Regulators fine banks, insurers for consumer abuses

Over 1,100 firms fined for breaking finance industry laws and regulations last year

Regulators fine banks, insurers for 
Wang Zhaoxing, deputy chairman of the China Banking and Insurance Regulatory Commission, speaks during opening ceremony for the China Development Forum 2019 in Beijing, China, 23 March 2019. Photo Che liang / Imaginechina/ AFP

(ATF) Financial services could become a "severe disaster area" for Chinese consumers, according to Baidu’s Big Data report for 2020.

Searches related to consumer rights in regard to insurance and banking increased by 19% year-on-year. The Securities Daily said China Banking Regulatory Commission data showed that some 1,141 firms were punished by the finance industry for violating laws and regulations.

The Peoples Bank of China’s has had a 'zero tolerance' attitude in recent years, which led to a total of 515 fines being imposed by the Banking and Insurance Regulatory Bureau, and 621 fines by the Banking and Insurance Regulatory Bureau, covering of banking, insurance, customer trust, and lack of strict supervision.

Fines were imposed for companies that made unexpected changes in the use of credit funds, for false reporting of loan data related to agriculture, and small and micro enterprises, for improper billing operations, for violations of loan approval or issuance, and not monitoring credit funds.

Penalties for the insurance industry covered problems with companies' statements, document falsification, compulsory bundling, tie-in sales, deception by an insurer, non-compliance with working capital regulations, and benefits to the insurer other than those stipulated in the insurance contract.

In addition to traditional banks and insurance institutions, firms that were insurance intermediary platforms were also punished. As well as punishing the institutions and relevant people in charge, multiple fines were imposed on "basic level employees" for violating laws and regulations.

Salespeople causing 'chaos'

For consumers, dysfunction by sellers in the financial industry in regard to bundled sales, disguised charges, and misleading sales were a major problem which frequently caused "chaos". The China Banking Regulatory Commission, or CBRC, issued a number of papers alleging that banks and insurers had violated consumer rights and caused disorder.

Recently, the CBRC issued a paper on Accident Insurance Reform with a key recommendation that companies “rectify industry sales behaviour.” It is understood that since July last year, the commission has conducted investigations into online loan platforms such as cash loans, which are usually the realm of "shadow banks".

An “Analysis of Complaints Accepted by the National Consumers Association in 2019” released by the China Consumers ’Association early this year shows that cars and parts were the top category for commodity complaints, except for quality. The bundling of car insurance was also a focus of consumer complaints.

Insurance sales generated many thousands of complaints.

Insurance broker Ms Xin told a Securities Daily reporter that due to pressure from frontline salesmen, intense competition from colleagues and inadequate corporate management, disorder in the industry would not be easy to eradicate in the short term.

However, industry sentiment had improved significantly, the paper said. And with the gradual trend of financial services going online, related internet marketing and other violations had become more prominent.

While strengthening supervision, financial institutions needed to continuously improve their awareness and capabilities in service and strengthen corporate culture guidance, the paper said.