Question 1: Consumer credit

Consumer credit refers to debts in form of money, goods or services provided to consumers in lieu payments. This kind of credit has different forms which include credit card, scorecards, personal loans, hire purchase, motor finance, personal loans and mortgages. Consumers who intend to enjoy these credit facilities must be well conversant with terms and conditions involved such as cost of credit o ensure that they are not mistreated by selfish business people. Several regulations have been put in place to ensure that consumer credit is carried out effectively and for mutual benefit of the consumer and the lender.

Protection of vulnerable consumers has been a major concern in the credit markets. However, in order to effectively protect the vulnerable consumers, it is vital for us to effectively understand what vulnerability is and what causes it. The most common forms of consumer vulnerability include information vulnerability, pressure vulnerability, supply vulnerability, redress vulnerability and impact vulnerability.

Credit consumers must be protected in a great way to ensure that the lending exercise is free and fair. The lending process must be guided by a framework that enhances competition, innovation, choice and enterprise which can only be realized in presence of fair lending practices. Consumer protection against unfair lending practices is challenging process that requires critical analysis of consumer threats. This will greatly help in designing a framework for the general welfare of vulnerableconsumers (OECD, 2010).

The first important vulnerability by consumers is the information vulnerability. This vulnerability is associated with presence of information gaps and the remedy to this problem is by bridging this information gap mainly through disclosures. However, the vulnerable consumers may not be in a good position to utilize the provided information. It is for this reason that more accredited means should be put in place to ensure information symmetry is realized. For instance, there should be laws that regulate what information should be disclosed and how.

Several regulations to improve consumer protection have been put in place in different countries to ensure that vulnerable consumers have the chance to thrive.This is aimed at minimizing consumer confusion presence in the credit market in terms of products and lack of transparency. The regulations compel the credit providers to provide all the essential information to potential borrowers. This information is crucial in enabling them to make rational choice. By completely removing information distortions, the consumers make informed decisions which drive competition among the different lenders. The creditors are also required to provide pre-contractual information in a legible and undispersed manner which must also be in a separate document.

Consumers are also faced with another vulnerability commonly referred to as pressure vulnerability. The consumers are susceptible to pressure especially from the sales people of different credit providers. The stiff competition in the credit market may drive most of the credit providers to engage in various persuasive techniques to acquire a great share of the market. These persuasive techniques which include advertising could cause undue pressure to consumers.

Several measures and precautions should be put in place to ensure that the persuasive techniques do not compromise fairness in the credit market. Several Acts have been put in place to ensure that susceptible consumers are not pressurized in their decision making. Credit advertising, as outlined by CCA sections 43-47, clearly outlines the process of advertising in the credit market (OECD, 2010). The Act strictly prohibits misleading advertising and stipulates what should be contained in an advert such as the kind of credit and its total costs. The advertising in credit market also puts restrictions on some credit items to prevent susceptible consumers from impulse borrowing for unessential products.

Another vital and of great concern is redress vulnerability. In most cases here are assumptions consumers can only be protected if they are capable of holding firms to account by obtaining redress. However, it is important to note that obtaining redress will require knowledge, confidence and resources. All these characteristics are short of to the vulnerable consumers. It is for his challenges that there must be tools and measures that will enable vulnerable consumers to seek redress from the credit firms. There must be blue prints to dispute solution between the credit providers and the borrowers.

In order to seek redress from lending firms, it is an obligation to the parties involved to have post contractual information. This is a very critical document especially in cases of default. In case there is no such legal document, the aggrieved consumers can contact solicitor or apply the trading standards as provided by laws of the land. The redress vulnerability has also been taken a notch higher by providing for possibilities of financial ombudsman who have the responsibility of providing essential information for running accounts. The state must also provide rules and regulations that will help in dispute resolutions among participants in the credit market. Both the borrowers and the lenders must have proper mechanisms that will enable effective handling of complaints (OECD, 2010).

In essence, the cause to consumer vulnerability can be summed up as a result of information gap. In order to effectively solve this problem, financial regulators such as FSA call for the lenders to have clear pre-contractual information, clear and transparent agreements and clear post contractual information. All this information is critical to the parties involved. For instance, consumers can be able to compare different offers and thus making informed choices. Redress issues requires careful considerations to ensure that dispute resolutions are achieved. The redress issues can be effectively resolved through legislation and regulation by the states. However, it should be noted that the legislation and regulation by state organs may not comprehensively solve the problem. Markets participants, borrowers and lenders, must be actively involved in realization of this objective. For instance, the credit providers must ensure that their marketing methods are fair to the vulnerable consumers. Consumers must also be responsible in the financial well-being since it is of great significance in consumer protection.

