|RETAIL FINANCIAL SERVICES – Commission announces its Initiatives in the area of financial services for a modern Single Market for the 21st century.
|Last week, ECRC partner Bob Schmitz attended a hearing on retail financial services organised by ECON (Committee on Economic and Monetary Affairs) where both the GREEN PAPER ON RETAIL FINANCIAL SERVICES IN THE SINGLE MARKET and the SECTOR INQUIRY ON RETAIL BANKING was discussed. In advance of the discussions, the Commission published its working document on retail financial services (see provisional version attachment below) which appears to have little concrete substance and hardly lives up to key consumer expectations such as those summarized by Bob Schmitz below.
SOME POINTS EXTRACTED FROM THE COMMISSION DOCUMENT:
CHOICE AND MOBILITY
- White Paper on Mortgage Credit (due in December 2007)
- Self regulation and common rules on BANK ACCOUNTS due from the banking industry before June 2008 to facilitate switching etc.. (a grace period in view of voluntary self-regulation before legislation will be considered)
- Study on PRODUCT TYING (i.e. cross selling and other potentially unfair practices) with focus on impact on mobility and “understanding the reasons why providers engage in them”!!! (in 2008, followed by a study on the merits of a regulatory approach on unfair commercial practices in the field of financial services) Under Competition law, product tying both for banking and insurance has been repeatedly denounced by consumer organizations. The Commission now proposes a lukewarm two-stage approach whereby it wishes firstly to find out " why financial service providers engage in them". This appears to be a naive statement as product/service tying is a well-known phenomenon to DG COMP and the rationale is easy for those pursuing such tying : sell more products/services to a same person thereby increasing revenues/profits !
- Examination of CREDIT DATA, record keeping and access (an expert group representing all relevant stakeholders will be created in 2008! Regulation envisaged)
- Commission scoreboard for car insurance premiums similar to the one on cars (2008)
FINANCIAL EDUCATION, INCLUSION, REDRESS
- On financial education (increasing consumer literacy) - for which EU competence is anyway limited - the Commission had announced its Study on financial literacy schemes and reasons for their importance would be communicated before the end of this year. Now it states simply "will soon be presented" (i.e. 2008)
- BASIC BANK ACCOUNTS, a thorough assessment of guaranteed access to these in EU Member States is due in 2008, so that by a certain date, nobody will be denied access to a basic bank account.
- Examination of improving alternative redress mechanisms (continue work on gaps in the coverage of existing FIN-NET network in 2008)
PERSONNEL VIEWS BY BOB SCHMITZ, EU counsel presented at the ECON Joint Hearing on Green Paper on Financial Services in Single Market ( European Parliament, 21 November 2007 )
1. The revision of the Consumer Credit Directive should be considered as a major
test case. It leads to great pessimism re finding a balance between a high consumer protection and a proper functioning of the single market. The questioning by Parliament’s Rapporteur of the Treaty’s obligation to ensure a high level of consumer protection and the proposal to replace it by an “ appropriate degree of protection for consumers”, makes consumer and social groups extremely suspicious.
2. Prime focus remains on MORE CHOICE AND LOWER PRICES (increased competition) which addresses the “competent” consumer ( Rapporteur on consumer credit). Consumers in financial difficulties ( over-indebtedness) are consistently neglected, even if the EU Economic and Social Committee recalled repeatedly their protection needs.
3. Market integration will be supply-driven, not by own consumer cross-border shopping. The role of INTERMEDIARIES should be crucial. Their rights and obligations ( liabilities ) should be clarified and harmonized urgently. Problems arise often in the sale, administration and enforcement of financial service agreements.
ADVICE AND RELATED LIABILITIES should be given a key role and not be left simply to market forces.
4. Too much focus is on INFORMATION OBLIGATIONS with a costly / unreadable overload
and increased consumer own responsibility ( CAVEAT EMPTOR principle). We have some doubts about the Commission expectations re testing information needs by selected focus groups. We await results to really judge.
We look forward to the Common Frame of Reference (CFR) REPORT ON INFORMATION REQUIREMENTS IN FINANCIAL SERVICES LEGISLATION ( workshop on 28/11/2007). Will it be possible to link this to the forthcoming horizontal directive on basic consumer rights ( proposal announced by end 2008 by Commissioner Mrs. Kuneva) ?
5. No harmonization re BLACK-LISTING aggressive / unfair trade practices ( cf. UCP directive, ECJ judgment C-384/93 Alpine Investments cold-calling) nor on specific unfair contract terms.
6. Wide discrepancy between business and consumer circles : Industry promotes increased PRODUCT VARIETY including by the use of non harmonized consumer protection rules ( early credit repayment, salary attachments,…) in competitive product design
( cf. European Financial Services Round Table in “ Consumer protection – Consumer choice”, January 2006). Users wish BASIC STANDARDIZED FINANCIAL PRODUCTS and benefit from some Commission support. Is there a way of bridging this wide gap and elaborate jointly some standard cross border contracts including out-of-court settlements ?
The so-called “28TH REGIME” ( EU optional legal instrument as an alternative to mandatory legislation) appears illusory.
EUROPEAN PARLIAMENT COMMITTEE ON ECONOMIC AND MONETARY AFFAIRS
ECON Joint Hearing on the GREEN PAPER ON RETAIL FINANCIAL SERVICES IN THE SINGLE MARKET and the SECTOR INQUIRY ON RETAIL BANKING
Brussels, Room PHS 1A002, Wednesday, 21st of November 11:00-12:30
11:00 - 11:05 Introductory remarks by the Rapporteurs:
o Mr Othmar Karas (EPP-ED, AT)
o Mr Gianni Pittella (PES, IT)
11:05 - 11:30 Presentations of speakers (5 min each)
o Xavier Durieu - Secretary General of EuroCommerce, the European retail association
o Michaela Koller - Director General of CEA (The European Insurance and Reinsurance Association)
o Andreas Pangl - Member of the Executive Committee of the European Association of Cooperative Banks and of various boards of Raiffeisen Banking Group (Austria)
o Guido Ravoet - Secretary General of the European Banking Federation (EBF)
o Bob Schmitz - Union Luxembourgeoise des Consommateurs
11:30 - 12:30 Debate with the MEPs
Created: 26/11/07. Last changed: 26/11/07.
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