Financial Redressal Agency (FRA)


The Centre in December 2016 invited public comments on a report for the creation of a Financial Redressal Agency (FRA) to address the grievances of retail consumers against all financial service providers in an easy, transparent and cost-effective manner.

The report, while pointing out substantial inadequacies in the current redressal system, suggested that the design of the FRA offer a simplified resolution process, allowing retail consumers in distant and remote locations to pursue effective remedies without imposing significant costs on them.
The Government has set up a 10-member Task Force under former pension regulator Dhirendra Swarup on Financial Redress Agency (FRA), as recommended by the Financial Sector Legislative Reforms Commission (FSLRC), on June 5, 2015. The task force has recommended that the agency should have the authority to direct FSPs to pay compensation to aggrieved consumers.

The task force highlighted the need for basic protections to be provided in law through a new financial consumer protection and redress legislation. However, it has urged the government to operationalize a shell FRA initially through an executive order with a budget of Rs100 crore. In the first phase, the FRA will be empowered to redress complaints being handled by Insurance Regulatory and Development Authority of India (Irdai), Insurance Ombudsman, and Pension Fund Regulatory and Development Authority (PFRDA). In the second phase, FRA will redress complaints by retail consumers against FSPs regulated by Securities and Exchange Board of India (Sebi) as well as retail complaints that are handled by the Reserve Bank of India (RBI) and Banking Ombudsman.
FRA would be managed by a board to be appointed by the financial regulators in consultation with the government. It would also have an independent assessment officer to consider complaints against the FRA’s redress function arising out of issues related to its standard of service.

The design of FRA offers a simplified resolution process, allowing retail consumers in distant locations to pursue effective remedies against FSPs without imposing significant costs on them. FRA will try to resolve all complaints through mediation. “Cases where the parties are unable to reach a settlement would be resolved through a light-touch adjudication process. It will discourage court-like processes. The FRA will establish a front-end presence in diverse locations for consumers to submit complaints,” according to a statement by the finance ministry.

The accountability of FRA will be ensured through robust requirements on disclosure and performance review. FRA will provide an independent feedback loop to regulators on complaints, including information on complaints received against unregulated FSPs, with a view to assisting them in strengthening consumer protection regulation and supervision.

Consumers will be able to appeal against the orders of FRA at Securities Appellate Tribunal (SAT). This would standardize the availability of such an independent mechanism across the financial sector

Friday, 30th Dec 2016, 02:57:32 AM

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