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China Banking and Insurance Regulatory Commission issued a paper named Huabei: Inconsistent with the concept of inclusive finance is actually inclusive but not beneficial



my country’s basic financial services have covered 99% of the population. In accordance with the spirit of the recent meeting of the State Council’s Financial Stability and Development Committee, while encouraging innovation, financial activities are fully incorporated into supervision in accordance with the law. The same supervision is implemented for similar businesses and entities, and market entities are supervised in compliance with laws , To protect the legitimate rights and interests of financial consumers.

1. Protecting the rights and interests of financial consumers is of overall importance and extreme importance to my country’s economic and social development

Finance is the core of modern economy and an important core competitiveness of the country. Financial consumers are the micro-foundation of finance, and they form two sides of financial transactions with the main body of financial services. If there are no financial consumers and the broad masses of people do not participate in financial activities such as deposits, wealth management, stocks, funds, etc., the funds needed for economic and social development will lack sources, and financial and economic activities cannot be effectively cycled. Therefore, protecting the legitimate rights and interests of financial consumers is an important foundation for promoting sustainable economic and social development.

Financial history shows that in a capitalist society, finance is an important cause of social polarization. Whether it was the great crisis of the 1930s, the international financial crisis of 2008, and the pandemic since this year, it is because financial service providers excessively chase profits, carry out predatory lending, and use technology to mislead financial consumers. Such behaviors make the poor poorer and the rich richer. The nature of socialism with Chinese characteristics determines that my country’s financial services are oriented to the broad masses of people, have a stronger inclusiveness, and undertake the mission of maintaining and increasing the value of people’s property and promoting social equity. Financial service providers, whether they are licensed financial institutions or emerging financial technology companies, must protect the rights and interests of financial consumers.

The Fifth Plenary Session of the 19th Central Committee of the Communist Party of China proposed that during the “14th Five-Year Plan” period, consumption will be promoted in an all-round way, and consumption will play a fundamental role in economic development. Financial consumption is an important part of my country’s consumption and has an important contribution to the added value of the industry and GDP. At the same time, it also promotes the development of automobile consumption, housing consumption and the development of urban and rural consumption during the “14th Five-Year Plan” period. In addition, the high-quality development of financial consumption will help increase the property income of the broad masses of people, expand the size of my country’s middle-income groups, and expand other consumption and domestic demand, strengthening the engine of my country’s economic growth. Therefore, it is necessary to improve the financial consumption environment and strengthen the protection of the rights and interests of financial consumers.

2. All types of financial service providers must protect the rights and interests of consumers

After more than forty years, my country has formed a multi-level and multi-format financial system, with banks, insurance, securities, trusts and other institutions developing together. At the same time, since the 1980s, the state has issued relevant development plans to encourage the integration and innovation of finance and technology. It not only encourages financial institutions to accelerate digital construction, but also supports mutual cooperation between financial institutions and technology companies, and gives financial technology companies a boost. Adequate space and tolerance. Therefore, technology and digitization play an increasingly important role in financial consumption, forming an orderly decline in the market share of large financial institutions, an increase in the share of other financial institutions, and the vigorous development of emerging financial technology companies to complement each other, compete and cooperate. .

Fintech is a technology-driven financial innovation. Its foothold is finance, and its essence is financial services. Therefore, emerging financial technology companies, like licensed financial institutions, have their customers as financial consumers. The deposit, lending and payment of customers’ funds are all financial activities, and the market entities that provide these financial services are essentially a combination of credit intermediaries and information intermediaries. From the perspective of consumer service, the core of products such as “Huabe”, “Bai Tiao” and “Willful Payment” of financial technology companies has no essential difference with the credit cards issued by banks. They also have the functions of credit supply and installment payment. Interest and expenses are the main source of its profits; products such as “borrowing”, “gold bars”, and “micro loans” are not essentially different from the small loans provided by banks. From the perspective of consumer risk control, when the first source of repayment is insufficient, the bank requires mortgage guarantee as the second source of repayment; financial technology companies require cash in the account as a guarantee, or delay payment of funds, charging other fees, etc. as risks Control measures.

