Tan Kin Lian
Singapore, the United Kingdom, the United States of America and Australia follow a similar legal system. Laws are passed to balance the rights of consumers and businesses. The aim is to provide an environment that businesses can innovate to improve their products and services and make a profit, and, at the same time, ensure that consumers are fairly treated.
However, when it comes to the issue of implementing the law, the approaches taken in these jurisdictions differ considerably. I wish to make some personal observations.
Fair treatment of consumers
Are consumers fairly treated by businesses?
The prevailing view is that the market can take care of this matter. If there are many competitors providing similar products and services, consumers can make their choice and buy from the most competitive source – based on assessment of the price and service level.
This concept works well for the market for physical goods – where the specifications can be compared and tested, prior to purchase.
When it comes to services, it becomes more difficult for the consumer to judge. How can the consumer know about the quality and competence of a doctor, lawyer or other professionals? What about the prices and service levels of repairers and contractors?
It is difficult for the consumer to know what is a fair market price and the expected level of service, especially as the terms of service are decided by the provider.
Financial products
A bigger challenge arises with financial products, such as the structured investment products and life insurance products. The consumers are given products that are designed by the financial institutions to make a profit. How can the consumer know if the products are fairly designed, and fairly priced?
In recent years, many bad financial products have been created and marketed to consumers. These products are designed by financial engineers and embedded with high margins for expense and profit. They are marketed under exotic names, but fall under the broad categories of capital guaranteed, capital protected, credit-linked, equity-linked and currency-linked products.
These products are described in documents and prospectus that do not give fair descriptions of the risk, features and charges. To put it bluntly, they are designed to “rip off” the consumers to make a large profit for the issuer.
There is no way that the consumer can know about the undisclosed features of these products. Even a financial experts cannot make a proper assessment as some vital information are not provided, such as the likelihood of certain events that have a material impact on the outcome of the investment.
Protecting consumers
The following approaches are taken by various jurisdictions to protect the interest of consumers:
a) The regulator scrutinises and tests the products to make sure that they are safe and suitable for consumers. This is the approach taken for the approval of drugs for sale to consumers.
b) The regulator or the attorney general takes legal action against businesses that contravene the law. This is the approach taken by the New York State Attorney General in charging the banks for the mis-selling of the auction rate securities. The Financial Services Authority of the UK and its counterpart in Australia also take pro-active actions against financial institutions that infringe the law or regulations.
c) In the USA, lawyers work on contingency fees to handle class actions for consumers.
Effectiveness
Consumers are fairly well protected by the regulatory practices and legal system in the USA, UK and Australia.
In my view, the protection of consumers in Singapore is rather weak. The alleged mis-selling of the credit linked notes has caused substantial losses to many consumers, caused by deception or negligence of the financial institutions.
Some consumers were compensated because they are deemed to be in the “vulnerable group”. But many other consumers were not given fair or adequate compensation. Their recourse is to take legal action, but it is extremely costly and risky. They will not be able to match the financial muscle of the banks in engaging the top lawyers.
The consumers worry about paying the fees of their own lawyers. They are more worried about paying the fees of the top lawyers engaged by the banks, if they should lose the case in court and bear the other party’s cost. Perhaps, there should be some clarity and reasonable cap on the other party’s cost, so that it does not become a burden for the consumer.
In Singapore, the lawyer collects a fee based on the work done, regardless of the outcome. The client has the burden of judging the likelihood of success of the legal action, based on the advice of the lawyer.
In the recent credit linked crisis, some consumers said, “I have been cheated by the banks in investing in these toxic products. I do not want to be cheated now by lawyers in taking up a hopeless case in court and paying large legal fees.”
Contingency fee
In the past, I held the view that the contingency fee system in the US is bad, as it led the society to be litigious and ridiculous cases are taken up, as reported in the media.
I now view the contingency fee system to be fair and necessary for the protection of consumer rights. If a consumer has been unfairly treated or cheated, and the authority is not willing to take action, the consumer has to seek redress through legal action.
Under the contingency fee system, the lawyer takes the risk of the legal outcome. If the lawyer loses the case, the lawyer cannot bill the client. This system makes the lawyer more careful about taking up a case where there is a fair chance of winning.
There is a possibility for contingency fee system to be abused. However, these bad examples cannot be taken to discredit the contingency fee system. It is possible for the system to be designed to avoid or minimise these abuses.
Conclusion
I hope that the legal system be reviewed to give better protection to the rights of consumers.
I hope that the respective parties review the case for adopting the contingency fee system in Singapore.
Perhaps, there should be some clarity and reasonable cap on the other party’s cost, so that it does not become a burden for the consumer.
