ConPolicy | Institute for Consumer Policy

Competence Center Consumer Research NRW publishes theses on vulnerable consumers

Wed, 24 Apr 2013 18:22:00 +0200

On the 14^th of April 2013 the Competence Center Consumer Research NRW organised a workshop in Düsseldorf on “Vulnerable consumers: The social-policy dimension of consumer policy”. Today the workshop documentation and theses were published. The theses summarize the essence of the presentations and discussions. These theses are summarized here (without further explanations that are part of the full version): 1) These on the context 1.1: Contemporary consumer policy is oriented towards middle-class consumers – the interests of vulnerable consumer groups are inadequately represented. 1.2: A modern consumer policy has to take care of all consumer groups – to do so it needs to apply a differentiated strategy. 1.3: For a differentiated strategy and effective consumer advice work it is imperative to understand the live situations of vulnerable consumers better and to test different policy interventions and their impact on vulnerable consumers. 2) Insights from consumer research 2.1: While vulnerable consumers are recognized as a new subject area in consumer policy and research, there are other research disciplines (in particular poverty research) that have investigated this consumer groups already for years. 2.2: Consumer policy should not only be directed towards individual consumers, but to households and it should apply the live-situation concept. 2.3: Children and young people represent an important target group for companies – yet consumer research knows little about the purchasing behaviour and decisions of children. 2.4: In the field of financial services even the well-educated consumer group of Young Professionals behaves far from what one should expect from rational and enlightened consumers. 2.5: Health policy is based on assumptions that might be justified as normative principles, but they do not have much in common with live reality. 2.6: While the debate about energy poverty has gained political momentum in recent years, there is still a lack of a definition of energy poverty and of insights into the causes and potential instruments to rectify this challenge. 2.7: Vulnerable consumers can give interesting impulses for other consumer groups in the realm of sustainable consumption. 2.8: The framework conditions of e-commerce show that it is important to distinguish between different consumer groups. Within this group it would be of interest to also assess the extent of vulnerability of these groups. 3) Theses on the implications for consumer policy 3.1: A consumer policy that is oriented towards vulnerable consumer groups requires a dedicated consumer education component. 3.2: To protect children as one important group of vulnerable consumers, various measures need to be applied. 3.3: Particularly in the realm of financial services, vulnerable consumers need to be protected and empowered. 3.4: Health policy should be based on more realistic assumptions about consumers – this would lead to stronger patient participation on the makro-level. Further information: http://www.vz-nrw.de/4-workshop-verbraucherforschung und http://www.vz-nrw.de/media221100A Source: Kompetenzzentrum Verbraucherforschung NRW

British Financial Conduct Authority publishes complaints data

Mon, 15 Apr 2013 18:22:00 +0200

Today the British Financial Conduct Authority published complaints data received by banks, building societies, insurers and mortgage providers during the second half of 2012. The data reveals a number of findings:

In the half-year there were a total of 3.4 million complaints to financial services firms. This represents a small increase of one percent on the first half of 2012.
Barclays Bank, Lloyds TSB Bank, Bank of Scotland were the three banks with most complaints.
The by far largest number of complaints related to payment protection insurance (2,170,537) followed by current accounts (304,196), other general insurance (296,679) and credit cards (283,705).

Further information: http://www.fca.org.uk/news/most-complained-about-firms-and-products-revealed and http://www.fca.org.uk/firms/systems-reporting/complaints-data/firm-level#myModal Source: FCA

British Office of Fair Trading investigates free children’s web and app-based games

Fri, 12 Apr 2013 18:19:00 +0200

Today the British Office of Fair Trading (OFT) has announced to launch an investigation into whether children are being unfairly pressured or encouraged to pay for additional content in ‘free’ web and app-based games, including upgraded membership or virtual currency. Typically, players can access only portions of these games for free, with new levels or features, such as faster game play, costing money. As part of the investigation, the OFT has written to companies offering free web or app-based games, seeking information on in-game marketing to children. The OFT is also asking for parents and consumer groups to contact it with information about potentially misleading or commercially aggressive practices they are aware of in relation to these games. In particular the OFT is looking into whether these games include “direct exhortations” to children – a strong encouragement to make a purchase, or to do something that will necessitate making a purchase, or to persuade their parents or other adults to make a purchase for them. This is unlawful under the Consumer Protection (from Unfair Trading) Regulations 2008. OFT Senior Director for Goods and Consumers, Cavendish Elithorn, said: “We are concerned that children and their parents could be subject to unfair pressure to purchase when they are playing games they thought were free, but which can actually run up substantial costs.“ Further information: http://www.oft.gov.uk/news-and-updates/press/2013/33-13#.UXkUJJXUamc Source: OFT

British Financial Conduct Authority announces stronger integration of behavioural insights

Wed, 10 Apr 2013 17:15:00 +0200

Today the newly created British Financial Conduct Authority (FCA) announced that it will incorporate insights form behavioural economics in its regulatory work. Behavioural insights should assist the regulator to better understand the mistakes consumers make in financial services, how firms respond to these mistakes, how this affects competition, and what interventions the FCA might consider.

