Consumers for fair financial services

Consumers International
March 2011
The importance of financial services
• Financial services (such as bank accounts, credit cards,
mortgages, pensions and insurance) help consumers
make purchases, save, invest and insure against risk.
• However, consumers need protection as FS products
are often complex, the market is changing quickly and
consumers make irregular purchases.
• Consumer financial protection can also help to prevent
national and even international crises. The US
subprime mortgage crisis was a catalyst for the 2008
financial crisis.
G20 process on financial services
• In 2010, following a campaign led by Consumers
International, G20 leaders requested the Financial
Stability Board (FSB) and OECD to report on ‘options to
enhance consumer protection’ in financial services in
time for their next summit in November 2011.
• In Feb 2011 G20 finance ministers asked the FSB and
OECD to develop ‘common principles’ on FCP.
• In response CI has developed a set of international
recommendations on financial consumer protection.
CI’s recommendations to the G20
All consumers should have access to safe, fair and
competitive markets in financial services. CI calls on the
G20 to:
• Adopt the following recommendations and commit to
a regular review of their implementation.
• Support the development of international standards
and guidelines based on the recommendations.
• Support the development of a new international
organisation to share best practice and highlight bad
practices that may pose a risk to other countries.
Information about FS products
• Consumers should receive clear, sufficient, reliable,
comparable and timely information about FS products.
Failure to meet these criteria should cause a contract
to be voidable.
• FS providers should be responsible for testing the
quality and comprehensibility of the information
provided, with additional audits conducted by national
• Standard formats (such as Key Information Documents)
should be used for the presentation of information
about FS products so that consumers can easily
compare products.
Contracts, charges and practices
• Many FS products are now so complex they can not be
understood. Regulators should therefore introduce a
requirement of comprehensibility and prohibit
products that are not comprehensible.
• Conflict of interest in the provision of advice and the
sale of financial services needs to be addressed.
• There should be protection against inappropriate
marketing methods.
• Contracts that do not meet basic standards of
consumer protection should be voidable.
Financial consumer protection bodies
• Governments should establish a national body with
consumer protection as an explicit regulatory
• It should have authority to investigate, halt and remedy
• It should be independent of industry, have close links
with other consumer protection bodies and have
consumer representatives integrated into its
Redress and dispute resolution
• Governments should ensure consumers have access to
adequate redress systems that are fair, affordable adn
• There should also be collective redress to reduce the
demand for individual proceedings.
• To prevent systems being overwhelmed by the large
numbers of complaints, results from disputes should
be synthesized to inform future regulation.
Competition in financial services
• Governments should instigate independent
competition enquiries to investigate increases in
market concentration and reductions in competition particularly with regard to actions taken as a result of
the financial crisis.
• Measures should be taken to enable consumers to
switch products more easily.
Stability and safety of deposits
• To prevent risky investment banking effecting
consumers, the investment and retail arms of banks
should be split through a legal separation of
• ‘Living wills’ should be introduced with provisions for
how consumers will be treated in the event of a banks
• All actors in the FS market (ratings agencies, providers
and consumers) should be subjected to greater
accountability and transparency
Access to basic financial services
• Governments should seek to encourage innovation in
safe effective, low cost methods of banking inclusion
whilst supporting the development of consumer
• The G20 should support safer and fairer rules for
remittances including the General Principle on
Remittances (2007).
Ongoing international co-operation
• The G20 should support a new international
organisation to enable national consumer protection
bodies to compare notes, share good practice,
highlight risks and develop minimum international
standards and guidelines.
• The body should have a consumer panel to monitor,
advise and challenge the work of the organisation.
For a full set of CI’s recommendations see:
Safe, fair and competitive markets in financial
services: recommendations to the G20 on
financial consumer protection.