The European Jurists Forum 2013 was focussed in its private law section on the consequences of the financial crisis and the law. In the final panel discussion also consumer views should get a place. This was why at the recommendation of BEUC iff overtook this charge. But the task was nearly impossible since the lawyers seem to see the problems just on the other side of the globe. They seem to assume that although overindebtedness has shown its nasty image with Spanish,UK and US home-owners foreclosures they thing the problem lies with the investors (which are in legal terms the creditors and not the debtors) Secondly they even presume that these investors are consumers. We assume that this mirrors the confusion which has been created by the deregulatory neo-liberal phase of the law in all states. The following paper has (jast as all other contributions to this panel) has not been distributed at this discussion. We make it available in this form over the Internet.
Udo Reifner, Hamburg/Trento
The consumer as a private investor – Panel discussion
Chair: Professor Niamh Moloney, London School of Economics (LSE)
Friday 19 April 2013 Afternoon session 17.00 European Lawyers Day Barcelona
Theses for Discussion
1. Consumer protection is a core goal of the European Union.[i] It targets ”any natural person acting for purposes which are outside his trade, business, craft or profession”[ii]. The definition does not relate to personal qualities but to the exercise of a function all people have to perform during their lives.[iii]
2. EU-politics have turned this concept into an arbitrary notion to justify all kind of interventions into the market. First consumer advantages replaced consumer protection in the Cecchini report and the consumer protection agendas. Since a free market has been generally attributed an advantage for consumers all obstacles to markets including social consumer protection rules are no longer protected by the Treaty.[iv] The proposals on insurance intermediation (IMD II)[v] or investment (MiFID II)[vi] just like the Payment Systems Directive replace consumers by „customer/client”[vii], „user”[viii], „insured person” creating the new legal principle of „customer protection”. For the traditional legal protection concerns Driven by the financial crisis and its social disasters consumers in the EU have faced through it a new field of social protection has been invented in consumer protection: „the vulnerable consumer” who obviously isd not vulnerable because he consumes but because he or she is poor. „Investor’s protection” is a further step towards the erosion of consumer protection in financial services law.
3. Investor’s protection aims at securing profit expectations of persons who intend to increase their return on lending money to all kind of debtors. (having money) Consumer protection instead wants to protect the future use of the money invested. (using money). The investment goals are protected by the general legal guarantees for markets and property. They do not need consumer protection on top of it.
4. Consumers may profit from investor’s protection but there are also conflicts of interests where the majority of consumers are those who pay interest, taxes necessary to keep up exaggerated earnings in the investment area.
5. Consumption is structurally weak in the market economy. This is the reason why the legal system has to tame economic power and protect such interests similar to tenants and labour interests. The enormous threat financial services have posed to consumer interests and are now quite generally be recognised by the G20 summit and its high level principles on consumer protection in financial services developed by the OECD. Housing, old age pensions, education, sufficient liquidity and shelter from risks have been threatened through financial products. Lack of access, suitability, safety and irresponsible suppliers need state control:[ix] ”All financial consumers should be treated equitably, honestly and fairly at all stages of their relationship with financial service providers. Treating consumers fairly should be an integral part of the good governance and corporate culture of all financial services providers and authorised agents. Special attention should be dedicated to the needs of vulnerable groups.”
6. Consumer protection with regard to such placements which the market views as investments but where the placement is nonly a means of consumption and not an end in itself should therefore be addressed as savings. Consumers need protection where they postpone the expenditure from present earnings tot he future. The traditional triangle of adequate investments (security, liquidity and interest) should therefore be adjusted to consumption purposes by suitability, access and social responsibility. Transparency information and education are important tools to access the best offer in the market and to uphold competitive market mechanisms. But they fail where consumers are not offered the adequate products for their needs, where suppliers show irresponsible behaviour during the savings process and where consumers are exploited.
[i] See Art. 4 (2) (f) (competence); 12 (general goal); 114 (3) (high level of); Art. 169 (consumer interest, high level of consumer protection to protect health, security and economic interests of consumers and to protect their right to information, education and organisation” See consolidated version by March, 30. 2010 OJ 2010/C 83/01
[ii] Article 2 (1) EU Directive on Consumer Rights
[iii] See §103 (h) Consumer Credit Protection Act where consumption is best expressed as serving ”primarily for personal, family, or household purposes”.
[iv] ECJ 13.5.1997, Rs C-233/94 (No 48): ”In that regard it suffices to point out that, although consumer protection is one of the objectives of the Community, it is clearly not the sole objective. . however, no provision of the Treaty obliges the Community legislature to adopt the highest level of protection which can be found in a particular Member State. The reduction in the level of protection which may thereby result in certain cases . does not call into question the general result which the Directive seeks to achieve, namely a considerable improvement in the protection of depositors within the Community.”
[v] COM(2012) 360/2 2012/0175 (COD) (recast).
[vi] 20.10.2011 COM(2011) 656 final 2011/0298 (COD) (recast).
[vii] Artikel 16 (10) and 41 (2) MiFID II use „retail customer”
[viii] Recital (22) Article 37 (2) of the banking supervisory regulation 1093/2010
[ix] OECD, G20 High – level principles on financial consumer protection, (”endorsed by the G20 Finance Ministers and Central Bank Governors at their meeting on 14 – 15 October 2011.”) http://www.oecd.org/regreform/sectors/48892010.pdf