Consumer Protection as the Bulwark of the Financial Industry
When customer accounts can be hacked in mere minutes, personal data is illegally traded, financial products are marketed without transparency on risks, and practices like moral hazard such as bogus investments and stock price manipulation continue to ensnare retail investors, what is truly at threat is not just consumers, but the very foundation of trust in the financial services industry itself.
In the digital era, a single case can shake the perception of millions of customers and investors in a very short time. Losses suffered by retail investors due to illusory euphoria, information manipulation, and price surges that do not reflect the fundamentals of issuers have repeatedly demonstrated the fragility of market integrity when behavioural oversight and consumer protection are not effectively implemented.
Therefore, consumer protection must no longer be positioned as a regulatory add-on, but as the primary bulwark for industry stability, market integrity, and the legitimacy of the national financial system.
Overlooked Resilience Strategies
The surge in consumer complaints, proliferation of digital scams, and increasing complexity of financial products serve as important signals for the national financial services industry. Amid efforts to promote growth, inclusion, and digitalisation in the financial sector, one strategic question emerges:
Can the financial services industry grow sustainably without strong consumer protection? The answer is increasingly clear: no. In the modern financial landscape, consumer protection is no longer merely a compliance issue, but a core strategy for resilience and strengthening the financial services industry.
Public trust is the primary capital of the financial services industry. It is not recorded on the balance sheet, but it determines business continuity.
When trust erodes due to mis-selling practices, misuse of personal data, unethical debt collection, or weak loss recovery mechanisms, the impact is systemic: the industry’s reputation is damaged, public participation declines, and intermediation functions weaken. Therefore, strengthening consumer protection must be seen as a long-term investment in industry stability and competitiveness.
Market Failures and the Urgency of Consumer Protection
Theoretically, the financial services sector is a classic example of a market with high information asymmetry. Financial services business actors (PUJK) possess deep knowledge of risks, cost structures, and product consequences, while consumers often operate with limited information. Within the principal-agent theory framework, this relationship is prone to conflicts of interest, especially when short-term incentives dominate over sustainable consumer relationships.
This condition gives rise to various forms of market failure: mis-selling of products unsuitable to risk profiles, contracts with non-transparent clauses, and exploitation of personal data. In the digital era, these market failures become even more complex due to app-based interactions, algorithm use, and aggressive data-driven marketing. Without strong consumer protection, digitalisation risks expanding dangers rather than strengthening inclusion.
From an institutional economics perspective, consumer protection serves as a corrective mechanism to keep markets operating fairly and efficiently. G20 and OECD countries position consumer protection as a pillar of financial system stability, particularly in the context of digital finance that demands fair treatment, transparency, and effective recovery mechanisms.
Strengthening the National Regulatory Framework
Indonesia responds to these challenges by bolstering the regulatory architecture of the financial services sector. Law No. 4 of 2023 on the Development and Strengthening of the Financial Sector (UU P2SK) affirms consumer protection as an integral part of financial sector governance and systemic stability. This law expands the mandate of authorities not only to maintain industry health but also to ensure fair treatment for consumers.
As implementation, POJK No. 22 of 2023 on Consumer and Public Protection in the Financial Services Sector comprehensively regulates consumer protection: from product design and marketing, information disclosure, complaint handling, to oversight of PUJK behaviour (market conduct). This regulation marks a shift from a formal disclosure-based approach to a fair treatment-based approach.
However, experience shows that administrative oversight and compliance sanctions are not always sufficient to restore consumer losses. Many consumers face limitations in costs, time, and legal capacity to claim their rights through courts. This is where more progressive and consumer-friendly legal instruments are needed.
POJK No. 38 of 2025: A Game Changer for Consumer Protection
In 2025, the Financial Services Authority introduces a significant breakthrough through POJK No. 38 of 2025 on Lawsuits by OJK for Consumer Protection in the Financial Services Sector, effective from 22 December 2025. This regulation grants legal standing to OJK to file civil lawsuits against PUJK on behalf of harmed consumers, without burdening consumers with costs until a court decision is executed.
The presence of this POJK marks an expansion of OJK’s mandate from administrative oversight to an actor in civil law enforcement for public interest. Conceptually, this is a response to the issue of access to justice in the financial services sector. Consumers no longer face large corporations with strong legal resources alone; the state is present through the regulator to balance the uneven relationship.
Targeting Root Causes: Mis-selling and Data Misuse
POJK 38/2025 is directed at addressing practices that have long been the main source of consumer complaints, particularly mis-selling of financial services products.