Research On Financial Consumer Protection System

In the lately years, with the rapid development of China’s socialist market economy and the deepening of market-oriented, space for continued expansion in consumer spending, and rising levels of consumption, in the pursuit of maximizing the interests, producers and operators infringe upon the rights and interests of consumers in the process of market competition are common occurrences. Consumer protection has become a serious issue in the economic and social development.On the ground of clearly defined the basic concept of financial consumers, this dissertation makes a profound analysis on the theory and realistic meaning of financial consumers rights protection, and systematically illustrates the necessity of protect the interests of financial consumers. Accordingly, the author further presents the national legislation core, the fundamental purpose of regulation and specific measures of supervision in the realm of protection of legitimate rights and interests of finacial comsumers. Lack of protection system of interests of financial consumer is one of significant shortcomings of financial regulation which is exposed in the finacial crisis. This dissertation focuses on the reform and innovation of western developed countries and regions in the protection system of interests of financial comsumers in the post-crisis era; based on the aforementioned reforms and innovation, the author presents the views that our country should fully learn from the international experience, based on the actual situation of our country, make clear of legislative thinking and protection path and strive to build the legal framework for system of interests of financial comsumers with the definition of basic concept and basic rights as the logical starting point.Despite the fact that currently domestic legal circles has not yet reached a unified consensus on the definition of the concept of financial consumer; however, as the theoretical basis of the dissertation, this dissertation still decided to introduce the concept of financial consumer and hope to be able in the course of discussion to produce better compatibility with the regulation ideas and regulatory measures in developed countries. At the same time, the dissertation holds a standpoint that it will better accord with new tendency of development in tending to protect the interests of financial consumer providing that the financial investment behavior is defined as the consumption behavior of financial market. In the past general legal knowledge, the financial investor is always in the strong position in the financial transactions. However, with the continued development of the financial markets, the highly specialization and complex of products makes a subtle change of the dominance position between the two parties in financial product transactions. The author also considers that defining the financial investor as financial consumer is better in line with the general characteristics of the security market transaction system, and is better beneficial to protect the legitimate rights and interests of financial consumer, and is more conducive to maintaining the order of security market transaction. As a result, the dissertation uses the concept of financial consumer in the course of discussion rather than the concept of security investor in the traditional sense. Based on the foregoing statement, the dissertation makes a systematic analysis on the importance as well as the legal basis of protection of legal rights and interests of financial consumers, and then further researches in depth the relationship between the legal system of financial supervision and the protection of interests of financial consumer.The whole process of financial transactions includes several dominant or recessive legal relations between financial institutions and financial consumers, financial institutions and financial regulators, and financial regulators and society as a whole and so on. Regulation could be regarded as a series of implicit contractual relationship between the supervisors and the counterparts, which decides the behaviors of the parties who sign the contract, and the measures could be adopted against the breaching parties. Contract could be designed to lead the behavior of financial institutions to avoid or reduce systemic risk; otherwise, it could impede or mislead the normal financial order, thereby increasing risk in the market. Therefore, the primary purpose of supervision is to enable the behaviors and reactions of financial institutions develop toward the direction which society desires. We could understand that the supervision object of financial regulatory legal system is the financial transaction order, the subject is financial institutions and the starting point and the ultimate goal of the system construction is financial consumer. The dissertation chooses the United Kingdom, United States and European Union for the research samples, researches from the perspective of protection of rights and interests of financial consumers, look back the formation and evolution of financial regulatory system in the three above countries, and describes in detail and compares the specific policy choose aspects like regulatory objectives, regulatory system, regulatory approach and the relevant legislation toward financial consumers, and summaries the features of regulatory behaviors which are made by the government in respect of protection of rights and interests of financial consumers. We find that although countries in the world are committed to the protection of rights and interests of financial consumers, the specific measures that the governments adopt are different.In the post-crisis era, countries in the world begin to re-examine various regulation vacancies which are the legacy of financial development and innovation in recent years, introduce financial regulatory reform plans and try to seek the best balance for protecting the financial interests of consumers under the premise of not hindering the development of the financial industries. After suffering heavy losses in the financial system, the authorities in the United Kingdom increase the regulatory powers of Financial Services Authority under the existing regulatory approach, improve monitoring mechanisms, strengthen the construction of consumer compensation system, and consolidate measures of risk prevention, etc. The aforementioned reforms and measures are based on protection of interests of financial consumers and attempt to reconstruct the existing financial regulatory system which regarding the protection of interests of financial consumers as the starting point and end point. In 2010, the signature of "Dodd-Frank Bill" in the United States is not only the milestone that meaning the completion of nearly two years long the U.S. financial regulatory reform legislation but also to some extent promotes the realignment of the distribution of benefits in the U.S. financial markets, thereby financial consumers have more opportunities to obtain more protection. Through using the monitor systemic risk and protection of financial consumers as the two core principles and guidance, the Bill creates a series of rules, such as:the United States will set up a Financial Stability