proposed revision of eu consumer protection October 9, 2008
Posted by Bradley in : consumers , add a commentShopping doesn’t seem to be most people’s top priority in current market conditions. But perhaps this means that it is a good time to think about consumer protection. The Commission published yesterday a new proposed consumer protection directive to collect and revise existing EU consumer protection rules. The proposal is designed as a “full harmonisation” measure. Article 4 states:
Member States may not maintain or introduce, in their national law, provisions diverging from those laid down in this Directive, including more or less stringent provisions to ensure a different level of consumer protection.
This is supposed to mean that traders can use the same contract terms in all Member States. At the same time consumer protection is increased in some respects. There are new lists of banned terms in consumer contracts (a black list) and of terms which are presumed to be unfair (a grey list). The proposal has some relevance to financial services, but does not apply to circumstances covered by the Distance Marketing of Financial Services Directive or the Consumer Credit Directive.
reading ages August 19, 2008
Posted by Bradley in : consumers , add a commentI was surprised to see that a large number of authors and others in the UK, led by Phillip Pullman, are campaigning against indications of age guidance on book covers. They have a number of reasons for doing so, one of which is that:
Everything about a book is already rich with clues about the sort of reader it hopes to find – jacket design, typography, cover copy, prose style, illustrations. These are genuine connections with potential readers, because they appeal to individual preference. An age-guidance figure is a false one, because it implies that all children of that age are the same.
I have no idea why they are so upset. The Publishers’ Association has been thinking for some time about this issue and thinks that age guidance will encourage people to buy books. US published books for young people are marked with suggested age ranges. They are often not very prominent - you can find them if you look, but they don’t jump out at you - but they can be useful. Do these authors really want children to learn to make purchasing decisions based on the manipulations of marketers who design the packaging for products rather than on data about what is inside?
regulatory budgets and collective action August 8, 2008
Posted by Bradley in : consumers , add a commentIn the same week that the UK’s Department for Business published its consultation document on Regulatory Budgets - the latest chapter in the Better Regulation saga - the Civil Justice Council published this week a 483 page document on Improving Access to Justice through Collective Actions’ : A Series of Recommendations to the Lord Chancellor. Collective action is a hot topic in the EU right now. Key Finding 1 of the collective action report is that:
Existing procedure does not provide sufficient or effective access to justice for a wide range of citizens, particularly but not exclusively consumers, small businesses, employees wishing to bring collective or multi-party claims.
But the implications of the BERR consultation document would seem to include making improving access to justice more complex, as it includes discussion of:
how to identify and capture the specific costs arising from regulation (i.e. enforcement activities, self-funding regulations, contractual obligations and legal proceedings) within a system of regulatory budgets
On reading the consultation document I’m not clear whether the costs associated with litigation (as opposed to regulatory action) resulting from regulations would be included in the regulatory budgets. But if they were, any expansion of collective action rights that would make it easier for citizens to enforce their rights would increase the costs of new regulations granting rights to citizens, thus making such regulations less likely in a regulatory budgets environment.
credit and securitization August 7, 2008
Posted by Bradley in : consumers , add a commentBefore the collapse of the sub-prime lending market the securitization industry tried to fend off a lot of attempts to regulate sub-prime lending by arguing that to do so would deprive consumers of needed credit. The strategy worked reasonably well then so why not keep pushing it? The American Securitization Forum comments on proposals to regulate unfair or deceptive practices with respect to credit cards as follows:
We are concerned, however, that the Proposed Rule too greatly restricts issuers’ ability to re-price interest rates, apply payments, and charge appropriate and disclosed fees. As drafted, the impact of the Proposed Rule’s restrictions on pricing will likely limit the scope and increase the cost of credit products available to consumers because, in part, it will heighten risks and increase costs associated with credit card asset backed securities (“ABS”) for secondary market participants that will necessarily be passed on to consumers. In contrast, a proposal that preserves credit card issuers’ ability to re-price for borrower default risk, maintains their flexibility in applying payments, and protects issuers and investors from litigation risk in connection with existing accounts, will ensure that consumers enjoy continued access to low cost and convenient credit products and services.
