2.2.1 Customer Account Management
Financial service institutions need to provide their customer about their consumer’s account but as permission of their customer. Banks currently do not have an obligation to issue or provide a monthly statement for customer unless they give an authorization to the bank. Financial Services Authority regulation No. 1/POJK.07/
2013 concerning consumer protection infinancial sector article 27 stated that the financial service providers have to send reports to the consumers regarding the balance position and deposit movements, funds, assets, or liabilities of the Consumers accurately, on timely basis and in the manners or means according to the agreement with the Consumers.
2.2.2 Disclosure and Sales Practices
There are no specific items of information that should be included for the different types offinancial products or any requirement of a product even though there are some provisions requiring disclosure of terms and conditions of products. The disclosure requirements infinancial consumer protection law do not adequately deal with these issues given the generality of the requirements in provisions e.g. articles 4 and 8.
In banking industry, the banking regulation allows exceptions to maintain secrecy regarding the deposits of any depositor. It includes provisions allowing certain disclosures for tax purposes in relation to deposit and depositor information, to settle a bank’s claims (in respect of a depositor) that have been transferred to the Agency for State Loan Settlement and Auction or to the Committee for State Loan Settlement; and to assist in respect of a criminal case involving the depositor; for or the purposes of civil suits; as required by the Anti-Money Laundering Law and a board of directors of a bank may disclose a customer’sfinancial information to other banks.
In capital market industry, capital market institutions can give an impact to investor in investment decision and performance. Therefore, disclosure about these entities is important to give full information about investors’ investment and the entity with whom they are doing business. It is recognized in the rule V.H.1 related to investment advisors that need to disclose the information if other entities or parties prepared research reports to their clients.
Related to disclosure and sales practice,financial service institutions should sell their product with accurate, honest, clear and not misleading information about its products and/or services. It is stated in Financial Services Authority regulation No. 1/POJK.07/2013 concerning consumer protection infinancial sector article 4.
Further, information shall be delivered to the customers regarding their rights and obligations when giving an explanation and making an agreement. Thus, various
media through advertisement in print or electronic media should state the infor- mation. Still the same regulation article 17, it states that The Financial Services Providers are prohibited to use marketing strategy of the products and/or services that can harm the Consumers by taking advantage of the Consumers’ condition which does not have other choice when making a decision.
2.2.3 Financial Literacy and Education
OJK issued Circular Letter PUJK. SEOJK No. 1/SEOJK.7/2014 concerning the Education Implementation Plan to Enhance Financial Literacy towards the Consumer and/or Society stipulates that every financial service institutions have to include education plans in their annual business plan and obliges them to report its imple- mentation to OJK. According to the OJK Commissioner in charge of Consumer Education and Protection, the arrangement of an education plan needs to refer to the Strategy of National Financial Literacy published by the President of Indonesia in November 2013 (Otoritas Jasa Keuangan2015). All education plans together with annual business plans have to be submitted to the supervisory board of OJK in 2015.
2.2.4 Dispute Resolution Mechanism
There are two statutory dispute settlement systems infinancial service sectors, the Consumer Dispute Resolution Board/Badan Penyelesaian Sengketa Konsumen (BPSK) and Central Bank of Indonesia mediation service. BPSK operates under regulation of Ministry of Trade and Industry no. 350/2001 and BI mediation service operates under the Banking Mediation Regulation No. 8/2006.
Further, Indonesia OJK as a regulator provides a procedure to dispute resolution mechanism. On 23 January 2014, OJK issued regulation No. 1/POJK.07/2014 concerning alternative dispute settlement institutions in thefinancial service sector.
This regulation governs the function and the establishment of independent insti- tutions that are appointed by OJK to solve any dispute that has occurred between consumers and Financial Services Institutions or through alternative dispute reso- lution mechanism. Indonesia also participates in ASEAN committee on Consumer Protection that gives an avenue for consumers to complain and seek compensation for loss.
There are six alternative agencies to manage mediation in financial services sector mandated under OJK regulation No. KEP-01/D.07/2016 dated on 21 January 2016 (Pengumuman2016), namely Alternative Dispute Resolution (ADR) agen- cies. The official list of ADR agencies are as follows:
1. The Insurance Arbitration and Mediation Agency (Badan Mediasi dan Arbitrase Asuransi Indonesia—BMAI) is one of service provided by the Life and General Insurance Associations to give a comprehensive mediation and adjudication service.
2. The Indonesian Capital Markets Arbitration Agency (Badan Arbitrase Pasar Modal Indonesia—BAPMI) provides mediation and adjudication service in capital market.
3. The Pension Fund Mediation Agency (Badan Mediasi Dana Pensiun—BMDP) provides mediation service in pension fund.
4. The Indonesian Alternative Dispute Resolution Institution for The Banking Sector (Lembaga Alternatif Penyelesaian Sengketa Perbankan Indonesia— LAPSPI) provides mediation service in banking sector.
