26th February: Financial Services

Chair: Prof. Christopher Peterson, S.J. Quinney College of LAw, University of Utah, (USA), Transnational Consumer Debt Collection

Prof. Christopher Peterson, S.J. Quinney College of Law, University of Utah, USA: Transnational Consumer Debt Collection:-

The speaker started by quoting from Adam Smith’s book, The Wealth of Nations; It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The taylor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a taylor…What is prudence in the conduct of every private family, can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the product of our own industry, employed in a way in which we have some advantage. So, if a foreign country can collect our debts better than we ourselves can, better to outsource them with some part of the product of our own industry, employed in a way in which we have some advantage. The basic premise of his paper was therefore to see how this was true or wasn’t and why.
The speaker spoke of how debt collection practices have great potential for consumer abuse such as harassment and the psychology of failure, over-charging, reputational captivity, identity theft, “Zombie” debts which keep coming back like zombies and issues of suicide.
He gave the example of how with millions of people fluent with English in India, in particular, has lead to providing product support, reservations and marketing for companies in the US, Canada, Australia, Ireland and UK. Indian companies are also providing consumer debt collection services for creditors in post-industrial countries.
He concluded by recommending that policy makers should anticipate that financial predators from both developed and developing countries are likely to attempt to exploit the various regulatory weaknesses that exist.

Prof. Jenny Hamilton, University of Strathclyde: Choice, information and education–the illusion of consumer empowerment in financial services:-

Talking about the explosion of the number of retail financial products designed by the industry for the mass retail market in the UK, it is not co-incidental but in response to the government desire to structure its public finances so as to reduce or withdraw from communitarian welfare provision. At the same time, social and familial structures mean that citizens are expected to make individual and private provision for their retirement and elderly care through market mechanism. The citizen has now become the consumer of financial services.
Various regulations have embarked on campaigns to improve the financial literacy and education of consumers in relation to savings, investment and debt. Here, the speaker posed the question of- Why, in the retail financial sector, information disclosure and financial education and capability regimes have not produced the anticipated benefits for consumers and why, despite continued consumer detriment, is there continued support for unfettered consumer choice?
The speaker suggests that the reason that information disclosure and financial literacy and education campaigns have produced only limited benefits for individual consumers of financial products and services, and in some cases the effects have been detrimental, while research into the effect of choice suggests that too much choice can be debilitating rather than liberating.
She concludes by laying emphasis on membership of a community rather than freedom of the individual, that doesn’t necessarily centre on choice as expressed through markets, and where outcomes don’t depend on possessing the ‘calculating framework’ of the ‘rational consumer’.
Rapporteur: Disket Angmo
IInd Year
NALSAR University of Law
Hyderabad, India.

Filed under: Uncategorized

27th February: Creating a Legal Infrastructure to protect Consumers in a Global Economy Consumers Rights and Poverty

Chair: Dr. A. Rajendra Prasad, Head, Department of Law, Andhra University

Joyeeta Chatterjee, Gujarat National Law University: Vulnerable Consumers and Poverty as an Issue of Consumer Law.

 

In the present era of globalization, the ‘cause and effect’ phenomenon relates to poverty has become immensely entangled and the present and the present surge of consumerism in its most aggressive mien has added fuel to the fire. It is largely contented that globalization policies have failed to strike a healthy balance between growth, development and its negative side- effects.

 

Competition between producers to attract customers is expected to create economic efficiency, innovation and better quality products at lower prices. However, instead of offering choices and lower prices, liberlisation has led to the creation of monopolies and cartels thereby denying consumer the very benefit which it is supposed to promote. It is thus imperative that competition is promoted with the benefit to the consumer in mind.

 

Consumer over- indebtedness has too been a central legal policies, procedures, law and cases from a consumer welfare perspective. It would throw light on the existing legislation in over- indebtedness and consumer bankruptcy along with consumer bankruptcy along with consumer insolvency regulation, and consumer credit legislations. Apart from linking debt relief to poverty reductions, it would analyze the nexus between bankruptcy and poverty. It would further suggest methods that can be adopted in the realm of consumer law to alleviate the poverty.

