Together, how can we fix financial services worldwide?
It’s not just Brits getting a raw deal from the banks, it’s an international problem. To mark World Consumer Rights Day, Consumer International’s Helen McCallum explains the challenges facing consumers globally.
In 2007 the world was thrown into financial turmoil by the US sub-prime mortgage crash.
At the heart of that crisis was a basic failure to protect consumers from bad products and predatory lending. Years later, as many governments concentrate on tackling high levels of debt and unemployment, consumers around the world are still being let down by financial service providers.
Consumers are being failed around the world
The list of complaints is endless. Bank of America, for example, recently planned to impose a monthly fee of $5 to all current account holders just for the ‘privilege’ of using their debit cards – this at the height of last year’s Occupy Wall Street protests.
In Spain, variable interest rates on mortgages have a minimum cap, but not a maximum. This prevents Spanish consumers from benefiting from low base rates, but not from suffering when interest rates sky-rocket.
Even in Germany, a country that has weathered the storm better than others, there are still only 1,000 debt advisors despite 10% of Germany’s households experiencing over-indebtedness.
The saga continues further afield. In emerging economies like South Africa, Chile and Brazil, easy access to credit is pushing up household debt to worrying levels.
And – in a truly international example – millions of families around the world who rely on money sent home from relatives working aboard are losing out on billions of dollars through the extortionate fees charged by money transfer companies.
The consumer movement fights back
The problems described above are just the tip of the iceberg, and many will sound depressingly familiar to UK consumers. In fact, there’s an astonishing amount of cross-over between the experiences in different countries, and consumer organisations have a lot to learn from each-other.
For example, Consumers’ Union, the US consumer organisation, was instrumental in getting legislation passed to create a new financial regulator charged exclusively with protecting consumers. Consumers Korea has also been lobbying their government for a similar regulatory model.
And now Which? is calling for a consumer protection regulator with teeth as part of its ‘Watchdog not Lapdog’ campaign.
These cases really demonstrate how solutions, as well as the problems, are often common across borders.
Our money, our rights
Consumer groups have their work cut out for them in other ways too. In the UK, victims of abusive practices can seek redress via the Financial Services Ombudsman or through the courts. But many other countries lack consumer protection legislation (or simply the resources to enforce existing rules), so lobbying governments for basic laws and regulations is often an urgent concern.
Access to the most basic of financial services is also a top priority in many developing countries, as it allows those on low incomes to manage their budgets and plan for the future.
Similarly, empowering consumers with basic financial literacy skills is very important. Consumer groups in Kenya, Tanzania and Uganda, for example, are doing great work to educate consumers as can be seen in our new short film.
It’s clear from all of these international examples that we’re in this together. So, to mark World Consumer Rights Day, we want everyone around the world to get a better deal from financial services. It’s our money, so we need rights to protect it. The question is – what problems are you facing with financial services?
Which? Conversation provides guest spots to external contributors. This is from Helen McCallum, the Director General of Consumers International – all opinions expressed here are their own, and not that of Which?
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