Author |Li Xun, authority, Zheng Bo, Li Lulu.
* |Ichikawa Law
In the past 2023, the top priority of financial supervision is undoubtedly the reform of the national financial regulatory system, and the highlight of the reform of the national financial regulatory system is the establishment of the State Administration of Financial Supervision ("FSRC"), a new important responsibility of the FSRC is to unify the financial consumer and investor protection responsibilities originally belonging to the People's Bank of China, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission under the management of the Financial Regulatory Administration.
Before the new regulatory rules are implemented, we might as well review the regulatory context and current situation of financial consumer protection, which will help to better understand the purpose and ideas of the unified supervision of financial consumer protection.
Although the concept of financial consumer protection sounds a bit large and abstract, it actually covers a wide rangeFrom financial marketing and publicity, to investor suitability management, from information disclosure, to standard terms, from user complaints and reports, to consumer personal information protection, all belong to the scope of financial consumer protectionTherefore, for all financial institutions engaged in the C-end business, financial consumer protection is a topic that cannot be avoided or bypassed. In recent years, under the policy guidance of "finance for the people", financial consumer protection has also jumped from a dispensable marginal role to one of the core focuses of regulatory attention.
Regulatory rules for financial consumer protection
Since the establishment of the State Administration of Financial Regulatory Commission, no new regulatory provisions have been issued for the unified supervision of financial consumer protection, therefore, China's current financial consumer protection regulatory framework still applies to the relevant provisions under the original "one bank, two sessions" framework (therefore, the expression of the China Banking and Insurance Regulatory Commission instead of the Financial Regulatory Administration is still used in this part), and can be divided into two main lines of financial line supervision and non-financial line supervision, and under the supervision of financial lines, it can be divided into three branch lines of People's Bank of China supervision, banking and insurance regulatory supervision and securities regulatory supervision.
1. Financial line supervision
As far as the supervision of financial lines is concerned, it is simply understood that the financial consumer protection supervision work is mainly responsible for the financial regulatory authorities, and depending on the different objects of supervision, the two banks and the two commissions apply their respective regulatory rules to supervise separately.
The first key word to understand the regulation of financial lines is "superior law".
In China's current laws and regulations, in addition to the "Consumer Rights and Interests Protection" applicable to general consumers, the only higher-level laws that can be uniformly applied to the current financial regulatory line are the "Guiding Opinions of the General Office on Strengthening the Protection of the Rights and Interests of Financial Consumers", which is a relatively principled and programmatic document and the "Notice on Further Regulating Financial Marketing and Publicity Behaviors" for the specific field of financial marketing and publicity behaviors, and the regulatory requirements of the People's Bank of China, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission have not yet been opened. The "top-down" regulatory system is not yet fully formed. Of course, the unified control of financial consumer protection under the supervision of the State Administration of Financial Supervision is precisely to solve this problem. The current consumer protection regulatory rules for the financial line are shown in the figure below
Figure 1: Regulatory Rules for Consumer Protection in Financial Sectors (Current).
1) Pedestrian lines
In 2013, the People's Bank of China issued the Administrative Measures for the Protection of Financial Consumer Rights and Interests (Trial), which was "regularized" into the Implementation Measures for the Protection of Financial Consumer Rights and Interests of the People's Bank of China in 2016, and then further refined and enhanced enforceability in 2020, becoming today's "Implementation Measures of the People's Bank of China for the Protection of Financial Consumer Rights and Interests", namely "Order No. 5".
In principle, Order No. 5 only applies to banking financial institutions and non-bank payment institutions (Note 1: Refer to the application to wealth management subsidiaries of commercial banks, financial asset management companies, trust companies, auto finance companies, consumer finance companies, credit reporting agencies, and individual domestic and foreign currency exchange franchise business institutions), but from a practical point of view, its scope of application may also be expanded to a certain extent, for example, on April 29, 2021, the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, The People's Bank of China (PBoC) has taken the lead in this rectification and extended some of the requirements in Order No. 5 to all entities engaged in financial business in the Group.
