Does your money really belong to you?

The theme of World Consumer Day this year, 15 March 2012, is very opportune, interesting and timely. It is our money, our rights – campaigning for real choice in financial services.

There is a doubt whether your money is really yours because it is managed by others. Your money is managed by the Central Bank and banks and other financial institutions at their wish and will. Whether they are accountable to you is very doubtful.

The money is managed by the directors of the bank and the company over who and which you have no control. They take decisions on your behalf for your funds. When there is a financial crisis locally or internationally, you are the main victim.

The world financial crisis was due to the fraudulent conduct and mismanagement of financial institutions in the USA and UK and the West, due to which the entire world had to pay a high price.

Collapse of the West

In the West the housing market on which the money market was depending collapsed as a result of over-inflating property markets. Western nations are used to credit card living, where spending is based on paperwork of financial institutions. They live on loans and credit cards.

This has not been the case in Asia and Sri Lanka. People did not want a mortgage and wanted a safe roof on their heads for a peace of mind. In the West purchasing a house, car or spending could be done easily on loans. It is not a happy scenario. In Sri Lanka obtaining a loan from a bank is a rigorous procedure. However, now this trend is spreading in Sri Lanka and now we find Sri Lankans carrying credit cards for their day-to-day purchases.

Strict financial regulations

During the recent crisis when the entire world collapsed, South Asians and Sri Lankans fortunately stood straight due to strict financial regulations and discipline. It is to the credit of the bankers that the country did not go through the crisis.

However, it was very unfortunate that there were private financial institutions that put the poor citizens as well as those who accumulated wealth for a rainy day into jeopardy. There are a lot of parties responsible for this apart from their lack of supervision, mismanagement and the media which turned a blind eye due to large sums of money paid to them by advertisements and the Police which did not intervene in a timely manner, probably due to shady deals.

Every year World Consumer Rights Day is celebrated on varied topics. Few years ago it was junk food, which is really an issue. This time the Consumer Affairs Authority and the consumer organisations should be organising discussions, workshops and activism to educate and to protect the consumers, as the Consumer Affairs Authority expects the authority and the organisations to act on it. The Consumer Affairs Authority’s Act is toothless and provides for protection through activism and organisation. The act provides for the authority to have a strong network of consumer associations countrywide.

Bad deal for the consumer

Consumers around the world are getting a bad deal for financial services due to a lack of effective competition in the market, which makes it difficult if not impossible for them to shop around. For example, consumers often have trouble understanding different financial products, mainly due to lack of information or because the products themselves are too complex or both. In Sri Lanka, lease, financial and most other documents are in English. It is only understood by about 5% of the population. The rest of the population can manage in English but not to the extent to read the subtle wordings in small letters. On the other hand, the pressure on them is such that they are compelled to sign any document at gunpoint due to need and pressure. The financial institutions and the agents are the main culprits, which get the signatures of customers.

Sad precedents

There are sad precedents including Sakvithi and other dishonest financial institutions. They cheat the public by using various methods to misdirect the customers. Some spend money having become philanthropists; some have photographs with dignitaries; or some employ leading figures as employees, having paid attractive salaries. They sell themselves posing as part of the establishment, misguiding the public.

Even after having gone through such difficult periods, it appears that people have not learnt a lesson on money management and financial regulations. Therefore, it is timely that the Consumer Affairs Authority establishes a network of consumer organisations worldwide, which is a part of its job.

There is one month more to 15 March, which is the day that their activism reaches a zenith. This is the day that they must use the media – print and electronic – to educate the masses on consumerism. The fact that there was Rs. 26 billion in unregulated funds over 26 years in Sri Lanka, amongst others, is a very worrying feature. This example is a lesson to be learnt for the future. This is the worst financial tsunami of Sri Lanka and it is a miracle that we stood straight despite the collapse of Western economies due to their own folly and greed with ulterior selfishness.

Sakvithi and other episodes too damaged our economy and the thrust on the system, loss of funds of innocent investors and families having to pay the ultimate price for which the investors and the so-called regulators are responsible – investments were genuine money mostly of expatriates and funds swindled via NGOs and black money circulation.

Large sums belonged to the genuine and innocent large and small time investors attracted by high interest rates and personal media publicity by the directors. They readily invested due to their personal glory to attract investors looking for easy money on interest some on retirement and some funds collected by selling lifetime assets.

Golden Key has been one of the many unregulated financial institutions blatantly violating basic principles of monetary management. It damaged the trust on banks and financial institutions, harming our image in the country and abroad.

The financial collapse in the West gave some relief to our economy from mere collapse. Therefore, it is time the financial regulator, the Central Bank, brings in legislation as a matter of urgency to protect the investors by affording them avenues to monitor and find out the financial management which is their right to know as a main ingredient of the rights formulated by the United Nations.

The Central Bank is the reserve bank of a state with exclusive privileges to lend to the Government, as a currency lender of last resort, lender to banks and the main financial regulator. The European Central Bank and the Federal Reserve System in the USA manage the respective finances.

In Sri Lanka, the Central Bank is managed based on the management of the Bank of England as the main regulator on the finance of the nation. It implements and maintains the financial policy. Now the Central Bank led by an able head has taken steps to supervise the errant and illegal financial institutions that were free to swindle genuine investors who have lost the investments. Another regulator responsible for this mishap is the Consumer Affairs Authority, from which the consumers are waiting for help.

Honesty and transparency

Honesty and transparency in business dealings are rare in Sri Lanka. Sometimes consumers are expected to sign blank papers in which the contents are in a language not understood or consist of small or illegible letters. During litigation and dispute, fat cat lawyers steamroll innocent consumers either by not representing them or representing them through junior lawyers. Credit card salesmen hover around workplaces on pay day to sell credit cards. Salaried employees are the main victims who are entitled to credit cards. The main expenditures of the poor consumer today are the mobile phone bill and credit card.

If the consumer is careful and conscious and knows when to buy, how to buy and where to buy an item, the cost of living will drop drastically. Simple living is another way for healthy living and comfortable living. These are things that we have to concentrate on, on the forthcoming Consumer Day.

Largest economic group

Kennedy in 1962 declared to Congress that consumers are the largest economic group affecting and affected by almost every public and economic decision and they are only important group whose views are often not heard. It is sad yet true that this statement is still valid in the present context and it is the duty of the civil society and statutory institutions and the consumer as a whole to organise themselves in the interest of the society with the wave of organisation initiated by Consumer International and the media. It is time society organises more and more consumer organisations and non-governmental organisations must explore this area instead of dabbling with internal political issues. Civil society and professionals too have a major role to play.

Way forward

Therefore, the theme this year is most appropriate to us and to the entire world. It is a sorry state that there is no proper accountability for our own funds. We earn so hard, but it is managed by strangers with little control by us. You must press for intervention by regulators, the Central Bank, the Consumer Affairs Authority and other regulatory bodies such as the Public Utility Commission and Telecommunications Regulatory Authority, etc.

At the same time, consumers should be alert and organise themselves. It is time that we take steps to avoid further financial tsunamis in Sri Lanka.

(The writer, LL.M (London) Solicitor, is the Sri Lankan Ambassador to the United Arab Emirates and former Chairman of the Consumer Affairs Authority. He can be reached via [email protected].)