It’s not often that countries in Asia speak with one voice. But they did last fortnight when consumer groups from the region called for a comprehensive law to protect consumers in credit transactions. The occasion was the Asian Conference on the regulation of consumer credit, organised by the Asia Pacific Office of the Consumers International (CI), a federation of consumer bodies worldwide.
Following the policies of economic liberalisation pursued by the governments in Asia, including India, the financial sector has grown in leaps and bounds. Today, consumer credit keeps the economy well-oiled and spurs the growth of various sectors including housing, automobile and white goods. According to the India Market Demographics Report 2002, published by the National Council of Applied Economic Research in May last year, the purchase of white goods by consumers through finance had grown in the country from 14.6 per cent in the mid-1990s to 23.9 per cent by the end of the century. Similarly, banking statistics published by the Reserve Bank of India showed a significant growth in the offtake of bank credits. While Calcutta recorded a credit offtake of 13 per cent between June 2002 and June 2003, Chennai and Bangalore recorded a growth of 20.2 per cent and 31.8 per cent respectively.
Today, consumers need not have to wait till they save that kind of money to buy a house, set up a business or take a holiday. Financial institutions are there to provide them loans for the purpose. Then there are credit cards to help consumers buy what they want and whenever they want, on credit of course.
But on the negative side, consumer protection laws have not kept pace with the developments in the sector, thereby exposing the consumer to the machinations of the marketplace. The increasing promotion of credit purchases by financial companies, for example, are prompting consumers to spend much more than they can afford, thereby leading them into a debt trap. Then there are other problems too, like the high rate of interest, particularly on credit card transactions. Last year in Bangalore, members of the Credit Card Holders’ Association of India had marched to the office of the Reserve Bank, demanding an independent authority to regulate the credit card industry. They were unhappy about the high interest rates charged by credit card companies. Consumers also have to contend with terms and conditions that are loaded in favour of the financier. It’s common knowledge that private banks today employ ‘recovery professionals’, a euphemism for bouncers, to repossess, without notice, goods such as cars sold on hire-purchase. According to an estimate, there are as many as 50 such ‘recovery agencies’ in East Delhi alone.
The CI conference discussed the problems of credit transactions in detail. It looked at the inadequacy of the existing laws and concluded that consumers in Asia needed a comprehensive law to protect their interest. The coming months will see consumer groups in India lobbying for such a law.