2) Banking and insurance regulatory line supervision
The China Banking and Insurance Regulatory Commission (CBIRC) is a department born after the merger of banking and insurance in 2018, and the consumer protection regulatory rules that unify and regulate the banking and insurance industries have also started from there: after the establishment of the CBIRC, it successively issued the "Guiding Opinions on the Construction of the System and Mechanism for Strengthening the Protection of Consumer Rights and Interests of Banking and Insurance Institutions" in 2019, and issued the "Measures for the Supervision and Evaluation of Consumer Rights and Interests Protection of Banking and Insurance Institutions", but there is still a lack of systematic provisions similar to Order No. 5 that directly face the specific specifications of financial consumer protection. Until December 26, 2022, the promulgation of the Administrative Measures for the Protection of Consumer Rights and Interests of Banking and Insurance Institutions has positively resolved this problem.
It is worth noting that, as far as banking and insurance financial institutions are concerned, in addition to the above-mentioned regulatory provisions of the CBIRC, there are other rules that need to be complied with: on the one hand, banking institutions need to apply the financial consumer protection regulatory provisions that refer to the PBOC line, such as Order No. 5, and on the other hand, the consumer protection regulatory provisions issued by the CBRC before the merger of the CBIRC are still in effect, such as the Guidelines for the Protection of Consumer Rights and Interests in the Banking Industry. Insurance institutions are required to apply the consumer protection regulatory provisions issued by the China Insurance Regulatory Commission (CIRC) before the merger of the CBIRC, such as the Opinions of the China Insurance Regulatory Commission on Strengthening the Protection of the Rights and Interests of Insurance Consumers.
3) Supervision of the securities regulatory line
The first point is that the concept of "investor protection" rather than "financial consumer protection" is used under the regulatory system of the China Securities Regulatory Commission; The second point is that the investor protection work under the regulatory system of the China Securities Regulatory Commission mainly involves the supervision of listed companies, rather than the supervision of financial institutions.
From the perspective of laws and regulations, the "Opinions of the General Office on Further Strengthening the Protection of the Legitimate Rights and Interests of Small and Medium-sized Investors in the Capital Market" issued in 2013 put forward clear requirements for the protection of small and medium-sized investors in the capital market, and the "** Law" revised in 2019 added a special chapter on "investor protection", reflecting the great importance attached to the protection of investors. In practice, violations of the rights and interests of small and medium-sized investors by listed companies such as "scallops have run away" have emerged one after another, and it should be said that it is realistic and reasonable for the CSRC to take the supervision of listed companies as its primary focus. However, on the other hand, due to the tilt of the regulatory focus to the supervision of listed companies, the CSRC's consumer protection regulatory rules for financial institutions (such as **company, **company, **company, **sales agency, etc.), in addition to focusing on the investor suitability rules, other provisions are relatively framework-oriented.
2. Non-financial line supervision
In addition to the supervision of financial lines, financial consumers, as a subset of consumers in a broad sense, may also face the regulatory requirements of non-financial lines, and the more prominent ones are the supervision of the market supervision line and the network information line line.
1) Supervision of the municipal supervision line
The market supervision department is responsible for the supervision of the protection of the rights and interests of general consumers, so in principle, it also has regulatory authority over acts that infringe on the rights and interests of financial consumers, namelyFinancial consumer protection work also needs to meet the regulatory rules of market supervision.
In addition to the "Consumer Rights Protection**" as a common superior law with the financial regulatory line, the market supervision line is subject to its own independent set of regulatory rules, and the main consumer protection regulatory rules of the market supervision line can be summarized in the following figure:
Figure 2: Market Line Consumer Protection Regulatory Rules (Current).
In practice, local market regulatory bureaus generally do not "overstep" their authority to supervise financial institutions, but they also have regulatory authority over financial institutions, and they may also supervise and punish financial institutions for typical market supervision concerns such as advertising violations and prize sales. From this point of view, the consumer protection requirements of the market supervision line cannot be ignored, especially for the traditional areas of the market supervision line such as advertising supervision, unfair competition, and ** supervision, which are also the key contents that need to be paid attention to in the process of financial consumer protection compliance.
