Consumer protection aspects of financial services

Practice Area:
Client: European Parliament
Published: February, 2014
Tagged: EC/EEA qualitative analysis stakeholder surveys and consultations

The financial crisis of 2007/2008 has clearly shown that inadequate consumer protection, especially in the US mortgage market, was a major contributor to financial instability. Moreover, many holders of sub-prime mortgages suffered considerable harm as a result of mis-selling or inappropriate selling. However, the USA is not the only country where weak consumer protection resulted in significant consumer detriment. In the EU, foreign currency mortgage loans in Hungary and payment protection insurance in the UK are two of the most glaring examples of mis-selling or inappropriate selling of financial products during the years preceding the financial crisis. Considering the significant potential detriment that financial services can cause to individual consumers and to the Single Market, consumer protection policy needs to properly focus on this area. Improved transparency and better informed transactions resulting from such policy will result in better solutions for consumers and greater market efficiency. A number of recommendations to strengthen consumer protection in the area of financial services are put forward in the report.