Financial services | Documents

Financial services in Europe: Consumers need to feel "at home" in Europe

16.03.2007 - vzbv; EWSA

Berlin/Brussels, 16 March 2007 - On the occasion of European Consumer Day, the European Economic and Social Committee (EESC) and the German Federal Consumers' Association (VZBV) drew attention to the need to safeguard the interests of consumers when organising the internal market. Removing obstacles hindering the activities of suppliers could not be the sole aim of the development of the European internal market. We should rather endeavour to strengthen the rights of consumers in order to enable them to accept the internal market. The EESC and the VZBV joined forces in highlighting the fact that "consumer protection did not constitute an impediment to an effective internal market but served rather as a driving force and a quality criterion for that market". The goal had to be to enable consumers to feel "at home" not just in their home country but in Europe, too.

The European Union (EU) has, since 1999, been striving to establish an internal market, also in the field of financial services. The aim here is not just to remove obstacles to payment transactions but also to facilitate the cross-border take-up of investment and credit products. The European Commission's White Paper on Financial Services Policy 2005-2010 lists no less than 72 measures in this respect. The objective of the EU can be summed up as follows: to unify and enact the diverse national legal provisions, also in the field of consumer protection. In the financial sector, in particular, national provisions differ considerably. The usual procedures adopted when making payments at checkout counters; the sales methods and claims settlement procedures of insurance companies; the form taken by different products; and consumer borrowing - many differences exist in all of these fields. Furthermore, whilst in states such as Germany there are over 2000 banks and savings banks, some other EU Member States have only 25.

Kuneva: "Consumers are a driving force for the economy"

Today over 200 experts in the fields of politics, society and consumer protection have come together in Berlin to discuss EU measures and objectives and the future of "financial services in Europe". The European Commissioner with responsibility for consumer affairs, Meglena Kuneva, also took part in the discussion. She underlined the important need to have self-assured, well-informed and strong consumers who could act as a driving force for the economy. She also announced that over the next three years she would be working hard to bring about underlying economic conditions which paid greater attention to the interests of consumers. Quoting from the consumer policy strategy paper published by the European Commission that very week, Ms Kuneva stressed that: "Consumers should be steering economic development". The strategy paper set out the following message: The EU had to reconnect with the people of Europe. The way to achieve that goal was by strengthening the position of consumers and increasing their decision-making capability by providing them with freedom of choice, information and a transparent market. There was also a need to bolster the confidence of consumers that they had been given real protection and solidly-based rights in respect of involvement. In the words of Ms Kuneva: "Markets that are more actively geared to meeting the needs of consumers are also more competitive and innovative".

Harmonisation versus consumer protection?

A frank and controversial discussion was then held on the issue of how to successfully achieve the balancing act between ensuring a high level of consumer protection, as "a driving force for economic change", on the one hand, and bringing about a harmonised - also in terms of consumer protection- internal market, on the other hand. Different views were expressed on this matter also by the organisers of the debate.

The EESC advocates the principle of "upward harmonisation" as a key element of the internal market. The EESC president, Dimitris Dimitriadis, pointed out that: "The EESC supports the goals of the European Commission, namely to increase consumer confidence, legal certainty and market efficiency in respect of payment transactions in the internal market; the drive to ensure transparency for consumers also has to play a major role. The existing legislation has to be fully implemented and strengthened, whilst, however, avoiding any excessive regulation." The EESC president went on to express his unequivocal support for the Single Euro Payments Area (SEPA) but he feared that the target date of 2008 could no longer be met. The aim had to be to ensure that consumers were able to enjoy freedom of movement in a European financial services market "without barriers".

The German Federal Consumers' Association (vzbv) , for its part, feared that, in the struggle to achieve full harmonisation, high-grade national consumer protection standards would fall by the wayside. The president of the VZBV, Edda Müller, pointed out that the hypothesis that "The first stage is to open up the market by means of harmonisation; the issue of consumer protection can then be addressed afterwards" did not hold water. There was no disagreement over the need to harmonise payment transactions, which were the mainstay of the internal market. Whether in the case of, for example, loans and insurance, there was, however, any need for an extensively harmonised internal market was a matter which needed to be examined. A market such as Germany was, to a large extent, saturated; there was no lack of choice but rather a shortage of transparency and comparability. The main objectives of EU policy had to be to ensure that the consumer protection measures applicable in the respective individual Member States were of a high standard and to bring about greater transparency; it was less necessary to call for provision to be made for financial business transactions to be concluded in other Member States. The horse trading involved in the Services Directive when dealing with the issues of "harmonisation" and the "country of origin principle" had to serve as a warning. Edda Müller pointed out that financial services were complex and often abstract products which people in many cases purchased only once in their lives; such transactions required personal conversations and consultations, which should preferably be conducted in the customer's own language.

No interest in purchasing financial services abroad
Surveys such as in Eurobarometer 2006 demonstrate that there is, at present, virtually no appetite amongst consumers for the establishment of an internal market in financial services. According to the Eurobarometer survey, 94% of consumers in Europe have not even considered taking out a mortgage or an insurance policy in another EU Member State. The three main reasons for this stance are as follows: no wish to engage in such transactions, linguistic problems and problems relating to information. A study commissioned by the VZBV on the way in which the distance selling Directive was being implemented in Germany had revealed, inter alia, that the level of cross-border distance selling in Germany was, up to now, totally insignificant. The study pointed to the following reasons for this lack of interest: legal problems and the way in which the Directive had been implemented. In the course of a number of tests, even highly trained experts had had problems in determining whether and at what point a contract had been concluded. The presentation of the required information was often incomplete and the instructions with regard to cancellations were, in many cases, not in accordance with legal requirements.

Ninth European Consumer Day
European Consumer Day was introduced on 15 March 1999 at the initiative of the European Economic and Social Committee. The aim of this venture was to inform the public about European consumer protection policy and ongoing activities taking place in that field. Every year since the organisation of the first European Consumer Day, a number of different issues of importance to consumers have been addressed.

European Consumer Day is celebrated on the same day as World Consumer Day. The latter has its origins in a declaration made by former US President John F. Kennedy in the course of an address to the American Congress on 15 March 1962. In his address President Kennedy set out, for the first time, four fundamental consumer rights. Some years later the UN decided to proclaim 15 March as World Consumer Rights Day. The first World Consumer Day was celebrated on 15 March 1983.