There is a general financial crisis based on usurious credit practices that shakes the world. The exploitation of weak consumers in America and Europe has undermined the financial markets in general. It is now threatening small savings and private pensions. Tax payers money has to bail out banks that distributed irresponsibly and irresponsible credit and guarantee profits that were insane and unfounded in real economics. Consumers as wage workers and families have been and will be the victims of this crisis while the upper ten percent will gain from its redistributional effects. This has according to a near political consensus from left to right been facilitated by the deregulation pushed through in Europe by the "internal market approach" of the EU Commission with Directives like the UCIT Directive, the Third Banking Directive, Investment Directives and lately the maximum harmonization approach of the new Consumer Credit Directive. The European Court of Justice too has contributed by putting free market access over culture, social protection and diversity. Consumer protection has been reduced to user protection where information, choice and access has replaced sustainable consumption, anti-usury legislation, debtors' protection and preventive supervision of financial products and practices.
In this situation a project called "Consumer Law Enforcement Forum (CLEF)" partly financed and obviously supported by the EU-Commission has now published
Guidelines on financial services for consumers’ organizations (October 2008)
We would have expected that these guidelines reflect at least some of the problems which are shaking consumers all over the world. But it looks as if consumer problems can be reduced to lack of information, free choice and law enforcement. Here are extracts from these guidelines which claim to represent the idea of consumer protection. We have given provocative headlines to these deliberations and highlight those parts which we think correspond to theses attributes.
Dangerous
Consumer credits: The Consumer Credit Directive 2008/48/EC aims at full harmonisation, but there are a number of issues which are still dealt with at national level such as mortgage credits, usury, overpriced credits (i.e. credits far beyond the average market prices), default interests, limits of calculating interests on interests, consumer insolvency or the role and function of credit bureaux.
[Official papers of the EU claim that usury ceilings (that would be the correct expression whould be abolished through central regulations. The lack of EU regulation is still its raison d'etre]
Wrong
The field of financial services: Financial services are very heterogeneous. From a consumer’s viewpoint four different areas can be distinguished:
�� Credit services: where the consumer requests money from the lender. Consumer credit can take various forms, including instalment sales (including hire-purchase), pure money loans, credit cards, overdrafts etc. Mortgage credit and consumer credit are usually treated as separate issues. Hire can also be viewed as performing the same function as credit in some situations (e.g. if the consumer receives the product and pays for it in instalments).
�� Securities for movable and immovable: when the bank grants a credit, it often asks for financial guarantees. These can take various forms (e.g. an indemnity from a relative or friend).
�� Investment services: where the consumer invests money, usually via an intermediary, quite often a bank, to buy funds, shares etc. in order to receive a reasonable return.
�� Banking services: these are usually related to the consumer’s bank account and raise issues about the fees and charges imposed on the consumer and the services provided, in return i.e. money transfers, overdrafts, deposits etc..
[Credit, Savings, Payment Services and Insurance are the distinct part of financial services which transport consumer income to where it would be needed in future, now, from the community to the individual or from one lieu to the other.]
Ignorant
III. Where the problems lie
The starting point: consumers’ organisations start bottom-up. Apart from when a new piece of legislation is being discussed, the trigger point for their involvement is consumers’ complaints. In this context, “Special Purpose Vehicles” - i.e. organisation set up to gather in claims in relation to particular problems (they are widespread in Belgium and the Netherlands in particular in the field of antitrust injuries) - have proven particularly useful for the gathering of claims. In the financial services sector, problems often give rise to quite large scale consumers’ complaints against a particular company and/or on a particular consumer issue.
Bank charges
Worldwide bank charges are often unfair to consumers
Mortgage credit:
One of the key issues for some consumers’ organisations is the right to cost-free switching.
Consumer credit:
Current consumer problems turn around strategies business use (i) to approach young consumers and persuade them to take on consumer credit (e.g. SMS credit), (ii) to attract the attention of consumers by advertising low interest rates, which in practice only a very small minority of consumers will obtain, (iii) to offer a credit to a consumer without adequately testing his or her creditworthiness, mostly through the use of intermediaries, and (iv) to offer credit as a means to providing associated but far more profitable products, such as payment protection insurance. Scams linked to credit intermediaries are also increasingly important problems consumers’ associations are confronted with.
Ridiculous
IV. Risks and chances of the involvement of consumers’ organisations
Chances: When consumers’ organisations become aware of large scale consumer complaints, or are approached en masse by individual consumers, they have the incentive to become involved. Consumers’ organisations can then become prominent players by pushing supervisory authorities into action, by constantly providing new information to the media and by supporting individual and/or collective consumer actions. In addition, such activity can have a positive impact on the image of the relevant consumers’ organisations. However, such an engagement is only possible, feasible and manageable, if the respective organisations have already built up the necessary expertise in the relevant field.
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