Furthermore, the FCA published two occasional papers. The first one focuses on how consumers choose and use financial products, and how behavioural biases can lead firms competing in ways that are not in the interest of consumers. The second paper explores how best to encourage consumers to respond to customer contact letters.

In a speech at the London School of Economics Martin Wheatley, FCA chief executive, summarises the key challenges facing the financial services industry. He highlights inter alia:

“One of the most significant challenges for modern financial regulators and financial services alike is to recognize that we operate within a very human environment. A fallible world – not just of ratios and complex models but also responses, sometimes flawed, that behavioural economics helps us to understand.”
“‘Buyers beware’ becomes hard to defend when unsophisticated customers are buying seriously complicated financial products, where the risk of failure is far more dangerous than a decision in the supermarket to buy three bananas instead of one.”
“I want the FCA to bring a more human face to the regulation of financial services; a more pragmatic approach to regulation.”
“It’s also worth pointing out that behavioural economics is not enough, on its own, to guarantee good regulation or strong financial products. It is a part only of the new FCA’s identity.”

Further information: http://www.fca.org.uk/news/fca-publishes-occasional-papers-on-behavioural-economics

The occasional papers can be found at: http://www.fca.org.uk/your-fca/documents/occasional-papers/occasional-paper-1 and http://www.fca.org.uk/your-fca/documents/occasional-papers/occasional-paper-2

Source: FCA

New British Financial Conduct Authority commences work

Mon, 01 Apr 2013 19:18:00 +0200

Today the new British Financial Conduct Authority commences work. Under the UK Government’s plan, financial services regulation is now split between the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). While the PRA will be a subsidiary of the Bank of England and supervise deposit takers, insurers and a small number of significant investment firms, the FCA is responsible for protecting consumers. The FCA’s objectives are to protect consumers, ensure that the financial services industry remains stable and that competition is promoted. To achieve these objectives, the FCA has rule-making, investigative and enforcement powers. In their regulatory activities and in supervising the 26,000 financial firms, firms will be supervised differently depending on their size and the nature of their business. This includes:

continuous conduct assessment for large firms and regular assessment for smaller firms
monitoring products and other issues to ensure firms play fair and don’t compromise consumer interests
responding quickly and decisively to events or problems that threaten the integrity of the industry
ensuring firms compensate consumers when necessary

To do this a risk management system was developed and mystery shopping will be used as a method to uncover market failures. The UK consumer organization Which? applauds that the FCA will take a tougher approach to regulation of the financial sector. Which? criticises that the FCA would have to learn from the mistakes of the past and succeed where the FSA – the predecessor organisation – did not. In particular Which? calls upon the FCA to:

tackle bad banking culture
stand up to the banks and promote competition
be open and act on problems before they spread

Richard Lloyd, Which? executive director concludes: “Light tough regulation didn’t work. You have the chance to make a big change in banking, where the customer comes first, not the bank.” Further information: http://www.fca.org.uk/ and http://www.which.co.uk/documents/pdf/open-letter-to-fca-pdf-315509.pdf Source: FCA and Which?

British Financial Services Consumer Panel launches four pillars to enhance consumer protection

Fri, 15 Mar 2013 20:55:00 +0100

On World Consumer Rights Day the British Financial Services Consumer Panel launched its four pillars of consumer protection. The objective of the framework is to enable a more effective assessment of EU legislation, standards and supervision. The four pillars consists of:

There must be universal and real access to the financial services consumers need.
Financial services must offer value to the customer; charges and costs must be fair, transparent and proportionate.
Consumers must have practical access to binding redress, no matter where they are located.
Policing of the financial services landscape must also be effective with tough enforcement and appropriate penalties.

