Regulations will protect consumers

Threat of getting stung by mis-sold products now eased

In the not-so-distant past, signing up for a consumer or investment product in the UAE was a minefield.

Some residents were able to take out 10 credit cards or more or sign up for a personal loan with a tenure of 20 years. The result: chronic indebtedness with many landing in desperate financial situations.

Others were stung by expensive fixed-term investment products, produced by insurance companies and sold by independent financial advisory firms and banks, that were complex and difficult to understand.

But the news from Nariman Alawadhi, chief manager at the Central Bank, that 100 customers have had the money they invested returned to them following complaints, is the latest sign that things are changing for the better. Four months ago, the Central Bank created a dedicated consumer protection department to better tackle issues raised by consumers and raise awareness about financial illiteracy.

It is one step in the UAE’s journey to regulate consumer and investment products marketed by banks and insurance companies.

One of the first positive changes came in 2011, when the Central Bank introduced regulations to prevent consumers getting in over their heads, such as shorter loan tenures and a debt burden ratio of 50 per cent, which ensure a borrower’s debt repayments do not exceed half their monthly salary.

Then, after endless complaints about mis-sold investment plans were received by the UAE Insurance Authority (IA) and the Central Bank, both financial organisations took action.

The IA confirmed in April that it was pushing ahead with tough new regulations to transform the way savings, investment and life insurance products are sold in the UAE.

Among the proposals were plans to impose maximum limits on the upfront commission advisers can earn from life companies. Advisers will also have to clearly show all fees and charges for which the client is liable. The changes are expected to come into effect in the fourth quarter of this year.

The IA announcement was followed in May by the Central Bank’s own circular, advising banks and finance companies to resolve all outstanding mis-selling complaints within 90 days.

Getting tough on mis-sold financial products is always positive for consumers to ensure they can grow their money rather than see it swallowed up by high charges.

Hopefully the days of poor financial products being peddled that benefit the person marketing it more than the consumer will soon be over.