Perhaps there’s a simpler solution - if consumers weren’t exploited they wouldn’t feel the need to litigate?
use of ‘consequential loss’ in consumer contracts unfair in uk August 7, 2008
Posted by Bradley in : consumers , add a commentThe FSA says:
Under the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations) firms must ensure that they express any written term of a standard-form consumer contract in plain, intelligible language. In our view, a term which excludes ‘consequential loss’ is not written in plain, intelligible language, as it refers to an expression that has a legal meaning. We do not believe that the average consumer would understand the terminology, and therefore what they are not covered for under the policy.
The FSA that the following formulation is clearer, although it seems to me to involve issues of interpretation of the word “direct”, and therefore to contain some (unavoidable) ambguity:
‘We will only pay costs which are incurred as a direct consequence of the event which led to the claim you are making under this policy’.
the real mccreevy? July 15, 2008
Posted by Bradley in : consumers , add a commentCharlie McCreevy is much more pro-regulation these days (since the financial markets went pear-shaped) than he used to be. He just gave a speech at an Open Hearing on Retail Investment Products where he seemed to advocate serious protections for consumers of retail financial products. For example:
The current difficulties besetting the EU financial industry are important – but they should not lead us to lose sight of these longer term challenges.
There will be a million reasons why progress will be hard to achieve. There will be thousands of voices defending the status quo. But we need to take the longer-term view. Lack of transparency and regulatory gaming are not a good basis on which to build sustainable markets or successful businesses.
There is a lot that we can do – particularly through effective product disclosures – to improve the quality of investor outcomes and facilitate competition based on the quality of products. These do not require us to turn the European financial rule-book on its head. By the end of the year, I would like to be able to set out a number of steps that we can take to start the necessary progress towards this objective.
eu commission, transparency and toy safety June 5, 2008
Posted by Bradley in : consumers , add a commentThe Commission has published the final report of an expert group on Evaluating Business Safety Measures in the Toy Supply Chain. The fact finding exercise which led to the report was announced in a press release on what the Commission was doing about toy safety issued in November 2007. It’s an interesting report which raises some good questions, and makes a list of recommendations, including a focus on harmonisation of toy standards at the international level. There’s an issue about the need to make it easier for manufacturers of toys outside the EU to know what rules they need to comply with (this is, of course, a general issue about the limits to the usefulness of harmonisation initiatives):
Chinese manufacturers claim that it is difficult for them to fully understand the legislative approach in the EU whereby conformity with a certain harmonised safety standard does not necessarily mean the product is in compliance with all applicable safety requirements as set out in the legislation. Although efforts from the EU and the Chinese authorities, as well as the European toy industry, to inform the Chinese toy manufacturers about the applicable regulations and harmonised safety standards for toys in the EU have resulted in greater awareness, there is still a need to improve in particular the understanding of requirements that are regulated in nontoy specific legislation such as for certain phthalates and azo colorants.
On the other hand, the whole exercise doesn’t seem to be a model of transparency. The report does not identify an author, nor does it list the members of the expert group. It states:
This report reflects the results of an evaluation project undertaken under the direction of an independent expert group with the support and technical assistance of the European Commission. The contents of this document do not necessarily reflect the views of the European Commission and are in no way an indication of the Commission’s future position in this area. Neither the Commission nor any person acting on its behalf can be held responsible for any use that may be made of the following information.
And:
An ad hoc expert group was established providing independent advice and consisting of representatives of the main stakeholders including manufacturers, importers, retailers, test laboratories, consumers and Member States. The Commission provided support and technical assistance to this group.
