Consumers International March 2011 consumersinternational.org

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 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. consumersinternational.org

CIs 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. consumersinternational.org

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 regulators. 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. consumersinternational.org

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. consumersinternational.org

Financial consumer protection bodies Governments should establish a national body with consumer protection as an explicit regulatory objective. It should have authority to investigate, halt and remedy violations. It should be independent of industry, have close links with other consumer protection bodies and have consumer representatives integrated into its governance. consumersinternational.org

Redress and dispute resolution Governments should ensure consumers have access to adequate redress systems that are fair, affordable adn accessible. 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. consumersinternational.org

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. consumersinternational.org

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 operations. Living wills should be introduced with provisions for how consumers will be treated in the event of a banks collapse. All actors in the FS market (ratings agencies, providers and consumers) should be subjected to greater accountability and transparency consumersinternational.org

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 protection. The G20 should support safer and fairer rules for remittances including the General Principle on Remittances (2007). consumersinternational.org

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. consumersinternational.org

For a full set of CIs recommendations see: Safe, fair and competitive markets in financial services: recommendations to the G20 on financial consumer protection. consumersinternational.org