The enactment of the Financial Consumer Protection Act (FCPA) marked a significant milestone in Lesotho’s journey towards a transparent, fair, and inclusive financial sector. Designed to safeguard the interests of consumers of financial products and services, the Act introduced a modern regulatory framework grounded in accountability, transparency, and responsible market conduct.
However, the true impact of the Act depends on how effectively it is implemented and enforced. Nearly two years after its introduction, questions remain about the operational readiness of financial institutions, the capacity of the Central Bank of Lesotho (CBL) to supervise compliance, and the practical mechanisms available to consumers seeking redress.
The Central Bank’s Enforcement Mandate
The Central Bank of Lesotho, as the primary regulator under the Act, bears the dual responsibility of supervisory enforcement and consumer protection oversight. This includes:
- Issuing compliance directives and market conduct guidelines;
- Monitoring disclosure practices among financial institutions;
- Investigating consumer complaints; and
- Enforcing penalties for non-compliance or unfair practices.
Since the Act’s commencement, the CBL has taken steps to strengthen its Market Conduct and Consumer Protection Division, but more consistent regulatory engagement and public awareness are needed. Many financial consumers, particularly in rural areas, remain unaware of their rights to transparent pricing, key facts statements, and complaint resolution mechanisms.
Effective enforcement will therefore require not only institutional capacity, but also consumer empowerment and continuous monitoring of the market’s evolution.
Compliance Challenges Among Financial Institutions
While large commercial banks have generally aligned their internal processes with the FCPA, smaller market participants, including microfinance institutions, moneylenders, and savings cooperatives, face significant compliance hurdles. These include:
- Limited technical capacity to produce Key Facts Statements (KFS) and maintain detailed disclosure records;
- Lack of standardised templates for affordability and suitability assessments; and
- Insufficient staff training on ethical sales practices and consumer communications.
The informal credit sector, which remains active in Lesotho’s low-income communities, is particularly difficult to regulate. Some lenders continue to impose excessive default fees or include unfair contract terms, directly contravening the Act’s requirements.
To address these gaps, the CBL could consider graduated enforcement measures, such as compliance audits, supervisory visits, and tiered sanctions that reflect institutional capacity and consumer impact.
Strengthening Consumer Awareness and Access to Redress
Enforcement cannot succeed without public awareness. The Act envisages a proactive role for financial institutions in improving financial literacy, mandating that providers offer education programmes and explain contractual terms in plain language.
Yet, implementation of these provisions has been uneven. Many consumers still sign contracts they do not fully understand, while complaint procedures often lack visibility. To strengthen this aspect, three complementary strategies are essential:
- National financial literacy campaigns coordinated by the CBL in partnership with civil society;
- Simplified complaint handling mechanisms within each financial institution, backed by a centralised CBL ombuds function; and
- Public reporting of enforcement outcomes, which builds trust and signals accountability to the market.
Empowered consumers are the cornerstone of effective regulation. When financial literacy and enforcement intersect, market behaviour begins to shift sustainably.
The Role of Technology in Enforcement
As Lesotho’s financial sector becomes increasingly digitised, with mobile money, digital loans, and e-banking expanding rapidly, the enforcement of the FCPA must evolve accordingly.
Regulatory technology (“RegTech”) tools could enable real-time monitoring of consumer complaints, electronic submission of KFS disclosures, and automated compliance reporting. The integration of technology would not only improve regulatory efficiency but also enhance transparency, accessibility, and public confidence in financial services.
Building a Culture of Compliance and Trust
The Financial Consumer Protection Act provides a solid legislative foundation but laws alone cannot protect consumers. Effective implementation requires a coordinated approach:
- Regulators must enforce fairly but firmly;
- Financial institutions must embed consumer protection into their business culture; and
- Consumers must be informed, empowered, and confident to assert their rights.
The long-term success of the Act will be measured by the trust consumers place in the financial system and the accountability institutions demonstrate in their conduct. By strengthening enforcement capacity, promoting transparency, and expanding financial literacy, Lesotho can create a more equitable financial ecosystem. One that drives inclusion, resilience, and sustainable economic growth.
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Read the original publication at Mayet & Associates