Based on the above logic, both licensed financial institutions and emerging financial technology companies must protect consumer rights. After the international financial crisis in 2008, the G20 issued 10 basic principles to protect financial consumers in 2011, and the World Bank announced the best practices for protecting financial consumers in 2017, all of which set requirements for various financial service providers. my country has always attached great importance to the protection of consumers’ rights and interests of financial institutions. In 2015, the State Council issued guidelines on strengthening the protection of financial consumers’ rights and interests. Financial management departments have successively introduced financial institutions to strengthen the construction of consumer rights protection systems and mechanisms and handle financial consumer complaints. Institutions and measures in other areas have strengthened the investigation and punishment of infringements on consumer rights and interests, and carried out annual consumer insurance supervision and evaluation on financial institutions. The China Banking and Insurance Regulatory Commission has carefully investigated and dealt with actions that damage consumers’ rights and interests from a few yuan’s mobile phone broken screen insurance, one hundred yuan tooth cleaning card, to nearly 100 million yuan of wealth management products. Banks and insurance institutions have properly dealt with them. The real money was cleared last year. 4.092 billion yuan was refunded and paid to consumers. Relatively speaking, for the protection of consumer rights and interests of financial technology companies, there are currently no clear rules and requirements, regulatory arbitrage behavior has occurred, unfair competition with licensed financial institutions, and ultimately it is difficult to effectively protect the rights and interests of financial consumers.

3. Attach great importance to problems and chaos that violate the rights and interests of financial consumers

In recent years, through strict supervision and strong supervision, the rights and interests of financial consumers have been effectively protected, which has enhanced the people’s sense of financial gain, and enabled more people to enjoy the fruits of my country’s reform and development. At the same time, in recent years, financial service providers have become more and more diversified. There are both licensed financial institutions and emerging financial technology companies. Both offline service channels and online marketing methods provide diversified consumer experiences. Disorderly competition and disrupting market order have emerged, creating chaos that violates the rights and interests of financial consumers.

From the perspective of financial institutions, some product structures are complex, information disclosure is insufficient, and the language used is too professional, making it difficult for financial consumers to identify the risks. In sales promotion, there are problems such as exaggerated returns and insufficient risk warning. Inadequate consumer suitability assessments have led consumers at low risk levels to purchase high-risk products. In addition, individual practitioners seek personal gains through “flying orders” and “radish badges”, infringing on consumers’ property security and income rights.

In the cooperation between financial institutions and technology companies, most of the funds come from financial institutions, but financial technology companies use oligopoly status to charge excessive fees and increase the cost of financial consumers. In the joint loans to individuals and small and micro enterprises, more than 90% of the funds come from the banking industry, and some are as high as 98%. Fintech companies use the advantage of guiding customers and directly charge 1% of the comprehensive cost of customer financing. /3 or so, plus the fees charged by agency sales or other excessive credit enhancement products, often as high as 2/3. In the digital economy era, data has become an important factor of production. The essence of these chaos is to turn the data that should be taken and used by the people into some companies seeking their own interests and charging consumers for high-value services. Cost of capital.

The chaos of financial technology companies infringing on consumer rights is more worthy of attention. Compared with licensed financial institutions, fintech companies rely more on shopping, transaction, logistics and other behavioral data, rely more on the borrower’s consumption and repayment willingness, and lack an effective assessment of the repayment ability, which often results in excessive credit, and the situation Inducing co-stimulation of advanced consumption has caused some low-income groups and young people to fall into debt traps, which will eventually harm consumers’ rights and even bring harm to families and society. In terms of fees, financial technology companies lack a unified standard, which is generally higher than that of licensed financial institutions. For example, “Huabe” is basically the same as bank credit card business, but the installment fee is higher than that of banks, which is inconsistent with the concept of inclusive finance. In fact, it is “inclusive but not beneficial.” At the same time, some financial technology companies have the problems of excessive collection and misuse of customer information and improper information management. Without the knowledge of consumers, their information is circulated among platform parties, payment institutions, investors, etc., which infringes consumers The right to information security. During the rapid development of cash loans in the past few years, illegal buying and selling of personal information of borrowers have occurred from time to time. The difference is that large technology companies such as Microsoft and Google have not become large lenders due to strict restrictions on the use of consumer personal information.

