Too much choice in the financial services market is a mixed blessing and is confusing consumers, warns the European Consumers Organisation.
Speaking at the European Mortgage Federation conference in Brussels last week, Jim Murray, director of the ECO, warned delegates that the complexity of financial services and consumer choice made it difficult for consumers to make rational and optimum choices.
He says: “If consumers knew the full facts of the choices on offer they would probably conclude they weren’t the optimum ones.”
Murray also says that educating consumers on financial services is not the answer and in most contexts is a cop-out.
He adds: “Preparing consumers is worth doing but in most contexts it is a cop-out. The notion of educating consumers on financial services, diet and medicine is not realistic.”
Murray criticises companies for trying to change consumers by turning them into financial experts and says they should deal with consumers as they are.
Murray maintains that he is not anti-education, but simply anti the education of consumers. He says if everybody was fully educated on the range of financial services available they probably wouldn’t buy half of them.
Specific areas of financial services that concern Murray include APRs on mortgage products and equity release.
He calls for more controls on features such as early repayment charges because as well as not being consumer friendly, they are also anti-competitive.
Murray adds: “Tie-ins are not always unjustified but they are anti-competitive and may be detrimental to consumers.”
Murray believes the equity release sector will continue to grow in the future, but he warns that it is a fertile breeding ground for “abuse and outright fraud”.
He adds: “This is a horrifically difficult area and could attract rogues that prey on vulnerable consumers.”