 

Ashish Krupakar, IInd Year, Gujarat National Law University: Vulnerable Consumers and Poverty as an Issue of Consumer Law:-

 

The speaker put forth his main aim, to address the need for the presence of a consumer law coupled with a procedure which would address the need of vulnerable consumers which the mainstream laws fail to address. He firstly defined a consumer as per Indian laws, the definition provided by the Consumer Protection Act of 1986 which was enacted in furtherance of the United Nations Guidelines. As per this Act, a Consumer is one: -who buys goods for a consideration, or someone who buys services for a consideration.

He says that the Consumer Protection Act of 1986 does not make any special provisions with regard to uneducated consumers and the poor whose access to legal remedy is restricted. He suggested that the Consumer Protection Laws should be further expanded with a view to include the following:

1. Protection of consumers from hazardous goods and the right to safety and health.
2. The promotion and protection of economic interests of the poor.
3. Access to adequate information.
4. Control of misleading advertisements and deceptive information.
5. Consumer Education.
6. Effective Vulnerable Consumer Redress.

His final recommendations were that we need in India the following:

1. Consumer Education
2. Adequate Consumer Information
3. Presence of a non – litigation form of a redress mechanism to settle minor disputes as a measure to tackle expensive litigation.
4. Simplify existing procedures in cases where litigation is a must and provide poor litigants with the right to free legal aid. 

                         Rapporteurs

-         Ayushi Mittal, IInd Year, NALSAR University of Law Hyderabad

-         Disket Angmo, IInd Year, NALSAR University of Law, Hyderabad.

 

 

 

          

Filed under: Sessions

26th February: Over Indebtedness and Possible Solutions

Chair: Dr.P.V.R.Jagan Mohan Rao, Director, Finance and Comapny Secretary, Ind- Barath Power Infra Ltd (India)

Phumudzo Munyai, Professor, UNISA (South Africa) :How to Crub Over- Indebtedness and Enhance Consumer Welfare in South Africa: Lessons from Islamic Law

 

Over spending and easy credit is singled out as the single biggest cause of consumer over indebtedness in many countries. Little attention is paid to economic and monetary polices and practices as possible causes of consumer over indebtedness. In South Africa easy credit is generally blamed for consumer over indebtedness. The National Credit Act, 34 of 2005, was premised fundamentally on these assumptions. The Act protects unworthy borrowers from unscrupulous credit providers, there is little attention paid to the welfare of those credit worthy borrowers, once the credit transaction is concluded. A comparative study reveals that there are valuable consumer protection lessons South Africa can learn from Islamic Law, which denounces payments or receipt of interest. By efficiently protecting consumers against higher prices, in the form of interest, Islamic law provides obvious benefits for consumers, especially the poor who would otherwise not be able to avail the certain basic needs. The benefit of this approach is that is that resulting consumer satisfaction will boast confidence in our credit system while at the same time ensuring equitable resource distribution and balanced economic growth in the long term.

 

 

Vincente Gozalo Lopez, Assistant Proffesor, Universaity of Cantabria (Spain): Over Indebtedness in EU

 

House hold over indebtedness has been a wide spread problem for years, but Spanish law makes no specific provision for it. At most the Spanish legislation has created a number of institutions designed more as a means to prevent over borrowing by placing constraints on lenders advertising. Looking at statutory provisions, it is a fact that consumers in Spain are unprotected in insolvency proceedings. This is unusual, since leading European Union countries have implemented frameworks that enable a consumer who is undergoing economic hardship to negotiate a grace period for her debts, or once her attachable assets have been fortified, she may even have liability extinguished for any debts that still remain outstanding. It is the nonetheless to be borne in mind that law in these European states is very careful to ensure that this fresh start afforded to a household so that it can sustainable rebuild its domestic finances is not granted blindly or indiscriminately in the form of an absolute discharge, rather the law deliuates the conditions of varying strictness under which it is fair for a consumer to enjoy protection.  The consumer insolvency calls for a range of legislative decisions that remain unachievable by any interpretative approach to the positive law now in place. Any reform should preserve a number of principles that have been worked out in the legal doctrine has so far addressed the issue.

