|NATIONAL CONFERENCE – The Consumer Agency, ECRC’s partner in Finland held a seminar at the end of last year and has summed up the discussions for us.
|Below is the report concerning the national responsible credit conference held in Helsinki the 20th of November, as well as some news from Finland including the recent change beginning of 2009 making Consumer Advisory Services move from municipalities to the state.
(From ECRC partner, Consumer Agency, Finland)
RESPONSIBLE LENDING - ABOVE THE LAW, AT THE LEVEL OF DAILY LIFE
Expert seminar, 20 November 2008 at the office of the Finnish Consumer Agency in Helsinki.
The Consumer Agency called together a group of experts from various sectors to consider issues around responsible lending at the level of daily life. In the previous seminar on the subject in 2006 the participants discussed what responsible lending could be defined as. This time the starting point was that the concept of responsible lending is already transforming into action as one manifestation of corporate social responsibility. Discussion was sought on what can be done in this field in practice. Practical responsibility is called for, now in particular as the entire functioning of credit markets hangs in the balance.
The seminar invited experts from from various sectors with a role in lending, including business representatives, representatives of consumer organisations and state representatives. In her keynote address, Director Anja Peltonen highlighted the perspective of behavioural sciences in the offering of credit. It was suggested that businesses can exploit the limitations recognised by behavioural science in either a positive or negative manner. The Director expressed her wish that good practices for making positive use of the approaches of behavioural sciences would surface.
Practical examples of how the concept of responsibility guides credit institutions were provided by representatives of Nordea Oyj and GE Money. An active discussion ensued on, for example, the efforts made by credit institutions to ensure that consumer credit decisions are made consciously, how to react to problems at an early stage and how to add flexibility regarding lenders in difficult circumstances. The proliferation of credit cards in consumers' wallets also aroused discussion. The participants agreed that the terms and conditions of credit agreements should be clarified. Some representatives of the business sector felt that consumers have themselves become less responsible as lenders and are seeing credit as a general right that everyone should have. In light of this, the business sector called for a positive credit register, which would help both parties better assess the appropriate level of credit in each case. Consumer representatives, however, espoused the view that such a register would not significantly reduce real credit difficulties, which are primarily the result of unexpected changes in the borrower's circumstances. What is needed, therefore, is more responsibility and flexibility on the part of creditors in these situations to ensure that the risks are not borne by consumers alone. It was also seen that economic education alone is not a sufficient answer to the questions of responsible lending.
The seminar also featured a look at the new consumer credit directive and a discussion on how successful the directive is in realising the seven objectives set for it by consumer authorities. The participants were also interested in hearing news from a seminar in London on responsible lending.
OTHER RECENT NEWS FROM OUR PARTNER KULUTTAJAVIRASTO:
NATIONAL CONSUMER ADVISORY SERVICES FLOODED WITH CUSTOMERS FROM THE START
The national Customer Advisory Service, which has been available since the beginning of the year, has received over 6,000 contacts.
The responsibility for Customer Advisory Services was moved from municipalities to the state on 1 January 2009. A subsequent change was that full-time municipal consumer advisors are now employed by Local Register Offices. The demand for the advisory services has been high from the start. Thus far, there have been over 6,000 contacts.
The Consumer Advisory Service provides consumers and businesses with information on their rights and obligations, such as reimbursements, agreements and payments. The service also provides mediation services in disputes between consumers and businesses.
The matters on which people contact the service vary greatly. The most common ones are questions concerning property, car and home appliance trade. The majority of the service's customers are consumers.
The advisors do not handle disputes between two private persons or businesses, or between housing cooperatives and occupants. Moreover, the advisors do not give advice in matters regarding security or stock trade or state or municipal services.
In case of problems, consumer should first find out their rights regarding the matter and negotiate the matter with the business in question. The website of the Consumer Advisory Services at www.kuluttajaneuvonta.fi contains information, instructions and ready-made complaint templates.
If you cannot resolve the matter on your own, call the national phone number for consumer advisory services, 071 873 1901. For the same service in Swedish, dial 0718 731 902. The numbers are available on weekdays between 9 am and 3 pm. The price of calling the national phone number is the same as a normal phone call. Calling the national number is the fastest way to reach an advisor and obtain an immediate solution to the problem at hand.