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CASE is supposed to do the job of protecting Consumer right but it seem that they are just a Company that accrediate other Companies. And those companies that they accrediate is it really trustworthy?
I really gave up on CASE as they know so much TimeShare, MLM problem exist in Singapore and yet turn a deaf ear!
There has to be a balance… there is nothing wrong with Time Shares and MLM. The abuse of them is the problem. Singapore is a young country… hopefully with time we will build up increasing effective and relevant consumer laws.
Consumerist.com is a great website to learn by example how consumers can protect themselves.
We need a CASE that is outside PAP control to represent consumers and finance consumer interest related litigation.
It is quite obvious that the Singapore system is very pro-business.
Consumers have always been at the mercy of big business.
For whatever reason, CASE has not been as effective as what we would like
it to be, especially in the structured product mis-selling saga.
It could have done a lot more for those victims but as it turned out it was left to people like TKL and a few others to take up the cause.
Tan Kin Lian can write on the internet or speak at Hong Lim rallies but it doesn’t matter. Although loud, it is stil a voice in the wilderness.
He can only have an effective voice when he can form an alternative gahmen at the next election.
Whether its Case, FIDREC or whatever, just find out who is their paymaster , the outcome will be obvious …
TKL said:
“Singapore, the United Kingdom, the United States of America and Australia follow a similar legal system”.
Not sure what you mean by the “legal system”. Do you mean the laws (as in statute passed by parliament)? Or the judiciary?
The judiciary is certainly not the same. It may be seem similar in form but certainly not in substance.
As for so call consumer protection laws, my reading is that they are certainly not frame as tightly to protect consumer as you would find in the US for sure and in the UK. Not sure about Australia. In any case, it is not so much whether the letter of the law is well crafted or not but the fact that (a) the consumer protection agencies (statutory and non-statutory ones) are prepared to take class actions, and (b) judiciary are prepared to come down hard on businesses. In the UK, for example, people (i.e. individual not agencies) have taken cases against banks for overcharging, and in the first circuit have won but still pending appeals.
In Singapore you rarely find people let alone willing to take on big businesses. Beside most cases probably don’t go to court and get handled by regulatory agencies only.
Lawyers out there, if the bad time has caught up with you, there is good news for you people. Mr. Tan mentioned about contigency fee practice in some jurisdictions, especially US , you lawyers can come together to offer this scheme to people who have been aggrieved by sellers of financial products.
There is new lobang untapped out there and that is suing the insurance agents and their companies for mis-selling and recommendation of unreasonable basis which contravenes the section 27 of the FAA.. I assure you almost all insurance’ agents langar’ this law. Where can you find the lobang? It is back to ambulance chasing days but that is nothing wrong. This calls for visiting the funeral wake and locate the spouse of the deceased. Of course you don’t sell your service right there and there. Get the details and do fact finding and wait until the whole affair is settled when reality begins to dawn upon the deceased’s spouse. Call her especially because female spouse with many young kids is one who always suffers with the passing of the bread winners. Offer your servcie and check with her whether her late husband has left any money, insurance money or enough to support the family unitl the kids are independent. That is waht insurance policies are bought for, right ? and not to make the insurance agents rich.if the spouse says her late husband left some insurance money you are in luck because tne insurance policy was definitely sold by an insurance agent who never had the interest of the deceased ‘s family interest at heart..
Ok, lawyers how to spot the mis=selling and inappropriate recommendation or recommnedation not on reasonable basis in the fact find forms. This is a skill and to learn the how to, well I charge fees too.
Interested? post your comments here.
Why would lawyers want to take the risk and not get paid when now they enjoy heads they win, tails they still win scenario? They even get a better deal advising car workshops how to sue insurers for more money. Only LKY, who was a lawyer, can change this by coming out and putting a stop to all these. But again, why should he rock the boat when he can be enjoying his millions every year eating freshly flown in sushi and sashimi everyday?
#8
Gd idea. Hope TKL, FiSCA follow up on it.
Hope some lawyer takes up yr offer of help.
Colluding with car workshop to inflate cost will soon to pass. it is also competitive.
But this untapped source is a sure thing and money comes from the insurance companies. They are cash rich.Sue the insurance agents and get the insurers to pay and let them deal with the agents.
This is not a just a business but helping the widows and her children .This is a social service get rid of the unethical insurance agents. There are so many agents in Singapore and death is almost a everyday phenomenon.
The lawyers can work with FISCA too.
What protection?
