UPDATE REPORT ON THE WORK TO SUPPORT THE
UPDATE REPORT ON THE WORK TO SUPPORTTHE IMPLEMENTATION OF THE G20 HIGHLEVEL PRINCIPLES ON FINANCIAL CONSUMERPROTECTIONG20/OECD TASK FORCE ON FINANCIAL CONSUMERPROTECTIONPrinciples 4, 6 and 9SEPTEMBER 2013As agreed in the Action Plan of the G20/OECD Task Force onFinancial Consumer Protection, endorsed by the G20 in 2012,the Task Force has developed the first set of EffectiveApproaches dealing with three of the ten High-Level Principles onFinancial Consumer Protection, endorsed by the G20 Leaders in2011.This document contains the ninth final version of the SummaryReport on Effective Approaches to support the implementation ofthe G20 High-Level Principles on Financial Consumer Protection.It is based on several meetings of the G20/OECD Task Force onFinancial Consumer Protection, subsequent written consultationwith member jurisdictions, other relevant bodies and StandardSetter Bodies (SSB), Vice Chairs, sub-groups and aninformal/public consultation with key stakeholders, includingconsumer and industry associations. This version was alsoshared under the written process with the OECD Committees onFinancial Markets and on Insurance and Private Pensions. InJuly 2013, it was submitted to the G20 Finance Ministers andCentral Bank Governors, who supported the work done by theG20/OECD Task Force on this first set of effective approachesand look forward to their report on other principles in 2014. TheUpdate Report and a new detailed annex providing informationon national approaches are now submitted for consideration bythe G20 Leaders.For further information please contact Mr. André Laboul, Head ofthe Financial Affairs Division, OECD [Tel: 33 1 45 24 91 27; Fax: 33 1 44 30 61 38; E-mail: andre.laboul@oecd.org] or Mr. MichaelChapman, Senior Policy Expert, Financial Affairs Division, OECD[Tel: 33 1 45 24 79 43; Fax: 33 1 44 30 61 38; E-mail:michael.chapman@oecd.org].Organisation for Economic Co-operation and Development,2 rue André-Pascal, 75775 Paris cedex 16, Francewww.oecd.org/finance
Ninth Draft Summary Report on Effective Approaches to Support the Implementation of the G20High-Level Principles on Financial Consumer ProtectionIntroductionBackgroundAt the G20 Cannes Summit in November 2011 the G20 Leaders stated: “We agree that integration offinancial consumer protection policies into regulatory and supervisory frameworks contributes tostrengthening financial stability, endorse the FSB report on consumer finance protection and the highlevel principles on financial consumer protection prepared by the OECD together with the FSB. We willpursue the full application of these principles in our jurisdictions and ask the FSB and OECD along withother relevant bodies, to report on progress on their implementation to the upcoming Summits and developfurther guidelines if appropriate.”At the Los Cabos Summit in Mexico, June 2012, the G20 Leaders endorsed the Action Plan of theG20/OECD Task Force on Financial Consumer Protection to develop effective approaches to support theimplementation of the G20 High-Level Principles and at the Meeting of the G20 Finance Ministers andCentral Bank Governors in Moscow, February 2013, they restated that “We look forward to an updatereport on the work undertaken by the G20/OECD Task Force to support the implementation of the G20High Level principles on Financial Consumer Protection by the St. Petersburg Summit.” At their July2013 meeting the G20 Finance Ministers and Central Bank Governors stated that they “support the workdone by the G20/OECD Task Force on Financial Consumer Protection on the first set of effectiveapproaches to support the implementation of the G20 High-Level Principles on Financial ConsumerProtection and look forward to their report on other principles in 2014”.The Ninth Draft of the Summary Report on Effective Approaches to support the implementation of theG20 High-Level Principles on Financial Consumer Protection is organised around three priority principles;Disclosure and Transparency; Responsible Business Conduct of Financial Services Providers and theirAuthorised Agents and Complaints Handling and Redress. At the Fifth meeting of the G20/OECD TaskForce on Financial Consumer Protection, 2 April 2012, the Task Force agreed that the focus of its workwould be on effective approaches and not new guidance, with a preference for developing anddisseminating relevant practices. The best way to drive this issue forward and to organise the work load indeveloping effective approaches was decided to be for country representative to volunteer and take the roleof Vice Chair’s for each of the priority principles.1 It was later agreed by the Task Force to form subgroups to work with the Vice Chairs in the development of effective approaches for each principle.This draft document takes note of the discussions held during the Seventh, Eighth and Ninth meetings ofthe G20/OECD Task Force on Financial Consumer Protection, on 27 March, 13 May and 10 June 2013,and subsequent written consultation with Vice Chairs, sub-groups and members of the Task Force,Committee on Financial Markets and Insurance and Private Pensions Committee.1The Task Force representative from Spain acts as the Vice Chair for Principle 4: Disclosure and Transparency. TheTask Force Chair from the Netherlands undertakes this role for Principle 6: Responsible Business Conductof Financial Services Providers and their Authorised Agents (replacing the previous Task Force Chair fromMexico, March 2013) and the Task Force representative from India acts as the Vice Chair for Principle 9Complaints Handling and Redress.2