It is worth noting that in December 2023, the State Administration for Market Regulation and the State Administration of Financial Regulatory Affairs signed the Framework Agreement on Strengthening the Monitoring and Disposal of Illegal Financial Advertising InformationReached a cooperation on consumer protection in the field of financial advertisingThis will help solve the long-term relative separation between market supervision and financial supervision in terms of consumer protection, and will have important guiding significance for the follow-up monitoring and disposal of platform financial advertising.
2) Internet information line supervision
The right to information security is one of the eight basic rights of financial consumers, but for the protection of personal information of financial consumers, not only the financial regulatory authorities have regulatory authority from the perspective of consumer protection, but also from the perspective of personal insurance supervision and law enforcement in accordance with laws and regulations such as the Personal Information Protection Law and the Personal Information Protection Law.
In practice, the inconsistency of the regulatory rules for personal information protection has also given rise to various problems, especially how the regulatory rules in the field of financial consumer protection are partially promulgated before the PIPL, and how to connect with the provisions of the PIPL in actual implementation and application? Can the PIPL have the effect of replacing the old law with the new law in the financial sector? At the enforcement level, how to avoid the additional burden of duplicate supervision on financial institutions? These are all issues that actually arise and are worth discussing.
Finally, the current regulatory rules for financial consumer protection can be summarized in the following figure:
Figure 3: Regulatory framework for financial consumer protection (current).
From the above summary and combing, it is not difficult to find that the current financial consumer protection regulatory rules are out of many doors, and the phenomenon of inconsistent regulations is still quite obvious, and the inconsistency of these regulatory rules has derived various problems at the level of regulatory practice, which is also urgently needed to be solved after the unified supervision of financial consumer protection, let's go on.
Regulatory practices for financial consumer protection
1. The connotation and extension of financial consumers
The primary question in the regulatory practice of financial consumer protection is: What is a financial consumer? Which groups need to be protected by the requirements of financial consumer protection?
The reason why this issue is critical is that consumer protection is not equal protection for civil subjects, but inclined protection for the vulnerable consumer sideHowever, on the other hand, if the scope of the definition is too broad, it may also impose unreasonable and excessive obligations on financial institutions and hinder normal financial transactions.
And on this,The division in current regulatory practice is not uniform.
Under the supervision of the People's Bank of China (PBoC) and the China Banking and Insurance Regulatory Commission (CBIRC), the scope of financial consumers is generally limited to natural persons who use financial products or services, and on this basis, no distinction is made between ordinary investors and professional investors. For example, the Implementation Measures of the People's Bank of China for the Protection of the Rights and Interests of Financial Consumers stipulates that "....The term "financial consumer" as used in these Measures refers to natural persons who purchase or use financial products or services provided by banks and payment institutions."
Under the supervision of the China Securities Regulatory Commission, there is a big difference, the China Securities Regulatory Commission clearly distinguishes between ordinary investors and professional investors, and the inclined protection of investors is mainly aimed at ordinary investors - the "Measures for the Administration of Investor Suitability (2022 Amendment)" stipulates that "ordinary investors enjoy special protection in terms of information notification, risk warning, suitability matching, etc." However, ordinary investors and professional investors are not divided according to the criterion of "whether they are natural persons", in short, professional investors can be natural persons, and ordinary investors may also be institutions.
After the unified supervision of financial consumer protection, from the perspective of the State Administration of the Financial Regulatory Commission, there is obviously no reason to completely exclude *** investors from the category of financial consumers, then, there are two obvious questions in front of us: 1) whether to limit the scope of financial consumers to natural persons? 2) Is there a distinction between ordinary investors and professional investors, and is it biased towards ordinary investors?