We don’t even have a Fair Trading Act here (or its equivalent here)…sheesh
Everything is so pro-business here – consumers will always get the short end of the stick…
what is CASE and other institutions that claims to mediate for consumers? bullshit!
as a sub-contractor, we have to finance main contractor for work to be done. then when they defaulted payment, you are in shit. 1. contractually if you are strong but you dont have the muscle to fight the case, tough. 2. if main contractor abandoned the site, worst , it all downs the drain.
sub-contractors and suppliers formed at least 70-80% of contribution to a building project. therefore, i see strongly that there must be a law to protect the supplier or sub-contractor of payment guarantee should main contractor failed to pay for whatever reasons it may be, through a form of bank guarantee. since sub-contractor are to provide the warranty for performance, why cant the law protect likewise.
at the persent moment, there is non to protect them. so all this while, laws here is to mainly protect the able, rich and powerful parties and not for lesser ground like us.
Hi 12) xtrociou
There s a Fair Trading Act. It is administered by the Consumer Association of Singapore (CASE).
See here
http://statutes.agc.gov.sg/non_version/cgi-bin/cgi_legdisp.pl?actno=2003-ACT-27-N&doctitle=CONSUMER%20PROTECTION%20(FAIR%20TRADING)%20ACT%202003&date=latest&method=part
The trouble is the implementation of the laws in Singapore. The laws are written in a vague manner and are implemented reluctantly. Many cases are not tried in court – so many of the vague provisions remain vague for a long time.
We need a contingency fee system for lawyers to test these cases in court.
Hi Mike (#13)
I agree with your views on the need to protect the sub-contractors.
The Government believes in the free market. This has resulted in the big businesses taking advantage of the small businesses and of consumers.
To overcome this “big bully small”, we need stronger regulation. We need more cases to be tried in court, so that the standard of decent and fair practices can be clarified and enforced.
Consumers and small businesses cannot afford to take the cases in court. We need a contingency fee system for lawyers, as practiced in the USA.
Hi Tan Ah Kow (#7)
The legal system means the laws (i.e. statues) and the implementation of the law by the law enforcement agency (police, prosecutor), the defending lawyers, judiciary and consumer agencies. All the parties have their role and responsibility in forming part of the legal system.
Thanks Mr Tan, I stand corrected…
But can you blame me for not knowing if the law is not well publicised?
When I was in Australia (years ago), there were periodic adverts on the telly highlighting consumer laws and raising the awareness of the FTC…
Dear xtrocious (#17)
I do not blame you for not knowing about the law. Many people, including me, are not aware about the law, unless we make specific research. Fortunately, we now have the internet to make this research.
What is the fault? It is our judicial system. We have wonderful laws that are just for show. They are not implemented. The authority is not willing to enforce the law and test the law in court. They prefer to make decisions outside of the court. This is less transparent, and the powerful people get away with getting their way.
We need to have more cases tested in court. But the consumers cannot afford to engage the lawyers, that are very expensive.
We need a system of contingency fee, that is adopted in USA. The lawyers get paid only from successful cases. Many lawyers are willing to take this risk. They are able to help the victims (i.e consumers) to get fair redress.
If we have a contingency fee system, many cases on fair trading will be tested in court. Other laws will also be tested. This will improve the understanding of the public on the law. The public interest will be better protected.
Hi all vice starts small (#3)
I agree with your view that the Consumer Association should be independent, i.e. outside the control of the government in power.
Perhaps, we need several consumer associations. They can focus on different areas. We can have a consumer association for each school, each community, and each type of activity, e.g. financial services, etc. With consumer associations. there is room for more people to be actively engaged.
This si similar to sports associations. There is an association for each group of sports enthusiasts, e.g. school, community, and for each type of sport.
I hope that consumers will be interested to take part in their local consumer association and have their voice heard. Being consumers, we need to be vocal in protecting our interest (as the Government has made it clear that they are “hands off”".
I saw the post below on a site called Property Scam in the UK. It related to Land Banking but could equally well relate to any other oversold financial product. It may be cynical but it is generally true. Whose personal or business interest is served by being against financial products? Will anyone be called to task for a sale they made 5 years ago or a positive report they printed or a contract they approved ? They probably wont even be the same people in the job. Ethics and sales commissions rarely go together.
["Its not a scam if they want to give us their money and they always do. We don't steal it. They give it to us. They want to give us their money and we take it. We give some of it to lawyers, consultants, newspapers, TV and even UK planning departments. They take it as well. Everyone takes the money. Nobody complains or asks questions because we all share the same desire to be rich. There is no profit in being against us so nobody significant is. The only time anyone important complains about us is when the money runs out so they can show they did their job."]
http://www.propertyscam.org.uk/d6plinks/7NYCFK#comments
Hi Friends,
We need to reflect on measures to better protect the interest of consumers. Which of these measures do you support?