The ProcessThe field of financial consumer protection is still relatively new but it is developing quickly and willprobably continue to do so for some time. Learning from previous experiences and gaining new insightsfrom behavioural and consumers research on how consumers think and feel about and handle theirfinancial issues, have stimulated both policy makers and practitioners worldwide. As a result many newapproaches to market conduct regulation are now being developed and implemented.To meet this challenge the G20/OECD Task Force on Financial Consumer Protection developed anapproach that aims to identify and present a broad range of effective approaches. These effectiveapproaches will be presented Principle by Principle. In this way a toolbox of practice is developed, insteadof detailed guidelines.The effective approaches are illustrative and serve to inspire and stimulate the implementation of the G20High-Level Principles, as well as to share lessons learnt and foster new insights on what works well undercountry specific and sector relevant circumstances.The analysis draws on information gathered through a survey of Task Force Members (including overtwenty responses from G20, FSB and OECD economies) which provided concrete examples of regulatoryand supervisory approaches to support the first three priority principles. This information wascomplemented by factual information gained through an informal consultation with key stakeholders,including consumer and industry associations and additional inputs from various member jurisdictions andother relevant international organisations and Standard Setting Bodies (SSB).During the process the Vice Chairs, sub-groups and members gave consideration to existing and plannedEuropean Union legislative measures in the financial services sector and guidance issued by relevant SSB,although this is not comprehensive at this stage.Effective ApproachesThe effective approaches identified are not exhaustive but they do reflect considerations highlighted withinthe members survey and the following consultations. They represent examples, based on individualjurisdictional initiatives, deliberated and identified, according to the expert opinion of the Vice Chairs, subgroups and members of the G20/OECD Task Force on Financial Consumer Protection.They are illustrative and non-binding and are designed to assist regulators, supervisors, policy makers,financial services providers, authorised agents and all other relevant stakeholders to enhance financialconsumer protection, while taking into account specific jurisdictional circumstances. These effectiveapproaches are of interest across all financial services sectors – including, banking and credit, investment,securities and insurance and pensions.In the context of this report2, the term financial services provider includes all independent entities thatprovide, or offer, financial products and services in the market place. The role of the consumer is that of aretail consumer rather than high-net worth individuals or institutions (which have the means, backgroundand access to professional advice that many retail consumers lack) and the term authorised agents is2The text of the report is organised by paragraph number to enable readers to link the effective approaches with thedetail information on country specific regulatory and supervisor approaches as outlined in an Annex whichwill be made available for the G20 Leaders Summit. This ordering is not intended to indicate, in any way,a hierarchy of significance within the effective approaches.3
understood to mean third parties acting for the financial services provider or in an independent capacity.They include any agents (tied and independent) brokers, advisors and intermediaries.These effective approaches should not be considered in isolation. The development of the G20 High-LevelPrinciples recognised that the Principles are supporting and inter-connected, thereby reflecting a holisticbut proportionate approach to financial consumer protection. While efforts have been made to avoidunnecessary duplication, in some instances, given the interrelation between the principles, it is necessary tomake more than one supporting reference to an effective approach to help support the implementation ofthe principle. For example, there is a strong interrelation between Principle 4 Transparency and Disclosureand Principle 6 Responsible Business Conduct of Financial Services Providers and their AuthorisedAgents. The Task Force is of the