5. The Indonesian Arbitration and Mediation Agency for Underwriting Companies (Badan Arbitrase dan Mediasi Perusahaan Penjaminan Indonesia—BAMPPI) provides mediation and arbitration service in underwriting companies.
6. The Indonesian Financing and Pawnshop Mediation Agency (Badan Mediasi Pembiayaan dan Pegadaian Indonesia—BMPPI) provides mediation service in financing and pawnshop companies.
ADR agencies above have their own distinct legal characteristics and implications.
These agencies provide mediation, adjudication and arbitration to resolve com- plaints from consumers. In general, there are two mechanisms to handle the com- plaints from financial consumers, i.e. Internal Dispute Resolution (IDR) and External Dispute Resolution (EDR).
1. Internal Dispute Resolution (IDR) Mechanism
This mechanism obliges financial services business players to solve their con- sumers’ complaints through giving the functions or units to deal with the complaints.
2. External Dispute Resolution (EDR) Mechanism
EDR is needed when consumers fail to reach agreements withfinancial services business players over their complaints. In this mechanism, consumers can contact one of the following institutions:
(a) The OJK
Since 2013, OJK has handled 3832 complaints and resolved 3574 com- plaints as the following (Table5):
(b) Alternative Dispute Resolution Agencies (ADR agencies)
Table 5 Complaints handled by FSA in 2016
Year No. of Complaints Cases resolved per year In progress
2013 2014 2015 2016
2013 844 313 429 98 2
2014 2182 1096 937 96
2015 734 410 178
2016 72 15
Total 3832 313 1525 1445 291 258
SourceOJK
Consumers can contact ADR agencies to mediate, adjudicate and arbitrage their cases. Since January 2016 to June 2016, ADR agencies has handled 47 cases and resolved 29 cases with the detail as the following (Table6).
The procedure to handle complaints are visualized as the Graph4.
Under OJK regulation No. 1/POJK.07/2014, everyfinancial services busi- ness players have to take further steps and settle all complaints from cus- tomers within 20 business days. In some cases, the settlement of complaints may be extended for further 20 business days and consumers must get notification about the time extension. Thefinancial services business players are also required to report to OJK every quarter all complaints received from their consumers and also mechanism used to settle the complaints.
Table 6 Cases handled by
ADR agencies in 2016 ADR agencies
No. of cases received
In progress
Resolved
BMAI 28 8 20
BAPMI 9 7 2
LAPSPI 9 3 6
BMDP 1 0 1
Total 47 18 29
SourceOJK
Customer Care
Hotline Counter
Service
Response of the received complaint to the customer
Internal Complaint Handling Procedure
Success Agreement Fail Agreement
External Dispute Resolution (EDR) Mechanism
FSA ADR Agencies
Cases Resolved Cases Resolved
Graph 4 Complaint and dispute resolution procedures.SourceAuthor, OJK and other sources
2.2.5 Guarantee Schemes and Insolvency
Indonesia already has a depositor protection scheme. Since 1 January 2014, OJK and The Indonesia Deposit Insurance Corporation (IDIC) became the parties who have empowered to take all measures to protect depositors when a bank proved unable to meet its obligations. Based on IDIC law act No. 24/2004, IDIC has two key functions: to insure customer deposits and to carry out the resolution of failed banks. Moreover, the IDIC law states that IDIC is designated as the insurer, and every commercial and rural bank must be a member of the deposit insurance program and pay a yearly membership fee from its own equity at the end of the previousfiscal year.
Based on IDIC regulation No. 2/PLPS/2010 deposit insurance covers a total of 2 billion rupiah on deposit by any individual in any member bank and maximum fair interest rate on deposit account at 7% for an account denominated in rupiah and 1.5% for an account denominated in foreign currency. The guarantee covers demand deposits, certificates of deposits, saving accounts, time deposits and deposits in other equivalent form on a per customer, per account basis for each bank (Fig.5).
Related to insolvency, the law No. 24/2004 concerning Indonesia Deposit Insurance Corporation states that depositor will enjoy higher priority compared to other unsecured creditors in the liquidation process of a bank. If the coverage given by IDIC is inadequate, the IDIC law sets out the hierarchy of payments to creditors from the disposal of assets and/or the collection of receivables. The order, stated in article 54, is as follows:
Financial Services Authority (FSA)
Ministry of Finance (MoF)
Bank Indonesia (BI)
Bank Non-Bank
Institution
Capital Market Indonesia Deposit
Insurance Corporation (IDIC)
Fig. 5 Financial system coordination forum.SourceOJK
1. Accrued and unpaid remuneration for staff 2. Severance payment for staff
3. Judicial fees and court charges, cost unpaid auction expenses and cost of operational expenses
4. Resolution cost incurred by the IDIC 5. Unpaid taxes
6. Uninsured portion of deposits and ineligible deposits 7. Other creditors.
Moreover, the IDIC law gives expeditious, cost effective and equitable provisions to enable the maximum timely refund of deposits to depositors.
3 Hard Infrastructure of Indonesian Financial Consumer Protection System