Weak laws or lax enforcement - Which hurts digital era consumers most?

Deceived by e-commerce? Defrauded by digital finance scammers?

There are reasons to ask for remedy from service providers, lodge complaints to authorities and sue the wrongdoers, but that does not guarantee any redress.

Prominent lawyer Barrister Tanjib-ul Alam believes Bangladesh has adequate laws to protect consumers from frauds, but the main problem is in implementing those. 

"One law after another will not solve your problem; it rather needs institutional capacity and will to use the laws in preventing consumer frauds," he said.

Weakness in legal framework 

Loopholes in the legal framework, however, have also helped some mass frauds under the nose of authorities.

The 2020-21 Ponzi schemes in disguise of deep-discount e-commerce, such as Evaly, Dhamaka Shopping, Eorange, Alesha Mart and many others.

They were selling products at unbelievable discounts to lure advances from customers and deliver products weeks, even months later. 

It did not take much expertise to understand that the firms were burning through people's money to lure others into the trap, creating a risk of massive consumer frauds. 

Technically, it was not illegal to take advances from too many customers and deliver their products 45 days later, while not failing delivery deadlines resulted in complaints with the Directorate of National Consumer Rights Protection (DNCRP) under the Ministry of Finance (MoF). 

When Evaly, the pioneer of similar controversial business, started in 2019, the E-commerce Association of Bangladesh (e-Cab) and many observers were stressing that the Ministry of Commerce's (MOC) Central Digital Commerce Cell tackle the growing risk through introducing a new legal framework. 

The ministry finally did so in the mid-2021 through introducing a Standard Operating Procedure (SOP) for digital commerce and the escrow system in digital payments. 

It came too late. 

The SOP prohibited taking advance payments if the intended delivery is scheduled for a period longer than 10 days, while the escrow system made the payment gateways transfer the customer advances to the bank account of the e-commerce platform only after the product was delivered. 

The two measures together made the 'pay less now and get more once later' e-commerce schemes impossible to continue due to their sole dependency on fresh advances against stretched delivery-cycle orders. 

More than two dozen Ponzi-like e-commerce platforms collapsed in the second half of 2021, leaving several hundred thousand consumers defrauded, according to the compilation of media reports and the MOC data.   

Major schemes like Evaly, E-orange, Dhamaka Shopping, once having more than a million active customer accounts together, are dead sites now. 

Evaly and E-orange founders are in jail custody and facing trial, while Dhakama founder fled the country leaving some of its top officials in jail.  

Owners of many mid and small platforms are either pledging for redress or yet to show in public.  

In the March-June period of 2021 alone, the platforms collected over Tk6,000 crore from customers and most of the money was lost to fraud, according to a Bangladesh Bank report to the Ministry of Commerce. 

The commerce ministry is directing the platform owners to return with bona fide intentions and clear all their liabilities to avert jail, but it is barely working. 

The defrauded customers are looking at courtroom updates and praying to God for the recovery of their money. 

The DNCRP from the mid-2017 till the mid-2022 received more than 27,000 consumer complaints filed against 43 ecommerce sites including the Ponzi-like ones. Consumers got their remedy in most of the cases as long as the sites were in operations. 

Over 85% complaints used to be resolved on an average of one month as long as all the respondent companies had been in business till the mid-2021, according to DNCRP Director General AHM Shafiquzzaman. 

But, after the collapse of the Ponzi platforms and their founders either fleeing the country or being detained in jail, the majority of e-commerce consumer complaints remained unresolved as there was no one to communicate with. 

Now, 54% of the 27,000 e-commerce consumer complaints are unresolved and it is likely to continue this way as the DNCRP DG said each of the site owners relevant to the bulk unresolved complaints are facing court cases for their fraud with customers or sellers. 

In cases of consumer complaints against the regular e-commerce sites like Daraz, Chaldal, Pathao, 80-98% complaints barely take time to be solved, the DNCRP officials said. 

The catch is tht many authorities, including the DNCRP had legal tools to use to stop the growth of Ponzi-like e-commerce sites much before they victimized so many consumers. 

For example, the DNCRP is empowered to even shut down businesses in cases of repetition of the same frauds with consumers or jail time for owners, but the directorate did not prefer such harsh actions, DNCRP former DG Bablu Kumar Saha said at a 2021 press conference.   

It had been trying to ensure the product deliveries or refunds instead of imposing the maximum of Tk2 lakh fine, of which the consumer gets at best Tk50,000, while many of their claims were much bigger, he added.   

