A Study Of Punitive Damages For Financial Consumers

With the increasing development and maturity of financial markets,consumers in banking,insurance,securities and other financial industries are growing.All kinds of disputes also follow.Consumers who buy banking,insurance,and securities products are financial consumers,without professional financial knowledge.They form a financial consumer relationship with financial service providers.Financial consumer is not the result of conceptual deduction,but the result of the development of transactions.After the financial crisis in 2008,there is a huge amount of discussion on the legal status of financial consumers.The current legal system lacks a legal definition of financial consumers,also lacks specific laws and regulations to protect the rights of financial consumers.In addition,academic and practical circles question the investment of financial consumers,so disagreements on whether financial consumers can be protected by the Consumer Protection Act exist.Whether financial consumers can be protected by the Consumer Protection Law and then claim punitive damages warrant attention and research.Compared to the 'consumer' under the Consumer Protection Act,the object of financial consumption has intangible,long-term and uncertain characteristics,unlike traditional general goods and services,however,whether it is based on the newly added Article 28 in the Consumer Protection Law and the interpretation of 'consumer spending' in Article 2 of the Consumer Protection Law,or to return to the logical origin of protecting the rights and interests of consumers,financial consumers can be included in the protection of the Consumer Protection in legal theory.In reality,it also satisfies the urgency and necessity to protect financial consumers as the 'consumer' under Consumer Protection Act.Because the financial industry is relatively professional and complex,financial consumers are more vulnerable to fraud.When financial consumers are cheated by business operators,financial consumers can claim punitive damages in accordance with Article 55,paragraph 1,of the Consumer Protection Act.In particular,when financial providers intentionally commit fraud resulting in financial consumers suffering losses,punitive damages clause should apply.In existing judicial practice,there are widespread losing or dismissing cases due to consumers failing to prove the operator's fraud.The 'fraud' requirement that is difficultly applicable to general commodities is even more difficult for financial consumers.The main reasons are that the ability and information between financial consumers and operators are more asymmetric and consumers are hard to complete the burden of proof fraud,thus such reasons reduce the actual value of the punitive damages system to some extent.On subjective requirements,considering the consistency of the legal system and the rigidity of the punitive damages system,the subjective status of 'fraud' should be accurately defined as 'intentionally'.For the time being,it is not appropriate to use 'significant negligence' with extremely close faults as a requirement for applying punitive damages.However,including 'gross negligence' can be expected in the future.On objective requirements,the premise of applying punitive damages is that financial consumers suffer losses.The loss does not mean that it must be specific and quantifiable,doing something that should not be done and infringement of rights can be both defined as loss.As to proof of responsibility,although there are many academic voices allocating the burden of proof to the operators,on the one hand,it violates the legal principle of 'who advocates who will present evidence.' On the other hand,it will bring much higher required obligations and pressure to financial service providers.Finally,as to the compensation base,Article 55,paragraph 1,of the 'Consumer Protection Act' stipulates that 'price' or 'service fee' should be used as the base,which is the loan interest,insurance premiums,commissions,management fees or other fees paid to financial service providers.Based on the legislative intent and institutional rigidity due to institutional goals of the punitive damages system,the compensation base should be based on the total amount of 'price' or 'service fee'.The court should not discount according to the investment of financial consumption or even the agreement between the parties.Unjust enrichment also lacks the theoretical basis applicable in the punitive damages system,thus cannot be the reason to refute the base of full amount.Because financial consumer objects are different from ordinary goods with one price,for example,savings in banks,purchases of wealth management products,etc.do not necessarily have 'price' or 'service fees',or 'service fee' is extremely low.At this time,punitive damages may not be able to play a role.In addition,'service fee' is much lower than the value of the financial consuming objects,losses that are not legally causally related to fraud are usually greater when financial consumers are cheated.That punitive damages based on 'service fees' are less effective for financial consumers.It may lead consumers to abandon their claims on punitive damages and affect the effectiveness of the system.Therefore,we can discuss the possibility of defining the compensation base as the amount of loss.The basic responsibility of article 55,paragraph 1,of the Consumer Protection Law may be Culpa in contrahendo,or a tort liability for the infringement of the consumer's right to know.However,the loss of the two cannot exceed the 'price' or 'service cost'.Therefore,to better protect the rights of fraudulent financial consumers,the cost or service fee for the compensation base is the best choice.Based on the foregoing analysis,this article concludes that financial consumers are consumers under the Consumer Protection Act,and the punitive damages clause of Article 55,paragraph 1 of the Act can be applied.