1. Change the law to allow lawyers to practice the contingency fee system?
2. Form an independent consumer association?
3. Lobby the Government to be more active in enforcing the law to ensure fair treatment of consumers?
Your views?
re post #21) Tan Kin Lian on May 1st, 2009 8.20 am
option 3) won’t work. not sure about the 1st 2.
. form laws with teeth to protect consumers
. make it easier to seek redress
. educate the public on their rights
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the suggestion of forming specific consumer associations to focus on different areas is a tough act to pull off. to better the chances of it suceeding is if they are formed at the same time, so nobody will complain why this group 1st not that other group?
having to form that many (or few) seperate consumer associations itself, the difficulties include having enough people to run them efficiently & professionally. in the end, consumers laws must work, if not there is little point fighting a case. with only the legal profession benefitting from it all (legal fees).
Hi mice is nice (#22)
I agree with your proposed strategy
orm laws with teeth to protect consumers
. make it easier to seek redress
. educate the public on their rights
We need an association to achieve it. We can depend on CASE or form another association (which can adopt a different approach from CASE). Perhaps,we need several consumer associations (adopting different strategies) to give choice to the public.
The old way did not work. Maybe, we have to think of a new way?
re post #23) Tan Kin Lian on May 3rd, 2009 10.16 am
any new way is not going to be easy, but saying that, i prefer to look ahead to identify possible “roadblocks” & come up with a solution if not solutions to deal with them.
the first would be some real laws that serve the interests of consumers. make the details clear, have as little grey areas to deal with as possible.
without that 1st step, we’re just like a navies fighting pirates- can catch cannot prosecute. no point setting up consumer associations till then, like fighting all the way just to lose (problem persists). it would deter more people from asserting their consumer rights getting redress in future….
Hi #24 mice is nice
I agree with your views on the need to have laws that are clear and enforced by the authority.
I also like the system of contingency fee, for lawyers to take up actual cases on behalf of consumers.
A law professor told me that the idea of introducing a contingency fee system is being explored in Singapore. I hope that it materialises and is implemented soon. I want more people to realise that it has merits, which outweigh the disadantages.
hi Tan Kin Lian (post 25),
since there is little 1 can do on the law side, the contingency fee idea should be give a chance. dun worry too much about materialising & implementing, if more time is needed to make it work, use it. worse if it there are major loopholes in the system early on.
do you have a link on this contingency fee thing? i would like to read more about it. thanks in advance.
Hi #26
You can search Google for “contigency fee”.
I found this link
http://en.wikipedia.org/wiki/Contingent_fee
I am surprised to read that contingency fee is now allowed in the UK. It is a no-win no-fee system, which is fair. If the lawyer wins the case, the lawyer is entitled to bill based on actual time spent and to have a success fee that is not more than 100% of the time based fee, i.e. he can get twice of the normal fee. This seems to be a good approach.
In the USA, the contingency fee can be a percentage of the amount awarded by the court.
after some thought i think its good, othewise lawyers think its easy money all the way to the bank, every day is a sunny day attitude.
“We have wonderful laws that are just for show. They are not implemented. The authority is not willing to enforce the law and test the law in court.”
Oh yes, all this are based on TRUST just like the reasons for using reserve, but when you try to ask them WHO ARE THE TRUSTEE, none of them can answer or want to answer. They make decision without accountability, transparency and responsibility because it is based on TRUST. We don’t even know who make the LAW because it is based on TRUST, so nobody knows and nobody admit.
Perhaps we have unlocked on the “world-class” secret recipe that leads to billion loss of Temasek , GIC , and how our government is run. The key ingredient for the recipe could very well is TRUST.
When Mas Selamat escaped, it is due to COMPLACENCY , and not a single high-ranking person from the government made up the committee of COMPLACENCY , and therefore absolve of all blame. And now we have TRUST, and anyone guess who make up the committee of TRUST ?
If anyone try to uncover the members of TRUST , guess what will they say ? Say that you are so lucky to be in Singapore rather than Vietnam, Burma or Thailand ?
A couple of year ago, i was ask to join insurance industry due to the franchising concept offer by the insurance company. After some time, i relaise that i like working for the company.It is not a business of my own as the company will do research and change the target citeria and use strategy to force us to leave the industry through increasing target and add rule that benefit the top and affect the middle tier. It become very tiring and unfair to the agent. A lot of guy left.
There is organisation that protect customer right.
Is there any organisation that will protect agent’s right?
I am curious with this.
I hope u can help . thank u.