Consumer Panel Chair, Adam Phillips, explained: "We envisage our four pillars of consumer protection stimulating a debate on consistent thinking on consumer protection across the EU. We would urge legislators and regulators to test everything they do against these four principles." Further information: http://www.fs-cp.org.uk/newsroom/2013/230.shtml Source: Financial Services Consumer Panel

American consumer and privacy organisations advocate for effective Do-Not-Track mechanism

Mon, 11 Mar 2013 20:46:00 +0100

Today American consumer and privacy organisations advocated for an effective Do-Not-Track (DNT) mechanism that allows individuals to decide when, whether, and how they will be tracked online, no matter what kind of technology or device they use. The organisations express their support for the World Wide Web Consortium's (W3C) ongoing efforts to develop standards for how DNT should work. At the same time companies such as Microsoft and Mozilla were applauded, that have taken steps to meet the public demand for DNT. The Internet Explorer 10 designates DNT 'on' by default. The organisations criticise, however, that some trackers say that they will outright ignore DNT preferences. They argue that if DNT was 'on' by default then this expresses the browser maker's choice, not the consumer's choice. As a result, even if consumers want DNT 'on' these trackers will ignore this. The organisations therefore call upon industry to provide consumers with an effective DNT mechanism. Further information: http://www.consumerfed.org/pdfs/Statement%20_Support_DNT.pdf Source: Consumer Federation of America

Friedrich-Ebert-Stiftung and ConPolicy will host workshop series on the state of consumer interest representation in Germany

Tue, 05 Mar 2013 08:01:00 +0100

Due to deregulation, liberalisation and globalisation consumer markets have gained in complexity for consumers. In light of these developments it is to ask whether the current landscape of consumer organisations is still adequately equipped to represent consumers in markets. This question will be elaborated in a workshop series which is organized by the Friedrich-Ebert-Stiftung with technical support by ConPolicy. The workshops will investigate, inter alia, (new) challenges to consumer protection, the relationship between public and private consumer institutions, the institutional, legal and financial preconditions for an effective consumer representation and international best practice.

British Financial Services Authority publishes discussion paper on transparency

Mon, 04 Mar 2013 20:56:00 +0100

Today the British Financial Services Authority has published a discussion paper looking at how transparency and more effective disclosure could improve the accountability of the regulator and the financial services industry, and help consumers make more informed decisions. The FSA distinguishes between three areas: a) Measures to increase the transparency of the work that the FCA will undertake:

Giving more detail to whistle-blowers about the action that has been taken after they have contacted the FCA.
Publishing aggregated information about supervisory activity, which could include the number of planned and unplanned supervisory visits that have taken place across different sectors.

b) Information the FCA could release about firms, individuals and markets in more general:

Disclosing more details about redress schemes.
Publishing the amount of redress paid by firms.

c) The FCA could require firms to publish information:

Publishing claims data on insurance products to help consumers understand the value of particular insurance products.
Providing more context around published complaints data to improve understanding of what the data shows.

Martin Wheatley, CEO designate of the FCA, said: “Transparency cannot be an end in itself. We want to make sure that disclosure helps consumers make the right decisions when purchasing products and helps the market function more efficiently. We are open to hearing from all interested parties about their views on this paper.” Further information: http://www.fsa.gov.uk/library/communication/pr/2013/019.shtml and http://www.fsa.gov.uk/library/policy/dp/2013/13-01.shtml Source: FSA

EU consumer organisations issue opinion on consumers and vulnerability

Sat, 16 Feb 2013 16:18:00 +0100

In recent years public interest for the concept of vulnerable consumers has increased. In February 2013 the European Consumer Consultative Group (ECCG) published an Opinion on consumers and vulnerability. The ECCG argues that while the concept of “vulnerable consumers” was well-known, there was no commonly accepted or widely agreed legal definition due to the heterogeneity of this group. At the same time, the number of vulnerable consumers seems to grow in numbers due to an ageing population and high numbers of disabled citizens (currently there are 50 million in the EU). The ECCG concludes that the specific needs of consumers who belong to a vulnerable consumers group should be identified and integrated more systematically and regularly into European and national policy making. Furthermore the perception of the “average” consumers – as opposed to the “vulnerable” consumers – requires re-thinking and adaption to a more modern and behavioural economics based approach. Against this background the ECCG puts forward a number of recommendations such as:

Undertake/commission targeted behavioural economics research and accident statistics data to gather more information about specific factors of vulnerability and their impact on certain categories of consumers;
Redirect the EU legal benchmark of the average consumer towards a more realistic and people focused concept through an EC recommendation, which introduces a new and more flexible concept of a consumer-taking into account that consumers are often credulous and inexperienced and cannot take a lot of time and care to try to understand what is behind traders information and practices.
Ensure that the needs of older people and people with disability are duly taken into account in other relevant Commission’s policies dealing with accessibility of goods and services.

The ECCG is a consultative group set up by the European Commission, entrusted to represent the interests of consumers at the Commission and give opinions on issues relating to the conception and implementation of policy action on the subjects of protecting and informing consumers. Further information: http://ec.europa.eu/consumers/empowerment/docs/eccg_opinion_consumers_vulnerability_022013_en.pdf Source: ECCG