There is no 100% correct answer to these two questions, from the perspective of consumer protection, it is the proper meaning to focus on the protection of natural persons rather than institutions, but whether it is necessary to further distinguish the types of financial consumers on the basis of natural persons, and if so, what is the relationship between this distinction and the existing division of ordinary investors and professional investors under the securities regulatory system, may also need to be carefully considered.
In fact, it is inherently difficult to fully integrate the CSRC's investor protection functions into financial consumer protection (for example, it is difficult to fully transfer the CSRC's supervisory functions for listed companies to the FSRC from a practical point of view).
2. Unified norms for financial marketing and publicity
As early as the end of 2021, the People's Bank of China and other seven ministries and commissions jointly issued the Administrative Measures for Online Marketing of Financial Products (Draft for Comments), but it has never been officially implemented. One of the views expressed in the market discussion on the approach was that the adaptability of different financial products was insufficient. In fact, it is completely understandable that under the framework of separate supervision, trying to unify and standardize the financial marketing and publicity of various financial products and services from the perspective of behavior supervision will inevitably face great technical difficulties.
Today, the establishment of the State Administration of the Financial Regulatory Commission and the centralization of the financial consumer protection supervision function have cleared some obstacles to the unified regulation of financial marketing and publicity. We believe that regardless of the format of financial products and services, there are always certain commonalities in financial marketing and publicity, and they can be unified and standardized, at least to a certain extent. If you want to find a "breakthrough" for the new legislation on financial consumer protection, it may be a good choice to have both legislative precedents (Notice on Further Regulating Financial Marketing and Publicity Behaviors) and practical necessity.
3. How to implement the suitability management requirements
A uniform specification of suitability management can be more technically difficult than a financial marketing campaign.
In various recent speeches made by the State Administration of Financial Regulatory Commission,It has repeatedly been mentioned that appropriateness management should be regarded as the key to financial consumer protection, and financial institutions should be urged to strictly implement the "three appropriate" requirements for financial products, sales channels and target customers。It can be seen that it has become a regulatory situation to extend the suitability management requirements that were originally mainly aimed at financial products with investment attributes (e.g., **, bank wealth management) to other financial products (e.g., credit products) provided to financial consumers. For example, in the Measures for the Administration of Insurance Sales Behavior, which was issued last year, for the first time, the requirements for the hierarchical management of insurance products and insurance sales personnel were proposed. The recently released Measures for the Administration of Consumer Financial Companies (Draft for Comments) also explicitly mentions the relevant requirements for suitability management, which can be used as evidence.
Suitability management is a relatively practical starting point in financial consumer protection supervision, and the establishment of comprehensive suitability management requirements is of course of great benefit to consumer protection, but there will be many problems arising here, how to carry out suitability management for credit products and pure service products such as payment and accounts (from the perspective of the current situation, the suitability construction of these products may be close to zero)? To what extent are the existing experiences and practices of investment attribute products indicative (the commonality of appropriateness between different types of financial products may be much smaller than that of financial marketing campaigns)?
4. Convergence and extension of personal information protection requirements
From the perspective of financial regulation, the primary concern is naturally to align with the regulatory requirements of the PIPL, but in addition, if the requirements on personal information protection in the financial regulatory provisions are only a copy and paste of the requirements of the PIPL, is there any practical significance? In particular, considering that financial business has its own characteristics, we believe that it is also worth considering whether it can be scalable according to the particularity of financial consumers and financial business on the basis of complying with the provisions of the PIPL.
Conclusion
Financial consumer protection involves a wide range of requirements and is not easy to clarify the context and show the whole picture.
From the perspective of regulatory rules, we cannot predict what kind of thinking the potential new regulations will take, and in terms of legislative technology alone, the new regulations can of course choose to "avoid" these key issues and only make more principled provisions, but if what is needed is to make real changes and improvements to the regulatory status quo, facing the problems head-on may be the only option.
Based on this, we also believe that in today's regulatory rules that are about to change, it is not without value to understand the existing regulatory context and issues, on the contrary, it will help us better understand the regulatory thinking and prepare for responding to and embracing regulation.