 

Philip Stoop, Lecturer,University of South Africa: South African consumer credit policy: measures indirectly aimed at resolving and preventing consumer’s over indebtedness

 

The Global economy has boomed during the last two decades and the boom is largely due to an increase in granting of credit and easy access thereto. However this economic boom came at a price since the number if individuals and business that are over indebted has reached new heights. Legislation protecting debtors and aimed at directly of indirectly preventing the problems of over spending in various ways is therefore an international phenomenon and this legislation differs from country to country depending on the needs of the specific country. Due to a considerable imbalance of power between the credit providers and consumers, low education levels, poorly informed consumers, weak disclosure and deceptive marketing practice, South African consumers also entered into unaffordable credit contracts and this over indebtedness caused many social problems. In order to align new consumer protection, the National Credit Act introduces regulatory measures directly and indirectly aimed at resolving over indebtedness of consumers. The purpose of this paper was to thoroughly address some of the indirect measures aimed at resolving and curbing over indebtedness in the South African credit industry and the role the indirect measures play in relieving problems connected with poverty and over- indebtedness in the context of the global economy

 

                        Rapporteur

                      - Ayushi Mittal, IInd Year, NALSAR University of Law, Hyderabad     

 

Filed under: Sessions

In a presentation entitled “Agriculturist Debtors – A Vulnerable Consumer Group”, Namrata Sharma and Priya Sharma of HNLU, Raipur brought out the plight of Indian farmers, caught up in the vicious cycle of debt compounding debt. Typically, the process starts with the deadly trio of the WTO, IMF and the WB laying down the guidelines for developing countries which are, more often than not, agro-based. The villainous trio of IMF, World Bank and WTO are in connivance with each other. With institutional credit also falling short of requirements, the recourse to unofficial sources – the village moneylender and mahajan – had increased enormously. Working in a completely unregulated environment, these agents often felt at liberty to charge extortionate rates of interest. In conclusion, various measures taken by the government were enumerated and suggestions given for further improvement. Avni Chari of NALSAR spoke about the ascendancy of MNCs over the seed industry, particularly in India. Talking about India’s first bout of farmers’ suicides in 1997, she pointed out that the cardinal reason for the suicides is the abysmal arrears the cultivators find themselves in. Moving on to the specific issue of commercialization of seeds, the researcher revealed that over the last few decades, scientists developed the ability to modify the blueprint of life i.e. DNA and it is in response to this novel scientific venture that intellectual property laws were adapted to encompass living organisms. Furthermore, India announced its globalization policy during the Narsimha Rao tenure in the early 1990’s. This prompted an effusion of MNC involvement (such as the agro-MNC of Monsanto) with India. Prior to its grand commercialization, seeds were under the ambit of the public domain. Now, seeds are owned by those patent a particular variety. The introduction and failure of Bt Cotton in India was thus discussed followed by the reasons for failure of compensation schemes for affected farmers. For instance a new survey in India has found genetically engineered cotton (Bt Cotton) is causing negative health effects among farm workers. In conclusion it was pointed out that it is government policy that needs to be cajoled out of its present position before any amount of consumer protection can be afforded. The team from RMLNLU and GNLU presented their perspective on “Multinational Companies: Consumer Protection Laws in India.” A brief introduction on multinational companies was first given wherein it was pointed out that Section 591 the Companies Act, 1956 defines “Foreign Company” as a Multinational Company having its head offfice outside India is a foreign Company. While talking about consumer protection at the international level, the role of United Nations Draft Code of Conduct on Transnational Corporations, 1977 and other declarations was also discussed. In addition, the role of consumer protection in India was discussed through a cursory presentation on the Competition Act, 2002 and the Foreign Exchange Management Act, 1999 among others. The drawbacks at the international and national level were discussed and recommendations were given. In conclusion it was said that the final hypothesis that is drawn in the paper is that though there are provisions in various enactments dealing with consumer protection as far as offences by companies are concerned, stronger laws both at national as well international level are required to protect the vulnerable consumers of developing country like India.

Rapporteured by

Arushi Garg, 1st Year

Gautam Swarup, 1st Year

Filed under: Uncategorized

The first presenter for the stream “The Rights and Responsibilities of Service Providers in a Global Economy” on the third day of the conference was Mr. Alan M. White from Valparaiso University School of Law.

