Consumer debt in T&T has increased by $6 billion over the past four years. Central Bank Governor Jwala Rambarran, who addressed the annual breakfast meeting of the Office of the Financial Services Ombudsman (OFSO) at the Central Bank Auditorium, Port-of-Spain, yesterday, said mortgages were driving the growth.
"Here in T&T, household use of financial services has been rapidly rising in recent years. Consumer debt stood at $25 billion in 2013, up from $19 billion in 2009. Mortgage debt rose still more rapidly, from under $7 billion in 2009 to over $10 billion in 2013," he said.
"Credit cards in active circulation are currently running at almost 200,000 cards, while consumer credit card debt stands at around $2 billion. At the same time, households have increasingly become more responsible for funding their own pensions while buying insurance policies and investing in securities and mutual funds. Households are also heavy users of remittances which averaged US$100 million in the past decade."
Retail consumers operate in a marketplace where imbalances of power, information and resources are on the side of financial institutions, Rambarran said."At its heart, consumer protection seeks to address this imbalance," he said.However, Rambarran warned his audience not to be deluded."Improved consumer protection and financial literacy can identify preventative measures to help avoid some of the worst financial consumer abuses but they are not silver bullets to solve all problems in consumer finance," he said.
"This rapid growth of household use of financial services over the past few years has been accompanied by an increase in the number of households that have difficulty in understanding the risks and obligations that they assumed–or even the full range of choices available,"
As promised at the OFSO's last breakfast meeting, Rambarran said a report on upgrading T&T's regime of financial consumer protection in line with international best practice is the basis for a draft proposed policy document (PPD) on upgrading the regime of financial consumer protection.
The report was done by David Thomas, a former chairman of the International Network of Financial Services Ombudsman Schemes and former chief ombudsman of the Financial Ombudsman Service in the United Kingdom.Elaborating on what he considered the highlights of the draft Rambarran said: "Perhaps the first and most critical legislative proposal relates to changing the voluntary nature of the Financial Services Ombudsman regime to one under pinned by legislative authority."
He said the new draft will addresss several other issues now faced in the market. "Finally, in order to deliver on this expanded mandate, the OFSO would need to be better resourced with the skill sets and talent as its jurisdiction and workload grows. The staff complement in the Ombudsman's office are currently seconded from, or approved by, the Central Bank.
"The draft PPD recommends that once a statutory Office of the Financial Services Ombudsman is established the ombudsman will have the power to recruit, employ and appoint staff necessary for the proper functioning of the scheme. The present staff will have the option to choose whether they will remain with the Central Bank or they will be transferred to the legislated OFSO," Rambarran said.