Page 65 - ITU-T Focus Group Digital Financial Services – Recommendations

ITU-T Focus Group Digital Financial Services
Recommendations

Title of recommendation Regulatory review of DFS provider contracts with customers
Working Group Consumer Experience and Protection

Theme Contracts/Disclosures
Audience for recommendation Regulators

Regulators should review DFS providers’ contracts with customers on a regular basis, such as every six months,
and as informed by consumer complaints. Regulators should verify that contracts are in compliance with domes-
tic laws and require that terms in violation of laws and regulations shall be void and removed. To the extent their
legal mandate permits, regulators should also disallow unconscionable or unfair terms or practices such as lim-
iting access to recourse, misleading terms, or omitting information about pricing or other key terms of service.
Regulators should publish, in multiple channels likely to be seen by consumers, a list of examples of unconscio-
nable and unfair terms and practices for DFS providers and public awareness.

DFS industry user agreements are considered contracts of adhesion or standard forms which do not allow
consumers to negotiate changes to the agreement should consumers not agree with the specifics of the offer.
Essentially, a consumer has two options: Adhere to the provider’s terms and conditions or elect not to use the
service. It is possible that this lack of real choice could contribute to consumers not reading user agreements,
and/or simply clicking boxes, indicating acceptance without a true comprehension of the provider’s obligations
to offer a quality service, nor an understanding of the consumer’s own obligations, such as a keeping one’s
PIN private or repaying credit installments on time.
ITU research on DFS user agreements illustrated that user agreements may contain clauses that are unfair
to consumers. The research also highlighted that several of the DFS user agreements reviewed contained
potentially illegal clauses when the substance of the user agreement was compared to the domestic legal
framework. For example, two Kenyan DFS provider contracts mandate arbitration as the sole method of
dispute resolution for consumers, even though Kenya’s Consumer Protection Act, in section 88(1), states that
requiring a consumer to submit to arbitration is invalid as it prevents a consumer from exercising a right to
commence an action in the High Court.
In an example from Tanzania, the provider’s user agreement states that it may change its charges and tariffs
at its own discretion and without notice to the subscriber. This clause may contravene Tanzania’s E-Money
Regulations of 2015, section 44(2), which state that an E-Money issuer shall notify its customers of fees and
charges before they are imposed. Arguably, if a DFS provider changes the tariffs without any notice to the
consumer, this could be viewed as violating the E-Money regulations.

To enforce existing regulations and identify areas in potential need of new rules, regulators should review
DFS user agreements on a regular basis. Regulators should indicate to DFS providers that any clauses deemed
unfair will not be upheld and that they should be removed from the contract.
Regulators may also wish to publish examples of unfair terms and practices so that providers and consumers
are on notice of what is considered unacceptable. For example, in 2015, the UK Competition and Markets
Authority published an unfair contract terms guide explaining which terms and practices are considered
blacklisted and which were on the gray list (i.e., suspect and unlikely to be upheld). Examples of gray-listed
practices included binding consumers to hidden terms, disproportionate cancellation fees, or financial penalties
and restrictions on consumer remedies.

In other countries, and even other industries, a regulatory review of standard form financial agreements is
common. For example, in the U.S. insurance and real estate markets, a regulator must approve consumer
contracts. In Peru, the banking superintendent conducts a review of financial services agreements for consumer
financial products.

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