Question 2: Consumer protection in the internet economy

The e-commerce has been on tremendous increase in the recent past. The key driver to this development is the increase in the population which is connected to the web. The population with internet access has risen tremendously over the years. This development has been even more significant in developed countries than it is in the developing countries. For instance, the population with internet access has risen with over 62% in the developed world by 2007. This is likely to have increased in the later years due to the increase in electronic gadgets that enables internet access such as smart phones and i phones.  This has greatly enhanced e-commerce where goods and services are traded through electronic networks (OECD, 2010).

E-commerce takes three basic forms namely business to business transactions, business to consumer transactions and consumer to consumer transactions. Among the three, B2B has been the largest category but the others have also made significant steps in the industry. This has been as a result of increased internet accessibility especially the mobile use. E-commerce is characterized by distance selling where the seller and the buyer have minimum or no contact. This has necessitated putting in place measures, rules and regulations to protect consumers. Consumer confidence is critical for the success of e-commerce and this can only be achieved through utmost consumer protection.

The e-commerce sector has been faced with numerous challenges. This has prompted the policymakers to work tirelessly towards strengthening consumer protection in the internet economy. For instance, the policymakers have put in place measures to adequately deal with cross-border fraud. The OECD designed a framework to curb both online and offline cross border fraud through faster, closer and efficient cooperation between consumer protection enforcement agencies. The guideline effectively outlines how various online transactions should be carried out. This served a good purpose for protecting online consumers from fraudulent and deceptive commercial practices across borders (OECD, 2010).

The policymakers have also employed technological advances to curb online manipulation especially through spams and internet junk busters.  Spam was initially unwanted and annoying online adverts which were associated with fraudulent consumer schemes. However, more sophisticated spams have emerged such as phishing, spear-phishing, vising tricks and pharming. All these spams are threat to consumer confidence and should be dealt with accordingly. Through the privacy and electronic communication regulation, the policy makers have been able to adopt technology that will help filter spams and other internet junk busters.  This will significantly help in the fight against spam. Enhanced cooperation in the enforcement of laws against spam has also been greatly advocated for to curb the menace.

E-commerce consumers’ protection can be further enhanced through increased internet regulation. The consumers must incur less search costs, enjoy greater privacy and reduce geographical distance. Achieving all these will significantly increase consumer confidence. With improved internet regulation, the B2B markets will even increase further thus making the trading exercise easier. The regulation exercise can be enhanced through regulation and strengthening internet contracts.  A successful internet contract should ensure flexible information and which is permanently available.

E-commerce is in most circumstances carried out in different geographical locations. This calls for great consumer protection in cases of distance selling. Policymakers, in 2000 and 2005, have put regulations to govern the implementation of the distance selling.  These policies are aimed at protecting consumers from credit card frauds. This can be achieved through introduction of cooling off period and provision of essential information regarding different transactions (OECD, 2010).

The policy makers have also put in place measures and regulations to control online information. There must be a significant level of privacy in electronic communication as outlined by the 2003 regulation. The regulations provide guidelines to information provision and use of cookies. The information regarding online transactions must be effectively discussed outlining all the necessary costs such as transport. This will greatly enhance consumer confidence in e-commerce.

Dispute resolutions in online transactions are another major concern that should be adequately addressed to increase consumer confidence. These resolutions should cover all types of B2C disputes to inculcate consumer confidence in the transactions. Online dispute resolution mechanisms should be free, low cost, visible and easy to use. Consumer protection can be further enhanced through considering language diversity and the security of the mechanism.

Dispute resolution and redress has also been of concern by to OECD. In 2007, the OECD issued a recommendation on consumer dispute resolution and redress. The policymakers under this forum outlined the basic principles for resolving B2C disputes both locally and cross borders. The guidelines serve a great purpose in building consumer confidence since they will have assurances that their concerns will be adequately addressed (OECD, 2010).

The policy makers must also consider protecting consumers from online theft. They should formulate rules and regulations that will enable consumers in identifying theft. Example of such regulations is the ‘’Fair and Accurate Credit Transactions Act’’which is in the United States laws. Such laws have instilled consumer confidence especially in cases of use of credit cards.

Consumer protection in the internet economy can be further strengthened through proper authentication process. For instance, OECD issued a recommendation on electronic authentication in 2007. The recommendation encouraged the member states to establish compatible technology –neutral approaches for authentication of persons and entities. Electronic authentication of persons and entities is vital in promoting internet economy since the consumers are aware that they are dealing with existing entities and not robots. Electrical authentication is a major stride in consumer protection as it enhances online trust to significant levels (OECD, 2010).

However, it is important to note that consumer protection should not be entirely a burden to the policy makers. Other affected parties should also strive towards realizing this noble course. For example, private sectors in various countries have been actively involved in designing ways and means of realizing this objective. For instance, Better Business Bureau (BBB) was initiated in United States to provide online code of ethics. This has made significant contributions in ensuring online marketing develops significantly. Such self-regulatory programs should be encouraged to enhance digital economy through increased consumer protection.

Reference

Publishing, O., 2010. Consumer Policy Toolkit. S.l.: OECD Pub..

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