Extracts from Finnish partner Kuluttajavirasto’s Current Issues in Consumer Law 3/2011
PDF version
This spring, the latest Consumer scoreboard, which analyses consumer conditions in each EU member state, was published in the EU. In Finland, citizens still have faith in the state and organisations. Three out of every five consumers have encountered misleading advertising in Finland. However, 79% of all vendors still feel that state authorities actively monitor compliance with the rules set forth in consumer law.
In the European Commission's annual Eurobarometer, it was found that only less than half of all European consumers felt trusting, knowledgeable and secure as a consumer on the market. The Finnish consumers, on the other hand, felt quite trusting and considered themselves very knowledgeable. They have a strong command of their basic rights, as in other Nordic countries.
Despite differences in national consumer policy, the problems faced are often quite similar in nature. In this issue we will talk about the marketing of the Power Balance wristband. The Australian consumer protection authority decided to reject the claims made, which lacked any credible explanation, and demanded rectification. We received information regarding the matter from the International Consumer Protection and Enforcement Network (ICPEN). After this decision was made, it was easier for authorities in Finland to reach an agreement with the importer of the wristband.
A policy concerning fitness club memberships is currently being drafted. A British High Court ruled that the maximum agreement period would be one year. The court deemed that longer periods of obligation would be excessive. This is also an excellent guideline for Finnish positions. The Danish Consumer Ombudsman intervened in a so-called penny auction (in Finland, known as the senttihuutokauppa), and sent the case to be heard by Cypriot authorities under the Decree concerning the application of the Regulation of the European Parliament and of the Council on cooperation between national authorities responsible for the enforcement of consumer protection laws.
Protection authority networks benefit from each others' decisions. In some countries the measures taken are more effective, sanctions tougher and resources in order. All countries benefit from the fact that businesses see extensive cooperation between the authorities. Market regulation oversight enhances a feeling of trust and well-being.
Anja Peltonen
Director
Behavioural economics dominates the sector
How do consumers behave on the market and why? This is a familiar question for advertisers. Now there's a push to bring this thinking to political decision-makers and other social actors.
In recent years a more realistic and multifaceted concept of consumer has received an increasing amount of attention in discussions held on a variety of fora. Behavioural economics attempts to characterise consumer market activity by means of behavioural sciences and psychology. This change in thinking challenges the principles of conventional neoclassical economic theory, in which the consumer is seen primarily as a rational decision-maker.
In OECD circles consumer market behaviour has been under scrutiny for a long time. Published in 2010, the Consumer Policy Toolkit has been a groundbreaking tool. At a brainstorming session to be held next autumn, the lessons outlined in the Toolkit will be applied to communications services. The terms of agreement for such things as broadband and telephone connections and other communications services will be discussed by member states.
National guides for use in political decision-making have been produced in different member states. For example, in Canada a guide for use in the drafting of social policy decisions has just been jointly produced by authorities and consumer organisations. The guide is helpful for authorities when assessing consumer impact in, for example, health care reform.
A book with new ideas for the business sector
Anja Peltonen, Director of the Finnish Consumer Agency, serves on the OECD Committee on Consumer Policy Secretariat. She has recently written a book on consumer and company market behavior. Titled ”Kunnioita asiakasta – lisää luottamusta” ("Respect the Customer - Build Trust"), the book introduces this line of thinking to the business sector.
Consumer decision-making models in different member states are primarily addressed in connection with political decision-making. The assessment of consumer impact is already required in many member states in support of regulation. In Peltonen's book, this thinking is applied to, for example, how a company can take advantage of an approach in a genuine effort to achieve customer-oriented marketing and customer service.
Fees for withdrawing cash should not come as a surprise
If withdrawing cash from an automated teller (ATM) is subject to any fees, the consumer must be informed of this. The proprietor of ATMs and banks are each responsible for informing the consumer of any fees.
Bank-owned Otto ATMs got some competition in the spring of 2008, when Nosto ATMs, which are managed by EuroCash Finland Oy came onto the market. Some consumers were surprised by the fact that, if they withdrew cash from a Nosto machine, their own bank would charge a fee for the withdrawal. The Consumer Agency felt it necessary to determine whose responsibility it would be to inform the consumers, and in what way.
Consumers can withdraw cash for free at banks. This is why ATMs can be considered an extra service that must be paid for by the bank and, in turn, just cause for charging a reasonable fee.
Even EU legislation stipulates that fees may be charged for cash withdrawals from ATMs. According to a European payment services directive , banks cannot make any distinctions between payments made at home and across national borders. This means that, if a Finnish consumer withdraws euros from an ATM i, for example, Belgium, they will be charged the same service fee as they would in Finland, and the fee would be drawn from their account in Finland. The payment service directive, however, does not stipulate what different types of fees might be used within a member state.
In actuality, today's consumers have fewer possibilities to withdraw cash from banks than before. Some banks have done completely away with their cash services or restricted their offering significantly. This could result in the need to reassess whether automated cash distribution can still be considered an extra service.
Fee information through a variety of channels
Information on whether fees are charged for withdrawing cash is, under the Consumer Protection Act, considered essential information, which is why it must be provided to the consumer. However, under the Payment Services Act, the proprietor of an ATM is not responsible for informing the customer of any fee increases, provided that they receive fee information from the bank.
