Kenya should learn from Brazil’s robust consumer protection system

By Stephen Mutoro

There is everything the Kenyan consumer needs to learn from the Brazilian counterpart, for very good reasons.

The South American country known for the beautiful game of football and attractive women fans – who often steal the show from the pitch – is equally inspiring on a completely different subject, a strong and institutionalised tradition of consumer protection.

Indeed an apt reason Consumers Federation of Kenya (Cofek) and Brazilian Institute of Consumer Defence (Idec), among other key stakeholders, have been discussing in Sao Paulo this week. I’m privileged to lead Kenya’s mission to learn from Brazil on consumer protection and dispute resolution.

Brazil boasts a robust and well-established consumer protection system, including a Consumer Protection Code (CPC) akin to Kenya’s Criminal Procedure Code.

Unlike the case in Kenya, banking and financial institutions in Brazil have well established principles, values, and codes of conduct that address key consumer protection issues such as transparency, ethical staff behaviour, and redress of consumer grievances.

The Consumer Protection Code established a comprehensive system of networks for defending consumer interests that involve multiple branches and levels of Government, such as municipalities to help consumers defend their rights and mediate disputes.

A notable key aspect of Brazil’s consumer protection, curiously a tradition fronted by Government, many banks and other financial institutions employ ombudsmen at their own expense to look out for and defend consumer interests.

But things have not just worked out by themselves. Idec, Cofek’s host led by Lisa Quinn, is one of the leading consumer protection groups. Idec focuses a portion of its work on financial services and banking.

In Kenya, Cofek has registered a non-profit subsidiary – Monetary Institutions Watch (Miwa) to focus on the commercial banks and other financial institutions on consumer protection and dispute resolution.

The legal and regulatory framework in Brazil can be split into two distinct categories: financial law and the general consumer protection law.

Consumer protection law protects consumers of all products and services, not just financial ones, but aspects of the existing CPC like contractual protection and bans on deceptive advertising are especially pertinent to financial consumers.

Financial consumer protection law is perhaps most interesting for Kenya given the latter’s high inflation, weakened shilling against hard currencies and widening gap between borrowing and lending interest rates.

Brazil’s framework law for the financial services industry is based on a legislation of 1964 which established the all powerful National Monetary Council (CMN), its subordinate Central Bank of Brazil (BCB), among other institutions.

The CMN regulates the formation and operation of all institutions within the national financial system, whether public or private. The law gives power to the CMN and the BCB to set consumer protection rules.

Brazil has a robust legal framework of consumer protections. Like Kenya’s Article 46 of the Constitution, Brazil’s 1988 Constitution boldly enshrines consumer protection as one of the basic principles of "Economic and Financial Order."

It is the 10-point CPC, passed in 1990, that was used to move this principle into practice. This law establishes basic consumer rights, details contractual protections, and sets penalties for infractions.

It is critical to appreciate the ten basic rights established by the CPC.

First, that Brazil offers protection of life and health. In this case, all suppliers whether Government or private must warn of possible risks from the products they offer for consumption.

Second, education before consumption is emphasised. In this case, suppliers have the burden of offering instructions on proper and unbiased use of their respective products and services.

Third is the freedom of choice among products and services. This important requirement strangles monopolies or cartels.

Fourth, Brazil legislation assures consumer protection from misleading and unfair advertising. False advertising is illegal and automatically voids the contract between buyer and seller.

Fifth, contractual protection, which details a supplier’s failure to meet a contract’s requirements is made a punishable offence. Courts can amend contracts that are deemed harmful to consumers, and consumers are not obliged to honour contracts they do not understand.

Six is about indemnity. On this, suppliers and not consumers are liable for damages caused by faulty products.

Seven, access to justice means consumers whose rights are violated can take their cases to court.

Eight, the law offers a literal inversion of the burden of proof. It says in cases of violations of consumer rights, the burden of proof rests with suppliers, not consumers.

Nine, the law stressed quality of public services. On this, Brazilian consumers can expect quality public services from Government agencies and their contractors.

Finally, the Consumer Protection Code established the National Consumer Defence System (SNDC). The SNDC is a network of federal, state, local authorities, other federal agencies and civil society groups. The Consumer Defence and Protection Department in the Justice Ministry coordinates the SNDC activities.

Idec has four main goals which include achieving a balance in the consumer-producer relationship; implement and improve consumer protection laws and regulations; prosecute the abuse of economic power in consumer-producer relationships and improve the quality of life for consumers, especially with regard to the quality of products and services.

—The writer is the Secretary General of Consumers Federation of Kenya