Monitor Board to monitor and deal with the systemic risks which threatens the national financial stability; proposes higher requirements of capital adequacy, leverage limit and risk concentration to the financial institutions which have the "systemic importance"; sets up the new Consumer Financial Protection Agency under the Federal Reserve and monitors the executives compensation mechanism in the financial enterprises; the Federal Reserve itself will be subject to more stringent oversight while the Accountability Office which is affiliated to the Congress will audit some policy and operation of the Federal Reserve, and so on. It is obvious that financial consumers are the biggest beneficiaries of the U.S. financial regulatary act, and these restrictive provisions are bound to produce the far-reaching impact on the mode of operation and development of the global financial industries in the furture. The EU’s administrative consumption which emerges in the apparent financial crisis, such as unclear financial structure, lack of supervision, makes financial consumers in the EU district paid a heavy price. The primary task of the EU at this stage focuses on constructing and improving a framework for financail supervision function agent. Comprehensive system reconstruction and guarantee program almost covering all aspects will build a barrier to effectively protest agasinst the financial risk for financial consumers.It is noteworthy from the financial monitor reforms taking place in the United States, the United Kingdom and EU that all the major developed countries or regions are gradually converging financial regulation towards the derection of mutual coordination. The countries like UK which adopts the self-discipline supervison mode in the past have begun to to strengthen the government regulation and walk the path toward legalization. The countries such as US which adopts the government centralized control supervision have begun to pay more attention to the functions of industries self-discipline management. The financial regulatory authories generally recognizes that an efficient financial regulatory system and effective financial consumer protection mechanism should regard the government leislative intervention and monitor management as the core, and actively seek government regulation, self-regulation and judicial relief, etc., in which various levels have reasonable division of labor and organic coordination, and could make institutional adjustmetns and timely and effective reform with the external environment changes.China began to reform the socialist planned economy system from the late 1970s. This progressive, two-track reform has achieved certain success. In the past 25 years, China’s annual GDP growth rate is up to 9.3% which is the fastest growing country in the world, and the average annual trade growth rate is up to 16%. Focus to the financial sector. Since the reform and opening up, China’s financial sector development and progress are not only reflected in the variety of indicators and data, but also fully reflected in the great change taking place in the market size, industry structure, capital structure and business types, and ability and level of financial supervision are simultaneously improved. The financial institutions in China are quite different from the western financial markets in the nationalization control, implicit deposit insurance, crisis aid and other aspects. Despite whether these regulatory differences restrict the efficiency of the financial industry, raise of financial regulatory costs, increase of risk of moral hazard in financial industry should be further discussed; three decades of steady development of China’s financial sector to some extent prove that the financial regulation in China is successful in general. Of course, these also could not cover up the existing defects and deficiencies of China’s financial regulatory system. Currently, there are still many problems in the financial sector to be solved which are worthy for our attention and reflection, such as the legal system is still not perfect, means and methods of regulation are more backward, operations of business are non-compliance, complaint channels are not clear, government excessively intervenes financial sector and the equal service are not appropriate, and so on. In the process of global economic and financial integration, as China’s market economy reform gradually deepens, both internal and external environment that financial industry confronts will be changing dramatically, the financial risk will be different from the former one in the past in terms of way of formation, transmission channels and the degree of damage. It will be important research tasks in China’s financial regulatory research to study how to fully learn the advanced foreign experience in financial sector regulation as well as effectively combine the objective reality in China, and continuously improve the regulatory methods, improve regulatory efficiency and better protect the legitimate rights and interests of financial consumers.China’s financial market development is still at the initial stage; in spite that in the financial crisis, China’s financial markets are still capable of immune, but the potential incentive of the financial crisis has emerged in the domestic financial markets. And the unsuitable financial regulation leaves worries when further deepening the reform of financial reform. There are still many serious problems, for instance, void of regulatory ideas and vacancy of institution, lack of disclosure of regulation information, the out control of the proliferation of financial innovation, as well as the shortcomings of the external environment of regulation. The financial physical levels between China and western developed countries and regions are at different levels, i.e., financial developed countries have more varieties of high risk transaction in financial industry, however, the product innovation of China’s financial sector is not high, and the financial business are relatively stable. This determines that China’s financial regulatory system is not necessary and has no ability to copy the western way of financial reform in specific operations; however, the rules and the high-quality kernel that the western countries create will give China more inspiration, which are worthy of reference.Accordingly, this dissertation makes a number of policy recommendations, such as: strengthen the financial consumer protection legislation, improve the financial consumer protection organizations, establish a qualified financial consumer investment system, improve the fair financial services, build efficient financial consumer complaint processing platform and improve the relief mechanism and so on. Meanwhile, regarding the financial regulation reform in the post-crisis era, it is necessary to emphasize the consistency of core principle and standards of international regulation, while China should give full consideration to the differences between China’s financial market and other countries’financial markets, and then improve the relevance and effectiveness of financial regulation and establish effective policy for protecting legitimate rights and interests of financial consumers pursuant to China’s own problems.