Independent Research and Policy Advocacy

A New Framework for Financial Consumer Protection in India

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The financial crisis of 2008 brought to light many consumer abuses prevalent in the financial services industry. As a response to the crisis, countries across the world have been re-designing their legal and regulatory architectures to better protect financial consumers and contain systemic risk. The United States, for instance, has passed the Dodd-Frank bill into law, leading to the creation of the Consumer Financial Protection Bureau (CFPB). The United Kingdom has changed its regulatory architecture, creating separate regulators for prudential regulation and market conduct (or consumer protection). Australia and the Netherlands already have separate market conduct regulators, and South Africa has indicated that it will soon follow suit. India is also undertaking a fundamental review of its financial sector legislation, with the creation of the Financial Sector Legislative Reforms Commission (FSLRC), whose mandate is to rewrite and harmonise all financial sector laws 2 . In this context, we feel that this is the appropriate time to re-think the framework for consumer protection in finance in India and arrive at an understanding of the fundamental philosophies that should underpin such a framework. In this paper, we propose a fundamentally new basis for financial consumer protection in India.

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