"Research on Financial Services － Consumers International Regional Meeting"

Ms Connie Lau, JP
Chief Executive
Hong Kong Consumer Council

5-7 March 2012

The HKCC's Strategy and Methodology

The approach of Hong Kong Consumer Council (the Council) to raising awareness and campaigning for consumer rights, regardless of the subject matter, is largely based on a strategy of intensive information collection, regular media contact events; and collaboration with key stakeholders in the community. 

Regular Information Gathering

The Council devotes considerable resources to research and surveys in a variety of subject areas. This is the lifeblood of our organisation. Many of these are regular events in every calendar year; thereby building consistency in the Council's yearly work program that fits well with the demands from the media for regular news items. 

Systematic media events

The way in which we disseminate the information on the surveys is also subject to a regular cycle of media events, that works well for media players. The Council holds a press conference on the 15th day of every month, without fail (or the next working day when it falls on a weekend) where it releases its monthly issue of ‘Choice' magazine. The certainty that important consumer news (as found in the magazine) will be released on that date every month provides an important link into the print and broadcasting media news cycle. As a result, the press conferences are always eagerly anticipated and well attended by all major newspapers and broadcasters. 

Over the years, the Council has published more than 100 reports on financial matters in its magazine"CHOICE". A detail rundown of the published reports could be found in the Appendix.

Spreading the Load

While we are very much an independent voice in the community, collaboration with other organisations also plays an important role. If necessary, the Council will have a representative from a relevant government agency, or business association, at its monthly press conference when a major research or survey initiative is being released. 

Sometimes we might have different views to those we invite to attend our media events. However, this increases the dynamics of the occasion, giving the public an impression that the Council is a confident professional organisation that works with all stakeholders, not just consumers. It also provides other representatives an opportunity to put their views forward, enhancing the Council's reputation for fairness and balance. 

This collaboration also extends to the use, where possible, of the resources of government agencies and business associations to advance the Council's work. For example, where possible we will use them to disseminate consumer information through their outlets, thus saving the Council's resources.

Examples

Financial matters are a critical aspect to the lives of all consumers. The Council has a regular program of collecting information through surveys of financial issues important to Hong Kong consumers, such as bank fees, and loan interest rates. It is important that these matters are brought up for regular scrutiny, not only to assist consumers making choices, but to place pressure on the relevant institutions to keep consumer costs low and provide better services.

Bank Branch Closures and Fee Increases

Bank branch closures (with more reliance on ATMs) and fee increases are a constant source of frustration amongst consumers, particularly the elderly and disadvantaged consumers. Past surveys have covered these issues, and they will also be part of our activities to mark World Consumer Rights Day this year.

The methodology employed in a major study undertaken in the past was as follows:

Identify key geographic areas where the concerns of residents in those areas were most likely greatest. It was important to focus attention on key areas to maximize the use of resources, and to obtain meaningful results.

Arrange focus groups with the assistance of government agencies working in the field of elderly and disadvantaged groups. Apart from utilizing those agency's resources, they will often appreciate the fact that we, as an independent consumer watchdog, are joining forces with them to assist their clients. Government agencies routinely come under criticism and they are usually keen to collaborate with others who will improve their standing.

Undertake field visits to collect information and make observations. Standard survey procedures were used to collect information through questionnaires and visual observation; and collated into a report. In the case of branch closures it was important to actually obtain information from a street level on what consumers were facing with regard to ATM access and walking or public transport distances from residential areas.

Meetings with relevant government agencies and legislators. The Council is careful to discuss survey and research findings with all stakeholders before going public. It is not prudent to 'ambush' others who have an interest in the matter under scrutiny. While it might give protagonists early warning it is important to maintain a professional stance. This also gives us an opportunity to gauge the other side's response and invite their participation at the media event that will release the findings.

Publicizing results through media events. As noted earlier, the Council has regular monthly press conferences, this was utilized to make the results public and to give the Council a platform to make its views known and to give the government and industry an opportunity to provide their response.

As a result of the Council's campaign in this particular matter, the government and the Hong Kong Association of Banks (HKAB) indicated that certain efforts would be made in relation to banks' closure of branches and fee-charging. For example, the launch of community-wide publicity programmes on the use of Automated Teller Machines (ATMs) and the launch of industry-wide simplified ATMs.

Proactive moves were also undertaken by the banking sector in response to the needs of the community; as identified in the Council's report. For instance, exploring the feasibility of interconnecting the two ATM networks in Hong Kong, conducting an opinion survey on use of cross-network ATMs, and assisting bank customers to switch between banks. Videos were also produced by the relevant government agency designed to educate elderly consumers on how ATMs work.

