Complaint resolution

Good practice in financial services regulation has long included provision of complaint mechanisms to customers. But this has not consistently been the case for digital credit at the level of either regulation or practice by providers. Even where regulated financial institutions provide complaint forums, these may be insufficient for credit delivered by mixed partnerships – or indeed irrelevant where no regulated provider is involved. 

Each entity in the value chain may have a separate complaints system (or none at all). For digital credit, the chain may involve a lender, a retail partner, a platform or app (which may or may not be operating legally), a telco, and a distribution agent – with the risk of consumer abuse or transaction failure at each link. With multiple redress forums, absent guidance as to where to lodge a complaint, the burden of identifying the correct forum falls on the consumer. Complaints may go unfiled, misfiled, or dismissed on technicalities due to complex or unclear procedures.¹

Thus, redress mechanisms in the digital credit field may prove inadequate for several reasons:

• Limited knowledge about how to complain and resolve complaints, and where to do so.
• Lack of appropriate channels for correcting errors.
• Lack of recourse regarding unauthorized activities, such as data sharing or abusive collection practices.
• Confusion over responsible parties in some digital credit models involving several providers.²

Recommendation: Regulation can address complaints and disputes through provisions such as the following:

• Every financial service provider should be required to provide its own public avenue for complaints and appeals, and to have written policies regarding their complaints handling procedures as well as a complaints handling function or unit under the responsibility of a designated member of senior management.
• Providers’ complaint handling should have to comply with minimum standards, i.e. the duty to:
  • Resolve each complaint within a maximum number of days, which should not be longer than the maximum period applicable to a third-party external dispute resolution mechanism.
  • Make available a range of channels—toll-free telephone, fax, email, web—for submitting consumer complaints appropriate to the type of consumers served and their physical location, and the size and complexity of the financial service provider’s operations.
  • Publish information on how a consumer may submit a complaint and the channels available for that purpose, including on providers’ websites, marketing materials, and disclosures, as well as at  locations where their products and services are sold.
  • Note the correct complaint forum in all substantive communications with consumers, and refer wrongly-filed complaints to the correct forum.
  • Keep written records of all complaints, while not requiring that the complaint itself be submitted in writing—that is, allow for oral submission.
• Providers should be required to maintain and make available to the supervisory authority up-to-date and detailed records of all individual complaints.
• If consumers are unsatisfied with the decision resulting from the internal complaints handling at the provider, they should have the right to appeal.
• External mechanisms should be made available including forums at other authorities with jurisdiction (e.g., data protection) and ADR schemes that can adjudicate or negotiate resolutions. A unified scheme or platform to lodge complaints can help avoid confusion about where a consumer should seek recourse.

Source: https://www.worldbank.org/en/topic/financialinclusion/brief/2017-good-practices-for-financial-consumer-protection