The bank must inform its own customers of any fees charged for the withdrawal of cash from ATMs. This is due to the fact that the bank is responsible for informing its customers of all fees it charges on the basis of the customer relationship.
Cash withdrawal is one of the more commonly used basic bank services and involves the largest percentage of the bank's consumer customers. This is why basic bank services must be reasonable. Customers should also be informed of them effectively and in such a manner that the consumers have easy access to information on the fees charged for each bank service at that time.
This type of information is easy to keep constantly available on the bank website and/or online bank login page. However, the fee must also be easily found on manual price lists in bank offices.
The Finnish Consumer Agency still recommended that Eurocash Oy list any withdrawal fees on the screen of its Nosto ATMs before the consumer completes their cash withdrawal. This allows the consumer to cancel the transaction if they should so desire.
The Finnish Consumer Agency has also required that other proprietors of ATMs provide the same type of general information on whether fees will be charged for use of the machine. The proprietors can direct customers to ask for more detailed information from their own bank or card issuer.
Competition also affected
Eurocash Finland Oy and two other ATM operators felt that the various fees charged by banks for making cash withdrawals on their Otto machines and others often restricted new operators from entering the market and competing. They brought the matter before the Finnish Competition Authority for investigation as a practice violating competition neutrality.
The Competition Authority received commitments from Nordea, OP-Keskus and Sampo Bank promising that they would price their customers' domestic, non-customer ATM withdrawals and withdrawals made on Otto machines with Visa and MasterCard cards attached to their accounts in a non-discriminatory manner. The Competition Authority requires that these commitments be observed.
Non-discrimination does not mean that the banks should charge customers the same fee for its own ATMs and those of other operators. The non-discrimination obligation affects how much difference in fees there may be, due to the fact that the banks must pay a variety of costs for withdrawals made on their own ATM and those operated by others.
Credit card usage costs to be more transparent
An airline's policy to charge a fixed fee for use of a credit card was not in the best interests of the consumer.
The Finnish Consumer Agency issued a complaint to Finnair Plcj concerning the practice of levying a EUR 7.50 surcharge for all purchases made with a credit card. Under the recently enacted Payment Services Act, it is possible to charge fees for paying with a credit card, provided that there is a real, practical need for them. Credit card companies typically charge a company offering the option of paying a certain percentage for each sum paid - in other words, costs vary.
Payment cost correlation is a prerequisite for equity
Credit card costs should be charged according to the actual usage costs, when charging the payer directly. Use of a payment service results in extra charges for the consumer that are not necessary to using the basic service.
With a decreasing use of cash, it must be ensured that the act of paying will not become another way for merchants and service providers to make a profit. After all, the goal of the Payment Services Act was to increase transparency and, in turn, secure the cost correlation of payments. Previously, the costs of paying with a credit card were paid by the merchant and other payees, which then transferred these costs to the prices oftheir products and services
KUV/8388/41//2010
New trends in payment and billing
There are plans to replace direct debiting in Finland with a new automatic payment model. At the same time, bills will become e-invoices.
At the end of October this year, Finland will join SEPA (Single Euro Payments Area), along with 31 other European Union member states. After this, banks in Finland will no longer handle payments with Finnish account numbers and payment instruments. At the same time, Finnish direct debiting will be replaced by the new Pan-European SEPA direct debiting system.
However, in addition to the new SEPA system, Finnish banks still want to retain a national direct debiting service, in which the consumer would give their bank a permanent commission for the payment certain bills. This service would be called automatic payment or direct payment.
For more than a year, the Federation of Finnish Financial Services has been in talks with the Finnish Consumer Agency and Financial Supervisory Authority on how existing direct debiting will be changed and what the new automatic payment service content will be like. For the time being, a consensus has been reached, at least concerning the fact that direct debiting can be changed in alignment with the new service, unless the consumer specifically disputes their notification.
Consumers will receive a joint letter to the banks and the pay-to vendor, which explains the change and the policy options. Customers using online banking services can either accept or reject the proposal on their online bank. If the consumer does nothing, the change will take effect.
Bills go electronic
The transition to automatic payments also means that bills will become e-invoices. According to a model introduced by banks, online banking customers will receive a billing notification only as an e-invoice on the online bank and the bank would automatically pay the bill on the due date.
The Finnish Consumer Agency considers the model problematic, because online bank codes are not in actuality available to all consumers. Banks could refuse to pay the bills of, for example, people flagged as having defaulted on payments. Following discussions held with the Federation of Finnish Financial Services, online banking codes will still be given to these types of customers.
The same type of service offered to online banking customers will be offered to those consumers who do not use online banking services. They will, however, also receive a copy or notification of the bill.
The Finnish Consumer Agency is monitoring the situation and will intervene if the model causes problems for consumers.
KUV/2489/48/2011
Debt Collection Act to be amended
A working group appointed by the Ministry of Justice will begin cleaning up the Debt Collection Act.
Issued in February, an EU directive concerning late payment gave cause to re-evaluate the Debt Collection Act. Enactment of the directive requires significant changes to legislation on payment periods and the consequences delayed payments.
In addition to implementation of the directive the Debt Collection Act will be formulated in such a manner that good collection practices will receive better support from legislation. Clauses concerning collection costs will also be revised, in order to ensure that these only cover reasonable costs actually incurred by collection.
A representative of the Finnish Consumer Agency will participate in the working group. The working group will submit its report and any amendment proposals by the end of 2011. |