4. Take multiple measures to protect the rights and interests of financial consumers

Encourage the joint development of finance and technology, and work together to improve the quality and efficiency of financial services. With the continuous development of my country’s market economy, the specialized division of labor and cooperation between market entities is becoming more and more important. Licensed financial institutions and emerging technology companies should learn from each other and compete with each other. Therefore, on the one hand, we must encourage financial institutions to accelerate digital transformation, make full use of the Internet, big data, blockchain and other technologies to improve the efficiency of financial services, reduce transaction costs, and improve consumer experience. At present, some financial institutions have established technology companies, which have significantly improved service efficiency. For example, loans for small and micro enterprises have changed from a 20-30 day approval cycle to “second review and second loan” and “ready to arrive.” On the other hand, it is necessary to support financial technology companies to continue to explore and innovate, closely follow the characteristics of financial consumers different from other consumers, reduce the degree of information asymmetry in financial transactions, and truly enable technology to empower finance. At the same time, strengthen the construction of infrastructure such as financial payment and credit systems, promote the deep integration of finance and technology, and better serve the vast number of financial consumers.

Formulate uniform rules to create a fair and just market environment. To unify product review standards, licensed financial institutions and emerging financial technology companies should set up dedicated personnel to conduct consumer protection reviews and organize customer experience before products and services are launched. For products that have hidden dangers of infringing on consumer rights, rectification or recall. Unify sales standards, implement the principle of sales adequacy, achieve “understanding products, understand customers”, ensure that sales behaviors can be traced, full information disclosure, and achieve “seller due diligence”. Unify information protection standards, strengthen the entire process management from information collection, storage, use, circulation, destruction, etc., follow the principles of “must know” and “minimum authorization” to protect consumers’ information security rights. By unifying market rules, eliminating regulatory arbitrage, promoting stable market operation and fair competition, and ultimately protecting the legitimate rights and interests of consumers.

Strengthen the risk control of financial technology companies. Fintech companies face credit risks, operational risks and liquidity risks similar to those of financial institutions. At the same time, due to the characteristics of channels and customer groups, some new types of financial risks may be triggered. Just imagine, without the uniqueness and superiority of my country’s new nationwide system, and the epidemic continues to spread like some countries, would the risk of credit default of financial technology companies not rise? Will liquidity risks not arise? Furthermore, the consumers of fintech companies are concentrated in the “long tail”, and their group characteristics are more uniform than those of financial institutions. Consumers have weaker anti-risk capabilities and are more likely to cause mass incidents and events when the epidemic cannot be effectively controlled. Systemic risk. After decades of gradual evolution of the Basel Agreement, the risks covered have expanded from credit risk to operational risk. After the 2008 crisis, liquidity risk control standards were added. Practices in various countries have proved that it has wide applicability. Therefore, from the perspective of preventing and controlling risks and protecting the property security of financial consumers, financial technology companies should gradually establish risk control measures such as capital and provisioning.

Strengthen the continuous monitoring of infringements of consumer rights and interests, and fully incorporate financial activities into supervision in accordance with the law. Similar businesses and entities of the same kind shall be treated equally, and licensed financial institutions and emerging financial technology companies shall operate in compliance with laws and regulations. Regarding the infringement of consumers’ rights and interests in cooperation between different market entities, while investigating and punishing licensed financial institutions, the regulatory authorities must also carry out extended investigations on relevant financial technology companies. In response to oligopoly behavior, it is necessary to organize consumer questionnaire surveys on whether relevant companies have abused their dominant market positions. Strengthen anti-monopoly and anti-unfair competition law enforcement and justice to prevent winner-take-all, “shop bullying”, infringing on consumers’ right to choose and fair transactions.

Strengthen the publicity and education of financial consumers and resolve complaints and disputes. In order to enhance consumers’ financial decision-making ability, risk awareness and contract spirit, all types of financial service providers must strengthen financial publicity and education, advocate a rational consumption culture, guard against blind comparisons, excessive consumption and excessive lending, and cultivate good financial consumer groups. Financial consumers should also be aware of their own financial needs, use funds in accordance with laws and regulations, and cannot misappropriate consumption funds and productive funds in the stock market, blindly “innovate” and speculate concepts, chase so-called market hot stocks, and harm themselves in the ups and downs. interest. At the same time, licensed financial institutions and emerging financial technology companies must implement the main responsibility for resolving complaints and disputes, establish and improve complaint handling mechanisms, respond to consumer demands in a timely manner, treat all types of consumers fairly, and explore the establishment of a rapid resolution mechanism for small disputes. In accordance with the principles of fairness in accordance with the law, voluntary mediation, and efficiency and convenience, we will make full use of third-party financial dispute mediation institutions established in various places to resolve financial consumption disputes through multiple channels.

Text/Guo Wuping, Director, Consumer Protection Bureau, China Banking and Insurance Regulatory Commission