G20 financial consumer protection proposals forget lessons of GFC

World needs new international organisation to protect consumers
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01.G20 can act to protect consumers

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What is the issue?

CHOICE is supporting a call by Consumers International (CI), the body representing consumer organisations globally, for adequate protection for consumers of financial services and products.

The global consumer rights movement believes crucial omissions in new G20 proposals on financial services will mean they do little to improve protection for consumers from bank failures and will fail to remove poor credit services from the market.

The open letter to the G20

CI, together with consumer organisations in all G20 economies, has published an open letter expressing dismay that the proposals being considered by G20 finance ministers “still fall short of what is required” on financial consumer protection. Finance ministers meet in Paris on Friday to discuss the proposals.

The letter urges the G20 to “remember that weak consumer protection in the form of irresponsible mortgage lending was both a catalyst for this crisis, and is a long-standing concern of ‘ordinary people’ who use financial services every day.”

The proposals, which were requested by the G20 following concerted pressure from the world’s consumer organisations, were drawn up by the OECD. While CI and its members contributed formally to the process, there is disappointment that key demands were not included in the final submission.

As outlined in the open letter, the proposals “do not include any explicit reference to deposit guarantees in the event of bank failures, nor do they support the adoption of minimum standards for financial products.” CI believes these are crucial steps for avoiding any future financial crises.

A new international organisation to look out for consumers

CI also calls for G20 leaders to support the establishment of a new international organisation to champion financial consumer protection in banking and the provision of credit. CI has proposed that the organisation is based on an existing network of national financial consumer protection agencies and has an independent consumer panel to monitor, challenge and advice.

President of Consumers International, Jim Guest, addressed G20 finance ministers and central bank executives on Friday 14 October 2011, ahead of the G20 meeting.

“These recommendations fail to grasp two of the most important lessons from the financial crisis - regulators should have done more to keep very poor and risky financial products off the market, and that in periods of uncertainty, consumers need to know that their deposits are backed by deposit guarantee schemes,” said President of Consumers International, Jim Guest.

“Given the importance of financial services to the stability of the economy and the livelihoods of consumers, it is unacceptable that we don’t have an international organisation to support consumer protection in banking and the provision of credit. G20 leaders should use this meeting to give their support to an effective new international organisation that will champion the protection of consumers of financial services.”

CHOICE is a member of Consumers International and stongly supportes the call for greater consumer protections in banking and credit internationally and is a signatory to the open letter from Consumers International to the G20.



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