+49 40 3096910 institut@iff-hamburg.de

References   [ + ]

1. Udo Reifner and Isabel Herwig, ‘Consumer Education and Information Rights in Financial Services’ 12 (2003) 2 Information & Communication Technology Law 125, 126.
2. (1976) Tatsachen zum Verbraucherschutz im Konsumentenkredit (– see list of publications).
3. For example, Reifner, Financial Literacy in Europe (Nomos 2006); Reifner and Schelhowe, ‘Financial Education’ 9 (2010) 2 Journal of Social Science Education 32.
4. Note that there is to date no agreement on what financial literacy is. It is described by the OECD as a combination of awareness, knowledge, skills, attitude and behaviour necessary to make sound financial decisions and achieve financial well-being, see Jana Valant, ‘European Parliament Briefing: Improving the Financial Literacy of European Consumers’ (May 2015), 2 .
5. See in particular, David Caplovitz, The Poor Pay More (The Free Press, Macmillan 1967) and George S. Day, ‘Consumer Research and the Evaluation of Information Disclosure Requirements: The Case of Truth in Lending’ (1974) 1 Journal of Consumer Research 21.
6. The iff is a not-for-profit organisation offering multi-disciplinary research founded by Reifner in 1987. It has influenced German and European financial policies since its inception and continues to do so today. It also provides key assistance to consumer associations and runs a number of financial education programmes, including SchülerBanking, aimed at school children aged 14 to 17.
7. Udo Reifner and Anne Schelhowe, ‘Financial Education’ 9 (2010) 2 Journal of Social Science Education 32, 32-42.
8. ibid 34.
9. ConFinAd project financed by the European Commission. The project was developed to build the capacity of the advisors of non-profit entities already providing or planning on providing general financial advice (GFA) to consumers in the various subject areas of consumer finance, consumer debt and money management matters. The Team at iff, led by Reifner, in collaboration with BEUC, wrote the training handbook and contributed to the roll out and training across Europe.
10. As the chair of the European Coalition for Responsible Credit (ECRC), Reifner developed the principles of responsible credit drawn up by a coalition of grass root organisations and consumer associations. For more on the work of the ECRC, see http://www.responsible-credit.net/index.php?id=1881.
11. Reifner and Herwig (n 1) 127.
12. ibid.
13. ibid.
14. ibid 128.
15. ibid 129.
16. ibid 130.
17. ibid 133.
18. ibid 138.
19. Similarly, Reifner advocates that the exercise of the right to withdraw from financial transactions, when offered also should be facilitated by the use of prescribed forms. Reifner and Herwig (n 1) 138.
20. Reifner and Schelhowe (n 7) 32.
21. ibid 33, para 1.2.
22. The article and Reifner’s work span the whole of financial services. For our purposes, I shall focus primarily on credit (consumer credit and mortgages) but a similar observation can be made of other areas. The Market in Financial Instruments Directive for instance, mostly concerns and incorporates information requirements and provisions and only few provisions can be brought under the heading of responsible lending. See Vanessa Mak, ’Errare humanum est: Financial Literacy in European Consumer Credit Law’ (2012) 35 JCP 307, 311 and Veerle Colaert, ‘Building Blocks of Investor Protection: All-Embracing Regulation Tightens Its Grip’ (2017) 6 EuCML 229 for an up-to-date account of legislative changes in this area. Furthermore, it is clear that the main objective of the MiFID is to improve competitiveness of EU financial markets, the objective of ensuring a high degree of harmonised investor protection is only an addition to that objective., See European Commission, ‘Public Consultation – Review of the Markets in Financial Instruments Directive (MiFID)’ (8 December 2010) p 5 http://ec.europa.eu/finance/consultations/2010/mifid/docs/consultation_paper_en.pdf.
23. Geraint Howells, ’The Potential and Limits of Consumer Empowerment by Information’ (2005) 32 Journal of Law and Society 349, 351.
24. ibid.
25. Vanessa Mak and Jurgen Braspenning, ’Errare humanum est: Financial Literacy in European Consumer Credit Law’ (2012) 35 JCP 307, 309.
26. Case C-210/96 Gut Springenheide GmbH and Rudolf Tusky v Oberkreisdirektor des Kreises Steinfurt [1998] ECR I-4657, [37].
27. Howells and Weatherill, Consumer Protection Law (2nd ed, Ashgate 2005) 5.
28. See for example, Bar-Gill, Seduction by contract: Law, economics and psychology of consumer contracts (OUP 2012); Geraint Howells, ’The Potential and Limits of Consumer Empowerment by Information’ (2005) 32 Journal of Law and Society 349; Baisch and Weber, ‘Investment Suitability Requirements in the Light of Behavioural Findings’ in K Mathis (ed), European Perspective on Behavioural Law and Economics (2015 Springer).
