Commissioner Kuneva outlines roadmap on retail financial services

28 April 2009

Kuneva announced publishing a Communication on Packaged Retail Investment Products this month that sets the roadmap to harmonize and improve disclosures and sales practices. The in-depth study on banking fees will be published in summer.

The next generation of retail financial services policies must not only fix businesses' problems, but must also tackle consumer markets, Commissioner Kuneva outlined in a speech held in Lisbon. In Financial Services, consumer trust is currently devalued and at an all-time low, she underlined and made clear that consumer protection must not be confuse with protectionism.

 

“Markets must be made to abide by certain principles that preserve competition on the merits and protect consumers from deception and abuse”, she said underlining that there are issues of concern in retail financial markets that pre-date the crisis. “They relate to the growing violation in the past decade of tried and tested golden principles of consumer policy: transparent information, enforceable fairness, comparability and choices and, very importantly, the regulation of risk”, she said.

 

In retail financial markets, informed choice is a difficult reality in a market with a bewildering array of complex products, Kuneva said. “These are sold in either an avalanche or a tiny trickle of information, without transparent pricing or fees, and often with little or inadequate advice”, she said.

 

Consumers should not be asked to bear all the possible risks attached to a transaction, Kuneva outlined. “It is now time we start addressing the issue of high-risk services and practices that may not kill consumers but can cause them significant and unexpected economic damage – including the loss of their homes or savings”, Kuneva said and announced to publish a Communication on Packaged Retail Investment Products this month that sets the roadmap to harmonize and improve disclosures and sales practices.

 

The pre-contractual information provided must include a description of the product and a true representation of its cost. It must also provide a fair and unambiguous indication of its risk.

 

“I am particularly concerned about citizens having been misled to purchase investment products that were misrepresented to them or that were not suitable to their investment needs”, Kuneva said and announced that the new proposals will need to meet strict criteria in particular on credit and mortgages.

 

“I intend to strengthen the strict rules and enforcement on the mis-selling of retail investment products”, Kuneva said also mentioning the work on the in-depth study, to be published in summer, on  banking fees and charges to consumers currently underway.

 

Finally, the Commissioner intends to start a discussion on “what amount of risk and toxic products are we willing to tolerate in retail financial market” and on the “regulatory oversight structure to ensure consumer protection principles are consistently implemented across retail markets”.

 

Full speech

 

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