The National Bank of Cambodia’s (NBC) legal department has advised consumers on the need to read the fine print as well as the terms and conditions of financial contracts they have entered into.
NBC’s legal department officer Sok Vanseka spoke to The Post about the importance of understanding financial and contractual terms so that consumers can avoid pitfalls and falling prey to fraud.
“As a central bank lawyer, I handle complaints from financial consumers. Some complaints or disputes in the financial services occur because of the lack of financial literacy.
“As an example, some financial consumers do not read the terms or obligations stipulated in the loan contracts prior to entering into such contracts. Some consumers cannot distinguish between formal and informal financial services providers,” she said.
Because of the frequent complaints, Vanseka said the NBC has imposed an obligation on all financial service providers to explain to their consumers about loan conditions, especially the interest rate and its calculation.
“Without any basic knowledge in finance, one time explanations and computer prompts cannot ensure that consumers can make rational decisions when negotiating or taking loans. Some consumers take the loans without paying attention to their repayment capacity or the future legal enforcement on defaults,” she said.
Vanseka said that the NBC has introduced a financial literacy programme to ensure that consumers will not be “vulnerable to any regulatory arbitrage or will be in an unequal disadvantage when they negotiate with financial service providers.”
She also said that lawyers in Cambodia were not well-versed with matters that dealt with a combination of the law and finance.
“The common problems faced by lawyers when handling finance related cases are that legal practitioners have limited knowledge when law and finance are combined. In law school, most of the academic programmes focus on the criminal and civil codes that have general application.
“However, not many law students try to focus on ‘Lex specialis’ such as financial law. Therefore, financial regulations and rationale are out of the purview of the legal practitioners,” Vanseka said.
To this end, she said that the NBC has also introduced certain regulations to protect financial consumers such as the regulation on the need for transparency in providing credit and regulations on complaint handling procedures.
“In order to ensure that such these provisions are made known to lawyers, the NBC will organise a training course for compliance at banking and financial institutions.
“At the same time, the NBC welcomes queries or questions to seek clarification from lawyers. If the opportunity allows, the NBC will further cooperate with the Bar Association of the Kingdom of Cambodia on the matter,” she said.
Vanseka underscored the importance of financial literacy for consumers and the public at a time when the financial market is becoming more complex.
“In all countries, if you want financial development to move forward by adopting innovative products or services, you need to enhance financial literacy among the public in order to make sure that they can benefit from such products.
“The public should be able to distinguish between formal and informal financial service providers in order to select the best option that is in their best interest. Otherwise, the speed of development would leave some major gaps in product knowledge,” she said.
Vanseka said development in the financial sector requires people to be literate in both technology and finance. People, she added, should be aware about the basic terms and conditions of the services or products in order to protect themselves.