The Commission published one press release about Commissioner Kuneva presenting the report, and another press release which gives some information about the members of the expert group which states:
The group included following experts:
* Helen Amundsen (ANEC/BEUC)
* Wim Berkel (Dutch Food and Product Safety Authority)
* Jerome Billot (Carrefour)
* Alf Cash (Mattel)
* Natale Consonni (Istituto Italiano Sicurezza dei Giocattoli)
* Linda Crane (British Retail Consortium)
* Brian Ellis (Toy Industries of Europe)
* Ton de Koning (Dutch Food and Product Safety Authority)
* Daryl Scrivens (HASBRO)
* Sanda Stefanovic (SGS)
It’s not clear whether the “the group included” language is just eurospeak, or whether there were other experts also included who are not listed. And why make it anything other than really easy to find out who the experts were?
consumer financial decision-making May 11, 2008
Posted by Bradley in : consumers , add a commentAs the Florida lottery invites its customers to pay out even more money (in a recession) for a very very tiny chance of a bigger jackpot, Capital One wants its customers to get very friendly with their credit cards by putting their own pictures on the cards. Probably they don’t want consumers to decorate their cards with warnings to spend less money - it seems they want pictures which will give customers warm and fuzzy feelings every time they take out the cards.
cesr and consumers March 7, 2008
Posted by Bradley in : consumers , add a commentCESR (which thus far has mostly focused its energies on consulting with financial market participants) today announced the publication of a new guide for retail investors on MiFID. The press release states:
The purpose of the guide is to explain, in clear and straightforward language, the new protections retail consumers will experience in buying financial services, following the introduction of this legislation across Europe. As a next step, this guide is expected to be translated into many languages by CESR’s Members, the national securities regulators. This is the first time CESR has developed a guide destined for consumers and it reflects CESR’s strong commitment to increase confidence amongst retail investors.
The guide states that a new consumer-focused website will be available later this year.
Rather oddly, the press release states that the guide’s objective is to increase confidence among retail investors and not to ensure that retail investors know their rights. And the guide is drafted in such a way that an investor would not really know what her rights are in a meaningful way by reading the guide. The guide chooses to be accessible to consumers by omitting the details. In one sense this is obviously necessary, but in another sense it is problematic. This is a perennial problem for those who communicate about complex rules to people who are not used to interacting with complex rules and raises the question whether we’d really be better off trying to make the rules simpler so we could avoid some of these translation issues.
The guide is published today in English and Hungarian and other versions are to follow. I don’t know about the Hungarian version but some of the English in the English version is a bit strange. For example the guide states:
Before providing you with an investment service, your firm is required to categorise you as a Retail
or Professional client. You will normally be categorised as a Retail client, a category which includes the majority of individuals.
I think that are trying to say that most customers will be treated as retail customers, and not that a customer will normally be classified as a retail customer, which suggests that under abnormal conditions she might be classified differently. And the description of the conditions under which a person may be classified as a professional client is unspecific:
Your firm will be able to categorise you as a Professional client only if you meet at least two of
the following conditions:
• you frequently carry out transactions;
• you have a large portfolio;
• you have worked in the field of investment services.
Here I think they would have been better off with more specificity. The directive states:
In the course of the above assessment, as a minimum, two of the following criteria should be satisfied:
— the client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters,
— the size of the client’s financial instrument portfolio, defined as including cash deposits and financial
instruments exceeds EUR 500 000,
— the client works or has worked in the financial sector for at least one year in a professional position, which
requires knowledge of the transactions or services envisaged.
Does the vagueness of the guide really help the consumer to understand her rights. And even within the articulated aims of the document, which formulation would be more likely to enhance the consumer’s confidence?
odd press release headlines February 12, 2008
Posted by Bradley in : consumers , add a commentOn Safer Internet Day, the EU Commission published a press release with the headline “Let’s listen to children: They know how to make the Internet a safer place!” It seems that talking to children is only part of the story - really they will be talking to adults too. But given the hysteria about children and the internet, what an odd headline that is.