opinion that transparency alone is not always sufficient and that effectivefinancial consumer protection through disclosure is best implemented with measures that ensureresponsible business conduct and improve financial education.The term underlying assumptions refers to those assumptions or statements that have been identified bythe Task Force as providing further clarity, or explanation to the High-Level Principle. These assumptionsrefer to traditional justifications for financial consumer protection interventions but the Task Force alsorecognises the importance of emerging points of view stemming from, for example, the perspective ofbehavioural economics as a way to better understand the rationale behind the development of the effectiveapproaches.The term common effective approaches refers to regulatory, supervisory and self regulatory measures andpractices which have been developed and are considered by the Task Force to effectively implement thekey aspects of the G20 High-Level Principles and are consistent with approaches developed by a broaderrange of jurisdictions. These common effective approaches are drawn from the member’s survey and arenot classified due to a specific number of jurisdictions undertaking such an approach.Innovative and/or emerging effective approaches are regulatory, supervisory and self regulatorymeasures and practices that have been identified in the member’s survey and are considered by the TaskForce as approaches worth further consideration. These effective approaches represent either innovative,(undertaking a different, alternative or new approach to implement the key aspects of the G20 High-LevelPrinciple) or emerging (the adoption or the specific use of a certain approach as a consequence of a new oremerging challenge to support key aspects of the G20 High-Level Principle). Innovative and/or emergingapproaches are not representative across a broader range of jurisdictions but instead are limited to anumber of jurisdictions and sometimes they are only applied to certain financial services. The Task Forceconsiders that after taking into account specific national circumstances, these approaches can be of interestto and prove useful for stakeholders engaged in work to enhance financial consumer protection.Future workAs outlined in the Action Plan endorsed by the G20 Leaders at the Los Cabos Summit in 2012, work todevelop effective approaches to support the implementation of the remaining G20 High-Level Principleson Financial Consumer Protection will follow a similar process (member led exercise) to the processdeveloped for the first three priority principles and the Task Force will deliver the final report on theseeffective approaches by June 2014. As the effective approaches will continue to evolve as a result of newinsights and experience, the Task Force will, when appropriate report on practices, so as to keep theeffective approaches relevant, effectual and up to date for policy makers, regulators, supervisors and allother stakeholders involved in promoting financial consumer protection.4
Principle 4: Disclosure and TransparencyUnderlying assumptions1.The principle of disclosure and transparency is important as it is clearly in consumers’ best interestthat they are given complete, clear and not misleading information about financial products andservices.2.Information disclosure, including standardised and prescribed information, supports the decisionmaking process for consumers and allows them to make informed assessments of the financialproducts and services on offer. An appropriate level of standardisation also supports informedassessment by improving the comparability of different products and services. As such, disclosurerules are essential for marketing and advertising materials and not just for specific product offerings.3.Consumers can be at a particular disadvantage when purchasing financial products or services, asthese are widely marketed but purchased infrequently. Behavioural finance provides insights thatsupport the view that traditional approaches to disclosure do not always match consumers’information needs with the decisions they may need to make. Moreover, consumers’ decisionmaking processes may be influenced or constrained by a number of inherent factors, which mayresult in poor financial choices. Effective disclosure and transparency should, therefore, aim tomitigate the effect of these factors by providing appropriate and adequate information andopportunities for consumers to process information with ease and clarity, for instance by disclosinginformation in the format, time, medium and volume that best facilitates informed decision-makingby consumers.4.Since transparency is not always sufficient, effective consumer protection through disclosure is bestcomplemented with measures that ensure responsible business conduct and improve financialeducation.Key Themes1.1 Key Information about the Product or ServiceFinancial services providers and authorised agents should provide consumers with key information thatinforms the consumer of the