29. Council Directive 87/102/EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit [1987] OJ L42/48.
30. Commission, ‘Report on the operation of Directive 87/102/EEC’ COM (95) 117 final, p 11 para 44.
31. Directive 87/102/EEC, art 4. The written contract must include a statement of the annual percentage rate.
32. Directive 87/102/EEC, art 3 and art 5. Council Directive 90/88/EEC of 22 February 1990 concerning consumer credit [1900] OJ L61/14 introduced a harmonised method of calculating the APR rate.
33. Cass R. Sustein, Christine Jolls, Richard H. Thaler ‘A Behavioural Approach to Law and Economics’ 52 (1998) Stanford Law Review 1471.
34. Information requirements also do not deal with the fact that consumers often do not take notice of the information provided due to lack of time, and the way in which the information and choices are being presented can be used to direct consumers towards a desired outcome. Consumers tend to be over-optimistic about their ability to avoid risk and to believe information which supports their own viewpoint and ignore information that does not. See Geraint Howells, ’The Potential and Limits of Consumer Empowerment by Information’ (2005) 32 Journal of Law and Society 349, 356-65.
35. Vanessa Mak and Jurgen Braspenning, ’Errare humanum est: Financial Literacy in European Consumer Credit Law’ (2012) 35 JCP 307, 309. See also the study by Asta Zokaityte, ‘Financial Literacy and Numeracy of Consumers and Retail Investors’ (2016) 11 CMLJ 405.
36. Commission, ‘Report on the operation of Directive 87/102/EEC’ COM (95) 117 final.
37. ibid p 34.
38. ibid p 35. In particular this includes the CLAS-CADAS project developed by the iff Hamburg.
39. Commission, ‘Report on the operation of Directive 87/102 concerning consumer credit – summary report of reactions & comments’ COM (95) 117 final, p 27.
40. European Parliament, ‘1996/1997 Session: Information and notices’ 17 March 1997 C85/1, p 139 para 20.
41. Council Directive 2008/48/EC of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC [2008] OJ L133/66, art 5(6). There is no obligation to lend responsibly in the Directive. The only obligation resting on the lender is to proceed with a creditworthiness of the consumer under Article 8. A similar mechanism is used by the Markets in Financial Instrument Directive 2004/39 (MiFID) [2004] OJ L145/1. Article 19 imposes that investment firms ask the client or potential client to provide information regarding his knowledge and experience in the investment field relevant to the specific type of product or service offered, to enable the investment firm to assess whether the investment service or product envisaged is appropriate for the client. It continues that in case the investment firm considers, on the basis of the information received, that the product or service is not appropriate to the client, the investment firm should warn the client.
42. Department for Business, Innovation and Skills, ‘Guidance on the regulations implementing the Consumer Credit Directive’ (August 2010), Summary of Key Changes s 8 on Adequate Explanations.
43. Directive 2008/48/EC, art 14.
44. ibid art 5 and Annex 2 of the Directive.
45. Information should be given to the consumer prior to the conclusion of the contract. See Recital 19. Article 4 also regulates the standard information included in advertising.
46. Directive 2008/48/EC, art 5(1)(m).
47. ibid, art 5(1)(o).
48. Directive 2008/48/EC, art 5(1)(g).
49. On this point, see Peter Rott, Consumer Credit, in Hanz Micklitz, Norbert Reich and Peter Rott (eds), Understanding EU Consumer Law (Hart, 2009) 185. The only reference to responsible lending in the Directive is found in Recital 26, which states: ‘Member States should take appropriate measures to promote responsible practices during all phases of the credit relationship, taking into account the features of their credit market. Those measures may include, for instance, the provision of information to, and the education of, consumers, including warnings, about the risk attaching to the default on payment and to over-indebtedness.’
50. Jana Valant, ‘European Parliament Briefing: Improving the Financial Literacy of European Consumers’ (May 2015)’ p 4.
51. ibid p 2.
52. Directive 2008/48/EC, art 8.
53. The Directive does not specify which consequences should be attached to the consumer’s lack of creditworthiness, see BIS, ‘Guidance on the regulations implementing the Consumer Credit Directive’, p 29.
54. For the creation of such an obligation, see Vanessa Mak, Jurgen Braspenning, ’Errare humanum est: Financial Literacy in European Consumer Credit Law’ (2012) 35 JCP 307, 327.
55. Commission, ‘Report on implementation of Directive 2008/48/EC’ COM (2014) 259 final, p 17 para 7.4.
56. ibid p 9 para 4.4.
57. ibid p 19 s 8.
58. ibid p 20 s 8.
59. Directive 2014/17/EU of 4 February 2014 on credit agreements for consumers relating to residential immovable property [2014] OJ L60/34, Recital 44.
60. ibid, Recital 40.