Like all others, the Bangladesh Competition Commission observed predatory pricing by the errant e-commerce firms and it also made some moves against them in 2020 and 2021. But it was far from enough to be of help. 

The Bangladesh Financial Intelligence Unit (BFIU) also initiated legal action against Evaly in August-September, 2021 after keeping the firm's bank account frozen, opined Barrister Tanjib-ul Alam. 

Like everyone else, e-Cab Vice President Shahab Uddin believes, had the Ministry of Commerce come up with the SOP promptly, the consumer losses could have been much smaller. 

He, however, still thanks the ministry for the mid-2021 measures that saved more people from being deceived. 

Tanjib-ul Alam said a January 2021 Police Headquarter report to the commerce ministry categorically said Evaly was involved in 8 types of consumer fraud and irregularities.

No agency or authority's action stopped the fraudulent schemes in time, because there had been lack of understanding and institutional capacity while influence and lobbying by the wrongdoers were even bigger causes of the prolonged time they got to grow their fraudulent net.  

Tech entrepreneur AKM Fahim Mashroor, a former president of Bangladesh Association of Software and Information Services (BASIS), said even before the escrow system was introduced in the mid-2021, the financial service providers could do much more to protect e-commerce consumers. 

The KYC of any business client was a must before acquiring it as a payment service merchant and the payment service providers should have denied serving the dangerous e-commerce sites, he added. 

Kamal Quadir, the Chief Executive Officer of Bkash, the largest mobile financial services provider, in a March, 2022 webinar organised by the Policy Research Institute (PRI) on consumer protection in digital financial services said when his firm proactively tried to stop serving the e-commerce platforms like Evaly, it was blamed for hurting the "local e-commerce". 

Clear orders from the regulators to stop financial services to the fraudulent sites would have made the FinTech industry's job easier, Bkash CEO said. 

He also said, proactive caution of Bkash helped minimize the damage by the errant e-commerce players. 

The debates on who should have played which role when, or absence of effective law or poor implementation of existing ones help consumer frauds have scope to be continued. 

It is apparent that proactive roles to protect consumers were lacking significantly. 

MOC Additional Secretary Md Hafizur Rahman who is heading the Digital Commerce Cell said, the government did not want to chock a nascent trade that was growing fast during the pandemic. Before introducing new policies and code of conducts it had to continue stakeholders' dialogues and that was why the disruptions took some time to take place. 

While talking to this reporter, he did acknowledge the delay hurt more consumers and the government is working for their remedies to a possible extent. 

However, he said, following the policy changes, situation has improved nowadays, of course after the expensive e-commerce lesson. 

No door is closed for the defrauded consumers. But the redressing possibility is a blur for the consumers who paid the fraudulent e-commerce sites before the escrow system was introduced. 

Defrauded digital-era consumers mostly suffer because of their lack of awareness or responses to the too good to believe offers by fraudsters, while cyber security and the traditional deceptions are also growing threats for them. 

The relevant regulations made service providers responsible to ensure measures to protect their customers from frauds, be it in e-commerce or in digital financial services (DFS). 

But still roughly one in every ten e-commerce and DFS customers suffers frauds, according to studies. 

Fraud prevention is more important as chasing the redressing process is not enough for the victims. 

An extensive PRI study in 2021 found nearly one-third of the fraud-victim MFS users never get their complaints for redress resolved, while a very few of them try for the next level battles like complaining to the central bank, or going for a police case. 

Anwear, a teacher at Rangpur, paid Evaly in advance for some home appliances and finally got nothing. 

He thought about complaining to DNCRP, but did not planning for a criminal case against the firm or its owners as he thinks it would be too cumbersome, expensive and most importantly the legal action would not guarantee a redress. 

Less than 5% defrauded MFS users go to police, according to the PRI study based on over 7,200 respondents from 45 districts of the country. 

The PRI researchers found, Bangladesh has shown existence and practice of laws against most principles of the OECD framework for consumer protection in DFS. But, there are still major limitations. Lack of a specific and effective consumer protection framework for digital crimes, inadequate data protection and privacy laws, and weak monitoring and redress programmes, among others, put Bangladesh behind many of the comparator countries that are performing much better in the field of consumer protection. 

The weakness is reflected in the Consumer Protection Index produced by The Economist Intelligence Unit, where Bangladesh scores a low 32 out of 100, well behind India and Indonesia with scores of 81 and 80 respectively, Pakistan with a score of 76, followed by the Philippines and Thailand, scoring 75 and 69 respectively. 

Until Bangladesh ensures a decent improvement in the index, smart consumers should keep protecting themselves best.