The Consumer Advisory Services have 36 offices all around the country. Their contact information can be found at the website kuluttajaneuvonta.fi. To meet an advisor in one of these offices, you must first make an appointment by calling the national number.
MERE ECONOMIC EDUCATION WILL NOT PREVENT CONSUMERS FROM GETTING INTO DEBT - MORE RESPONSIBILITY IS NEEDED IN THE MARKETING OF CREDIT
The money and debt advisors who answered a survey executed by the Consumer Agency estimate that the heavy marketing of credit has increased the consumers’ getting into debt. The Consumer Agency calls for the creditors to share the risk more fairly with the customer and exercise restraint in the marketing of credit cards.
Consumers have more and more different kinds of credit cards to choose from. For example, different store groups and businesses offer their customers their own branded credit cards. Often, their desirability is increased through different benefits and prizes. The customer, for example, will receive a discount on his/her purchases if s/he applies for a new credit card or will have the opportunity to participate in lotteries.
The bonuses may inspire the consumer to acquire new credit cards, even though s/he already has those. When the cards have been acquired, the temptation to use them exists, especially if finances are otherwise tight. In the survey made by the Consumer Agency to money and debt advisors, almost half of the respondents thought that the marketing of credit has a very great effect on getting into debt. Over half of the respondents also felt it was problematic that consumers are granted credit without their payback ability being checked.
The Consumer Agency has raised discussion on the responsibility of companies in an expert meeting it organised for actors in the credit field.
- A responsible company does more than the law requires on its own initiative. Accountability extends to the whole loan granting process from marketing to the making of the contract and the clarifying of possible problems, notes Director Anja Peltonen of the Consumer Agency.
The company must ensure that the consumer taking out a new credit card understands what s/he has committed to. The essential information must be told clearly enough. The risks must also be discussed openly, and they must be distributed more evenly than now.
- Risks related to credit are still too often the risks of the consumer – not of the loan givers. As the company has gone through the trouble of getting the consumer as its customer, it could also make greater efforts to ensure that the content of the credit contract were more understandable, says Peltonen.
Consumer-oriented risk management is also important because the customer cannot always influence his or her getting into debt. Based on information received from money and debt advisors, the biggest reasons for getting into debt are unforeseen changes in life situations that the customer cannot predict in advance, such as divorce, unemployment or getting sick.
Some consumers get into debt quicker because they do not have adequate skills or motivation to manage their finances. Indeed, according to money and debt advisors, addictions and helplessness have during the past year become greater background factors than before for getting into debt.
Giving out information and teaching economics are often presented as the solution for ignorance.
- The consumer education given in schools is important. The company cannot, however, on the basis of that escape its own responsibility, says Peltonen.
THE PROVISIONS REGARDING MARKETING IN THE CONSUMER PROTECTION LAW HAVE BEEN REVISED - THE PRINCIPLES REMAIN THE SAME
Chapter 2 regarding marketing in the consumer protection law changed on 1 October 2008. The principles of the new provisions correspond to the principles of the old ones. However, the new provisions are more detailed.
What is new is that the chapter now also covers the trader's conduct in a customer relationship after the agreement has been made. A CUSTOMER RELATIONSHIP COMPRISES, FOR EXAMPLE, THE PROCESSING OF THE COMPLAINTS FILED BY THE CLIENT AND THE PROCEDURES TO BE USED IN THE COLLECTION OF DEBTS.
The chapter also defines in more detail than before all the procedures that are improper from the point of view of the consumer and against consumer protection law.
The web pages of the Consumer Agency go through all the paragraphs of revised Chapter 2 and the explanatory memorandum of the Government bill. The policies of the Consumer Agency related to the matter are reported after each paragraph. The policies have been updated to correspond to the new provisions.
CONSUMER OMBUDSMAN CORRECTS MISUNDERSTANDINGS: CONSUMER'S STANDING HAS NOT BEEN FORGOTTEN IN THE ISSUE OF INTERESTS
Consumer Ombudsman and Director - General of the Consumer Agency Marita Wilska, stresses that the Consumer Agency has not forgotten the consumer's side when commenting on the right of the banks to increase their interest rates at the time when their solvency is threatened. There have been erroneous conceptions about the matter, causing unnecessary concern among the consumers.
The banks' model conditions of contract are the result of negotiations between the Federation of the Finnish Financial Services and the Financial Supervision Authority (FSA). The Consumer Agency is not a signatory to the agreement.
