The OECD issues a recommendation concerning consumer protection in the field of consumer credit

On 2 July 2019 the OECD approved the new recommendation concerning consumer protection in the field of consumer credit.

The recommendation provides for measures in different areas of financial consumer protection, in line with the principles approved by the G20 High-level Principles on Financial Consumer Protection, most notably:

• Legal, regulatory and supervisory framework;

• Role of oversight bodies;

• Equitable and fair treatment of consumers;

• Disclosure and transparency obligations of institutions;

• Financial education and awareness of consumers;

• Responsible business conduct of financial services providers and authorised agents;

• Protection of consumer assets against fraud and misuse;

• Protection of consumer data and privacy;

• Complaints handling and redress;

• Competition among institutions.

This Recommendation updates and replaces a previous recommendation issued in 1977.

Since the adoption of the previous recommendation, the consumer credit market and the relevant regulations have changed considerably. In addition to establishing disclosure obligations, regulations now cover the suitability of products and the prevention of and reduction in over-indebtedness. Moreover, factors such as low financial literacy levels and behavioural biases of consumers make it difficult to assess information provided by institutions and the decisions made by consumers.

The most recent recommendation takes into account all these developments and also echoes concerns (already raised in the 1977 recommendation) about information provided to consumers, the respect for basic human rights and protection of consumer’s privacy and economic interests, as well as means of redress and sanctions in cases of disputes.

Banco de Portugal was also involved in the revision of this recommendation.

As a member of the G20/OECD Task Force on Financial Consumer Protection (part of the OECD Committee on Financial Markets), Banco de Portugal was part of the working group established in 2017 that worked on the revision of the recommendation.

The revised recommendation was submitted for public consultation beforehand.