One bank also announced its plan to increase 300 additional ATMs, with one third to be placed at public housing estates territory-wide over the next three years, and to actually expand its branch network in Hong Kong. Part of our strategy, in furthering the collaborative nature of our work was to publicly acknowledge the bank's proactive step in realising its corporate social responsibility in meeting the needs of the community; in particularly underprivileged groups. This sort of positive feedback is important to obtain the trust and respect of industry and increase the chance of achieving positive reactions from future surveys and research projects.

Consumer Panic

There are some situations that call for an immediate response to consumer panic outside the normal areas of consumer concern, such as bank fee increases or branch closures.

One of these was the collapse of the Lehman Brothers in September 2008 and the subsequent panic from consumers who had invested in so called 'minibonds' with Hong Kong banks that had acted as intermediaries for Lehman Brothers. There seemed to be clear cases that the minibonds were sold on the basis of misrepresentation and other untoward conduct; in breach of contract law. In the absence of a government consumer protection agency in Hong Kong, that could take class action on behalf of consumers who had a reasonable action under contract law, the matter fell to the Council for immediate consumer assistance.

The Council's response, in the face of thousands of complaints and enquiries was to to create a special task force, which assured the public the Council saw this as a high priority and that special efforts were being made to allay public fear and ultimately to seek redress. A key component to the Council's strategy of redress in these matters is the existence of the Consumer Legal Action Fund (CLAF). This fund is used to

• assist in financing individual legal action on behalf of consumers who have a meritorious case;
• that can serve as a precedent for future actions; or
• that will put pressure on the industry to resolve matters administratively rather than endure legal action and face the likely prospect of a doomed legal battle.

The Council's next step was to create selection criteria that focused on the vulnerability of complainants to the financial loss, as well as cogency of evidence regarding unscrupulous sales tactics, inadequate risk disclosure and misrepresentation that would serve as evidentiary basis for the private action.

To expedite the legal work, the Council also commissioned out a portion of the work to barristers in private practice to assist in the taking of statements and preparation of legal analyses.

A special press conference was also called, drawing attention to the thousands of retail investors holding the minibonds who were at risk of losing their lifelong savings, and outlining the Council's response to the crisis through the special task force and CLAF.

Within a short time, the Council had received over 20,000 complaints and inquiries from distressed consumers. Acting both as a mediator and facilitator of private legal action, it raised the cases with the banking regulator and the relevant banks in an effort to resolve the complaints quickly and administratively. A substantial number of these were settled with the banks, without having to resort to action in the courts.

The remaining complaints were examined by CLAF and subsequently granted approval for funds to be used in legal action. In the process of providing this assistance and forecasting legal action some further settlements were achieved.

We are still working with a very small number of remaining consumers who have not had settlements. However, the outcome of the Council's strategy in this matter has been an unqualified success in calming the initial panic and then addressing the vast majority of financial losses faced by holders of the minibonds.

Hong Kong activities on coming WCRD

One of HKCC's functions is to handle complaints and resolve disputes through mediation. Over hundreds of complaints about fee disputes in connection with various banking/financial services were lodged to the Council each year. To echo CI's coming WCRD, HKCC has prepared a study report about complaints of fee disputes of bank charges.

In 2011, of the total 215 cases about fee disputes in financial sector, 51% (110 cases) involved credit cards, 28% (61 cases) about general bank accounts service (e.g. deposits, auto-pay, money transfer, etc.), while the remaining (21%, 44 cases) about investment and loan services.

From the complaints received, it is found that consumers in Hong Kong may not fully understand the costs of remittance services in banks. In general, consumers need to pay the handling charges of local banks and its correspondents (e.g. intermediary banks and beneficiary banks). However, the basis of handling charges for intermediary banks or beneficiary banks is not clearly shown in the fee schedule for each bank. Some charge per transaction; some base on the remittance amount, while others do not list the charging basis, just provide the fee details upon request.

Though the operation of remittance services in banks may be different, it is recommended to raise fee transparency such as to fully disclose to customers how handling fees are charged before they use the services. We shall shortly forward our full report to CI for its information.

Conclusion

Dealing with financial concerns that face consumers on a day to day basis, whether it is the typical annoyance with increases in fees and poor service; or whether it is dealing with a serious crisis, all require the same approach.

There has to be an established strategy of collecting information

• to build historical records; and
• to maintain efficient collection processes within the organisation.

Regular media contact events

• build a strong relationship with media stakeholders; and
• promote the Council as a regulator and trusted contributor to news stories.

Collaborating with government agencies and business associations, without compromising our consumer advocacy principles

• builds trust and respect in the Council, by those who have responsibility for final outcomes; and thereby
• ultimately works for the benefit of consumers.

Appendix

CHOICE articles on Finance and banking industry done in the previous 20 years (From 1981-2011)

In reverse chronological order
( Name of study reports published in its official magazine"CHOICE": 111 articles)