- During the process, the Finnish Financial Services has sought the Consumer Agency's opinion only on one of the agreement clauses, Marita Wilska states.
THE NEW CLAUSE IS FAIRER TOWARDS THE CONSUMERS THAN THE OLD MASS TERMINATION CLAUSE
According to the Consumer Agency, the principle behind the new provision is more reasonable from the viewpoint of the consumer than the earlier alternative. Until now, the banks have been able to call in all the customer loans whenever their solvency has been under threat. Now the consumer can still pay all the loans fully in one go, but in addition can also remain as a customer of the bank and pay increased interest for a fixed period. In some situations this may be the only possibility for trying to keep one's home. In any case, the consumer's alternatives in a difficult situation increase.
The use of the provision is possible only in rare crisis situations, not in the market situation of the current kind, for example. A bank cannot use the clause, to give an example, only because its business activities are failing.
The implementation of the clause does not mean giving a green light to a possibility for a larger one-sided increase in the interest rate. According to FSA, the banks have better opportunities to increase interest rates in the other Nordic countries than is the case in Finland with the Finland's now implemented model conditions of contract.
INTEREST INCREASE MUST BE BASED ON THE ESTIMATION OF FSA
From the beginning, the Consumer Agency has wanted to ensure that a bank would not be able to decide unilaterally about increasing the interest rate.
- Because the Financial Supervision Authority is responsible for supervising banks' state of solvency, we wanted - within the loan terms - a clause according to which FSA's approval is always required for an interest rate increase by a bank, Wilska says.
FSA has also been of the opinion that a bank should always first consult FSA about any proposed increase in interest rates. However, this has not been entered in the loan condition itself but just in its application directive, which the consumer does not receive. The Consumer Agency regarded that as an inadequate procedure, but the Agency's stance has not been paid attention to.
PUBLIC INFORMATION IS NEEDED
- We have not aimed to keep the public in the dark about the matter. It is clear that the involved parties, that is FSA, the Finnish Financial Services and the banks, should have informed the public about the reforms to the model conditions of contract in their full extent. It is good that the matter has now been brought to the public discussion.
The Consumer Agency will get in contact with FSA and the Finnish Financial Services and discuss, among other things, how in the future one can ensure that matters of that kind are reported to the public.
NO SCHOOLBOOK CAN TEACH CONSUMER SKILLS – TEACHING MATERIALS NEED TO BE DEVELOPED
Schoolbooks discuss consumer affairs too little and too late, based on a study by the Consumer Agency assessing the consumer knowledge imparted by schoolbooks.
Consumer skills are not taught in schools as a separate subject but rather dealt with in connection with several different subjects and themes. Consumer education includes seven thematic areas: personal finance, consumer law, advertising and influencing, environment and ethics, safety, foodstuffs and the media.
The themes of consumer education have traditionally been understood as skills that teenagers will need as they reach adulthood. As a result of changes in the society and the market, however, consumer skills are already needed since the first school years. One example of this is the fact that ever younger children have a mobile phone at their disposal, which is comparable to a payment instrument. Even if children often have better technical skills than their parents and teachers, they are not equally advanced as consumers. They need guidance to be able to act safely in the market.
According to the study by the Consumer Agency, the current textbooks cannot alone meet the requirements of the curriculum and the changing society. In practice, many themes of consumer education are not dealt with in the textbooks until the seventh class, and even then the information is scanty. For example, the basic rights and responsibilities of a consumer when concluding a deal receive little attention. It is also difficult for the pupils to get an overall picture of the themes, as they are scattered under various subjects.
The study by the Consumer Agency shows that in case nothing but textbooks in their current form is used as learning material in school, the pupils are left with poor consumer skills. This is why consumer education learning materials in textbooks and on the Internet should be developed towards a better correlation with today's world. The teaching of consumer knowledge could be illustrated by topical every-day phenomena, for example. In addition, the Consumer Agency proposes increased research in teaching methods of consumer and financial education.
The study looked at 85 textbooks that represent the common subjects studied by every pupil in comprehensive school. The sections containing themes relevant to consumer education in the books were counted. In addition, the study contained an assessment of whether it is possible to impart comprehensive consumer education based on textbooks alone. This study was conducted in co-operation with the National Board of Education.
Created: 27/01/09. Last changed: 27/01/09.
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