 

The subject of his paper was “Regulating Credit for the Poor: Lessons from Micro-lending in Developing Nations.” He began with a discussion on the access to capital available to the poverty-stricken people of the world, juxtaposing their low capital access with their exploited status.

 

            He mentioned the usury driven credit structures that have typically been employed by low-income groups. The fact that this section of the financial services industry has typically been deregulated has lead to exploitation of people procuring small amounts of money, leading to over-indebtedness of consumers.

 

            He discussed Welfare Economics, the utility as well as the disutility. The utility comes from income-producing investments while disutility results from such factors as overconfidence bias leading to negative returns.

 

            The substance of his discussion came with discussions of such microfinance organisations as the successful Grameen Bank of Bangladesh.  Delineating the successful model employed by them, he mentioned their high level of controls leading to comparatively excellent rates of repayment. The welfare impact of such organisations has been tremendous.

 

            Contrasting this to the debt cycle and over-indebtedness created by small-consumer loans in the U.S., he discussed the paternalism of such microcredit organisations. He also discussed similar situations in Bolivia and South Africa and how their debt-remedy measures may be applied to the U.S. small-consumer loan systems.

 

 The second presenter of the day was Ms. Wenette Jacobs, from the University of South Africa, presenting a paper on “The Liability Insurer’s Right to Defend and Settle Claims against the Insured by Third Parties and Legal Protection Insurance in the Context of Liability Insurance.”

            The researcher presented the participants with keen and penetrating insights into the liability insurer’s right to defend and settle claims against the insured by third parties and legal protection insurance in the context of liability insurance. The presentation dealt with liability insurer’s right to defend and settle claims and the scope of  legal protection insurance in liability policies. The pros and cons of a separate legal protection insurance were gone into.

           

Regarding the liability insurer’s right to defend and settle, it was said that the Insurer may take over and conduct the defence and settlement of any claim and have the right to use the insured’s name for this purpose. Therefore it becomes imperative to compare the right to subrogation with the right to conduct the insured’s defence and settlement. The liability insurer’s duty to defend was contrasted with its right to defend. The conflicts of interest between the liability insurer and the insured and the conduct of the proceedings by the liability insurer were then discussed.

 

After a riveting discussion on legal protection insurance it was concluded that there remain limitations in a defence by the liability insurer and the provision of legal protection insurance in a liability policy. Perhaps the time has come to seriously start considering a separate legal protection insurance.

 

The third presenter for the day was Ms. Surabhi Singh presenting a paper by herself and Ms. Renu Arora.

 

Professor Surabhi Singh sought to present before the august gathering the pros and cons of banking institutions. These were classified these into public, private and foreign banks.

            Starting off with the definition of banks as community based and business organizations, the researcher pointed out that banks play a role of considerable economic significance. It has been observed that in India the bank system is facing stiff competition and advancement of technology. Banking in India is considered as fairly mature in terms of supply, product range and reach but well computerized foreign banks are beginning to compete seriously with the nationalized banks.

The services provided by banks have become more easy and convenient. The Indian banking industry is passing through a phase of customer market. A few of the electronic banking services are offered viz. ATM, ECS, EFT, tele-banking, internet banking and so on. To provide continual customer satisfaction, banks are now required to continually improve the quality of services.

            Primarily three research questions were identified.

l      What are the major factors affecting customers’ satisfaction with the quality of services?

 

l      What is the level of customers satisfaction with the quality of services provided by public sector, private sector and foreign banks?

 

l      Do customers switch over to the IT adoption in public sector banks and to which extent?

 

A survey of 60 people was undertaken and their relationship with banking systems was studied and it was confirmed that the younger generation is starting to switch over on private and foreign banks. Reasons for selection of nationalized banks include faith, old bank and near the residence. Good services and more facilities were  the primary reasons for choosing private and foreign banks. Respondents of nationalized banks were not satisfied with employee behavior and infrastructure. Respondents of private and foreign banks were not satisfied with high charges, accessibility and communication.

                           

Session rapporteured by

Shuchita Thapar, 1st year

Arushi Garg, 1st year

 

 Note: The previous session was rapporteured by

Shuchita Thapar, 1st year.

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