CONSUMER AFFAIRS UNIT Annual Report 2012

Malta Financial Services Authority



Consumer Affairs Unit - Annual Report 2012

CONTENTS

(Click on items below to be directed to relative chapter)

Chairman’s Statement

2

Responsibilities of the Consumer Affairs Unit

5

Complaints’ Handling

8

Reporting of Complaints and Enquiries

10

International Participation

13

Consumer Education

16

Review of Complaints and Queries

18

Appendices

37

1

Malta Financial Services Authority



Chairman’s statement The year under review marks the tenth anniversary since the Consumer Complaints Manager had been appointed by the Authority to review complaints from private consumers against financial firms. Over the years, the Complaints Manager has reviewed various issues and practices which were detrimental to consumers of financial products and services. The financial sector has always thrived when the products and services brought to the market met the needs and expectations of the consumer. However, various cases of alleged misconduct have arisen as a result of dubious selling practices and low consumer awareness. The review of cases relating to alleged mis-selling of certain types of financial products appear to have arisen from inherent factors that are often present in the mistaken choices people make when reviewing a financial product. Consumers tend to focus and make their decisions by comparing a possible outcome with one or more situations they feel they are familiar with. The choices people make are sometimes influenced by similar situations and past mistakes, but unconscious factors – such as biases, preferences and personal loyalties – are often at play during the decision-making process and may significantly lead to poor outcomes. Unlike many other choices, a single investment decision may have long-lasting and costly implications to the consumer. Some consumers do not have the luxury of learning from multiple financial transactions. For instance, some consumers may only be required to take out a home loan or life policy once in their entire life. For others, their first entry in the investment world might occur after long years of savings. Their natural inability to make decisions will lead them to seek assistance from firms which can guide them through the process. They expect these firms to select a product which best suit their needs, after assessing their requirements, risk profile and expectations. Unconscious biases and other personal factors have led consumers to make poor financial decisions and there may be situations where losses cannot be recouped. While consumers can often make poor decisions because of ill-informed risk assessments, some firms may have exploited low consumer awareness of risks associated with high yield products or provided inaccurate or misleading information about risk/return assessment to these consumers. Understanding how and why consumers make certain choices can be difficult and complex to assess. This is why it is important for the industry to always remain focused on consumers’ legitimate needs and expectations. Consumers expect the industry to create products and services which bring real value to them, without necessarily shifting on to them undue risk. The industry is therefore expected to compete by creating products which do not come bundled with unnecessary add-ons and unreasonably high exit charges and which are accessible without restricting the ability of the consumer to switch to another investment. Consumers also expect the industry to shed their inexplicable urge to complicate financial products through misleading and complicated documentation.

2

Consumer Affairs Unit - Annual Report 2012



In the coming months, the Authority