The Centre has invited public comments on a report for the creation of a Financial Redressal Agency (FRA) to address the grievances of retail consumers against all financial service providers in an easy, transparent and cost-effective manner.
The report, while pointing out substantial inadequacies in the current redressal system, suggested that the design of the FRA offer a simplified resolution process, allowing retail consumers in distant and remote locations to pursue effective remedies without imposing significant costs on them.
The report also calls for a new financial consumer protection and redressal legislation and recommends an initial budget of ₹100 crore for the setting up of the FRA.
“The average consumer is put under unnecessary stress when required to approach different redress agencies based on the nature of the product,” according to an official statement based on the report. “This stress is further amplified due to varying levels of consumer protection across regulators.”
“In some instances, regulated financial service providers (FSPs) are not covered within the scope of the concerned regulator’s redress functions,” according to the statement. ”Further, there is a lack of powers to award compensation in some cases, pushing consumers to courts or consumer forums.”
The report also added that there is little room for specialisation as present systems do not have a specialised cadre of redress professionals and it highlighted the possibility of a conflict of roles between the various redressal agencies.
“It (the proposed FRA) will try to resolve all complaints through mediation. Cases where the parties are unable to reach a settlement would be resolved through a light-touch adjudication process. It will discourage court-like processes. The FRA will establish a front-end presence in diverse locations for consumers to submit complaints.”
Finance Minister Arun Jaitley had in his budget speech of 2015-16 announced the creation a sector-neutral FRA, following the recommendations of the Financial Sector Legislative Reforms Commission (FSLRC), which had, in 2013, recommended an FRA as part of the regulatory framework aimed at fostering customer protection and regulator independence and accountability.