fundamental benefits, risks and terms of the product. They should alsoprovide information on conflicts of interest associated with the authorised agent through which the productis sold.3 In particular, information should be provided on material aspects of the financial product.Appropriate information should be provided at all stages of the relationship with the customer.Standardised pre-contractual disclosure practices (e.g. forms) should be adopted where applicable andpossible to allow comparisons between products and services of the same nature.Effective ApproachesCommon3Financial services providers and authorised agents should provide clear, concise, accurate, reliable, comparable,easily accessible, and timely written and oral information on the financial products and services beingoffered, particularly on key features of the products and (where relevant) on possible alternative services orproducts, including simpler ones, they provide. In principle, information should include prices, costs,penalties, surrender charges, risks and termination modalities.5
5.Financial services providers and authorised agents do not make statements that are untrue,misleading or omit information that is necessary to understand the nature, risks, terms and conditionsof the products or services.6.Consumers are provided, by financial services providers, adequate information on the key features ofa financial product or service, highlighting the fees, charges, penalties and risks.7.Additionally, the information can be layered to make it easier for consumers to differentiate betweenwhat is essential and what is less important by presenting first select key terms, in a manner thatdraws them to the attention of the consumers.8.Consumers receive appropriate and consistent information on the product or service, irrespective ofwhether they are dealing with a financial services provider or an authorised agent.9.Information documents are provided free of charge. According to the type of product and othercircumstances, their provision is either mandatory or upon request.10.All information, disclosures and other communications by financial services providers andauthorised agents to consumers are clear, accurate and comprehensive at all stages of the relationshipwith the customer. This means that information is provided before and at the point of sale, at regularintervals until the end of the product term or the termination of the service and at appropriate changeor decision points. In the case of mandatory disclosures and communications, regulators make surethey fulfil these characteristics.11.Consumers are allowed a period of reflection to study, question and understand the information theyare provided with, to enable them to make an informed decision about the product or service they arebuying and the consequences of their purchase.12.After buying the product or service, consumers are granted a sufficiently long cooling-off period,allowing them to withdraw from the contract without suffering any inconvenience. Theimplementation of this cooling-off period is adapted according to the nature of the product, clienteleand marketing and distribution practices, such as distant or door to door sales, and as far as it iscompatible with the kind of financial transaction.13.Information for consumers is displayed on the websites of financial services providers and is madeavailable in branches, offices and other client or consumer areas. This is particularly important forlower income users of financial services or other more vulnerable consumers who may lack access tothe internet. Regulators and supervisors provide guidance to financial services providers ondisclosure requirements for product information, including when it is provided online or throughelectronic devices.14.After signing a contract, the consumer receives regular information that allows him/her to monitorthe incurred costs, performance and risks related to that product, with the help of key information,and receives reasonably advanced written notice before any changes in the terms of a product orservice are enacted, according to the conditions laid down in the law and agreed in the contract.6
15.Standardised forms with essential information are used to reflect the nature, key features, risks andcosts of the products and services offered, how such products and services may be paid for and thekey information of the financial services provider, so that the consumer can easily compare productsand providers.16.Information is consistent throughout all the documents and material given by the financial servicesprovider to the consumer, especially regarding numerical data.Innovative/emerging17. Financial services providers and authorised agents adapt information and co
Report on Effective Approaches to support the implementation of the G20 High-Level Principles on Financial Consumer Protection. It is based on several meetings of the G20/OECD Task Force on Financial Consumer Protection, subsequent written consultation with
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