March 15 is World Consumer Rights Day, and the focus this year is fairness in financial services. In honour of the day, consumer advocates are calling for more choice in financial services.
Consumers International, a global consumer advocacy group, says that consumers around the world are getting a bad deal from the financial services industry, and a lack of effective competition in the market makes it difficult, if not impossible, for them to shop around.
“For example, consumers often have trouble understanding different financial products, whether due to a lack of information or because the products themselves are too complex, or both,” it says. And, it notes that changing firms can be tough, either because the process of switching is prohibitively complicated, or because a lack of competition means better deals are scarce.
It calls on financial firms to make it easier for consumers to switch firms, and to do more to demystify the process for consumers.
In the UK, the Financial Services Consumer Panel published a new position paper that calls for a new deal for bank customers, and says that the creation of the new Financial Conduct Authority represents a unique opportunity to ensure that consumers get a better deal.
It calls for the new FCA to: require transparency on the true cost of the different parts of banking services; empower consumers by making switching firms easier; tackle cross-subsidization within retail banking; end inappropriate incentive structures which reward one-off sales rather than developing long-term customer relationships; and, make it easier for new competitors to enter the retail banking market in order to increase consumer choice.
“Fifty years ago President Kennedy called for consumers to have the right to safe products sold on an informed choice basis, within a market with competitive choice at a fair and transparent price. This has become the norm for consumer goods from kettles to cookers, but yet remains elusive in banking services,” said Mike Dailly, a lawyer and a member of the FSCP, speaking at a British Bankers’ Association seminar in London.
“All too often, banking innovation is designed not to empower consumers but to exclude choice, lessen transparency and reduce competition. The creation of the new FCA together with the forthcoming Vickers Bill and EU legislation provide a once in a generation opportunity to set out a new deal for consumers,” he said. “Concerted action by government, new regulators as well as technological change are necessary to ensure consumers don’t have to wait another 50 years for Kennedy’s vision to be a reality.”
At the same time, the Montreal-based consumer group, Option Consommateurs, called on Canadian financial institutions to act responsibly with regard to the problem household indebtedness. It says that lenders must be responsible by properly assessing the ability of households to repay loans when they borrow, and enhancing personal finance education for consumers.