The gulf between financial sector regulators and consumers can be challenging to navigate from either side. While some financial consumer protection (FCP) authorities are more accessible than others, financial service providers (FSPs) generally have an easier time getting the regulator’s ear than consumers do. This creates an imbalance of market power and increases the risk of harm for customers, particularly those who are most vulnerable.
How can FCP authorities bridge this gap so they have the information they need to ensure the financial marketplace is fair and balanced for all consumers?
One promising solution is consumer advisory panels, which we define as a formally established group of experts that engages with a financial sector authority to elevate the voice of consumers on proposed policies and emerging risks. In practice, these entities go by many different names, such as consultative or advisory group, forum, committee or panel. CGAP research published in 2021 on elevating the collective consumer voice in financial regulation identified consumer advisory panels as an effective tool to integrate consumer perspectives into financial regulation and alert regulators to harmful practices. Elevating the collective consumer voice gives customers more power and influence over policies that affect them, while regulators gain a better understanding of consumer risks so they can tailor their oversight accordingly.
CGAP has built on this research by looking more closely at consumer advisory panel features and practices to better understand what is required of an emerging market and developing economy (EMDE) authority to develop and interact meaningfully with an advisory panel in their jurisdiction. We used desk research and in-depth interviews to learn from experts who engage regularly with advisory panels in different domains and countries (primarily in advanced economies, where they are most prevalent). Our review covered several different advisory panel features and options, such as:
- The legal basis of the panel and how it engages with the regulator
- How many members the panel has and how they are selected
- How often the panel meets and what they talk about
- The cost and time required to administer the panel’s activities
- If engagement with the panel elevates the voices of vulnerable customers
- Concrete examples of how panels support FCP work
Each panel had a unique structure and organization, but there was one common theme: consumer advisory panels are an effective platform to gain deeper insights and a more complete view of consumer risks in the marketplace, particularly for vulnerable customers. We also learned that while some of the panels are fairly sophisticated and well-resourced, it is possible to start small and still reap benefits.
During our discussions, interviewees were uniformly positive about their experience with their advisory panel. They find great value in having reliable access to information about consumer risks that they would not have otherwise, a more balanced view of consumer issues and needs relative to those of industry, and an effective platform to update consumer advocates and the public on new policies and market trends. Authorities also believe regular interactions with the panel improve their accountability and credibility as regulators and supervisors and increase public confidence and trust in formal financial services. In addition, the time and effort involved in managing panel activities is relatively modest compared to other market monitoring tools.
Our research highlighted several positive features that advisory panels share. We also asked for advice that would help EMDE authorities who are getting started. The key takeaways were:
It’s okay to start small
Run a pilot, try different approaches and have stakeholders help build the panel. It doesn’t have to be too formal at first. Have a cup of coffee with existing contacts and get the information flowing.
Know your why
Be clear about your purpose. What do you need or want to know that you don’t know already? How can this help improve your FCP work?
Bring the right mix of people together
Like any committee or group, you need both technical skills and experience, and participants who can work together productively. Members should be able to elevate voices that are less likely to be heard through other channels, including women and those most vulnerable to harm.
Focus on priorities
The panel can’t address every issue and panel members are busy people, too. Good facilitation and leadership are needed to make the most of members’ time and expertise.
Culture and relationships are critical
The underlying relationships with members are key to productive conversations and information sharing. Regulators also need to be open to critical feedback and willing to listen and learn, or disagree constructively if necessary.
Don’t silo the activity
The panel is just one tool in the FCP toolkit and will work best when integrated with others, such as complaints, research, market monitoring and supervision activities.
Use the panel to build consumer association capacity
The platform can be leveraged to cross-train and educate consumer associations about regulation and financial services if capacity is low in the jurisdiction.
Define what success will look like
Track impact and success stories to share in annual reports and publications to enhance accountability and credibility for the advisory panel. Interviewees shared examples that demonstrate the impact of their engagement:
- A consumer advisory panel raised awareness of the misselling of mobile phone plans to vulnerable customers. The regulator investigated, assessed a fine (the second largest in its history), and issued an enforcement action against the company.
- Another advisory panel challenged a proposed increase in the time FSPs had to respond to customer complaints. The regulator used their feedback to require a timelier FSP response.
CGAP’s research findings make a compelling case for the value and feasibility of creating a consumer advisory panel in EMDE jurisdictions. While building this bridge may seem like a heavy lift for a busy FCP authority, it is possible to reap the benefits of this engagement on a small scale once the foundation is in place, without heavy cost or time commitment.
Perhaps the most important takeaway from our findings was that success does not hinge on how the panel is structured and its component parts. The real value will come from building strong relationships between regulators and consumer advocates that lead to better quality and more timely information about consumer risks and, ultimately, more informed FCP efforts.
Want to learn more? Visit FinDev Gateway to read our paper, which provides details on the findings and further resources.