinance portfolios of less than EGP 10 million. [3] Union of Arab Banks, “Financial Literacy in the Arab Region: A Prerequisite for Financial Inclusion”, October 2017, available through this link.