61. Council Directive 2008/48/EC, Recital 26.
62. Directive 2014/17/EU, Recital 29: In order to increase the ability of consumers to make informed decisions for themselves about borrowing and managing debt responsibly, Member States should promote measures to support the education of consumers in relation to responsible borrowing and debt management in particular relating to mortgage credit agreements. It is particularly important to provide guidance for consumers taking out mortgage credit for the first time. In that regard, the Commission should identify examples of best practices to facilitate the further development of measures to enhance consumers’ financial awareness.
63. Directive 2014/17/EU, Recital 42.
64. Directive 2014/17/EU, art 6 states:Member States shall promote measures that support the education of consumers in relation to responsible borrowing and debt management, in particular in relation to mortgage credit agreements. Clear and general information on the credit granting process is necessary in order to guide consumers, especially those who take out a mortgage credit for the first time. Information regarding the guidance that consumer organisations and national authorities may provide to consumers, is also necessary. 2. The Commission shall publish an assessment of the financial education available to consumers in the Member States and identify examples of best practices which could be further developed in order to increase the financial awareness of consumers.’
65. Directive 2014/17/EU, art 18.
66. Lisa Waddington, ’Vulnerable and Confused: the Protection of “vulnerable” Consumers under EU Law’ (2013) EL Rev 757, 766.
67. See e.g. Directive 2008/48/EC, Recital 8-9 and 18.
68. ibid, Recital 7.
69. Commission, ‘Report on the implementation of Directive 2008/48/EC on credit agreements for consumers’ COM (2014) 259 final, p 6.
70. BIS, ‘Guidance on the regulations implementing the Consumer Credit Directive’ (n 42) p 32 para 8.7.
71. Veerle Colaert, ‘Building Blocks of Investor Protection: All-Embracing Regulation Tightens Its Grip’ (2017) 6 EuCML 229.
72. Geraint Howells, ’The Potential and Limits of Consumer Empowerment by Information’ (2005) 32 Journal of Law and Society 349, 350.
73. Jana Valant, European Parliament, ‘Consumer Protection in the EU – Policy Overview’ (September 2015), p 6 point 1.3.2.1.
74. ibid, p 18 point 4.2.
75. Council Regulation (EU) 254/2014 of 26 February 2014 on a multiannual consumer programme for the years 2014-20 and repealing Decision No 1926/2006/EC [2014] OJ L84/42, Annex 1, Objective 2(7). This tendency is echoed in the UK, where the concept of financial capability has emerged and arguably become a key part of UK government and regulatory thinking in recent years. The now abolished Financial Services Authority stated in 2006 that better informed, educated and more confident citizens are able to take greater responsibility for their financial affairs and play a more active role in the market for financial services. See (Chris Clark, ’Learning to Fail: Resilience and the Empty Promise of Financial Literacy Education’ 18 (2015) Consumption Markets & Culture 257, 259-60).
76. Better finance, http://www.betterfinance.eu and Finance watch, http://www.finance-watch.org.
77. European Commission, ‘Increasing consumer involvement in financial service policy-making’ <https://ec.europa.eu/info/business-economy-euro/banking-and-finance/consumer-finance-and-payments/consumer-financial-services/increasing-consumer-involvement-financial-service-policy-making_en>.
78. Commission, ‘Consumer Financial Services Action Plan; Better Products, More Choice’ (Communication) COM (2017) 139 final.
79. ibid, p 8 para 2.6.
80. Commission, ‘Consumer Financial Services Action Plan; Better Products, More Choice’ (Communication) COM (2017) 139 final, para 2.6.
81. Commission, ‘Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Central Bank, the European Economic and Social Committee and the Committee of the Regions – Consumer Financial Services Action Plan: Better Products, More Choice” [2017] OJ C434/51 (opinion on Communication).
82. ibid, point 3.19. Point 4.12 (action 7): efforts to find ways to prevent consumer over-indebtedness – financial education and lifelong training should be key concerns, promote more ambitious and harmonised financial education.
83. Commission, ‘Report on the implementation of Directive 2008/48/EC on credit agreements for consumers’ COM (2014) 259 final, p 19.
84. According to art 27(2) of Directive 2008/48/EC, the Commission must undertake a review every five years, the first was undertaken in March 2013.
85. Another way to shift the balance towards more effective consumer protection may also be to urge to reconsider the average consumer standard and refocus on the notion on vulnerable consumers. On this, see Irina Domurath, ‘The case for vulnerability as the normative standard in European consumer credit and mortgage law – An inquiry into the Paradigms of consumer law’ 2 (2013) 3 euvr 124.
86. Udo Reifner and Anne Schelhowe, ‘Financial Education’ 9 (2010) 2 Journal of Social Science Education 32, 36.
87. For further support for this position, see Vanessa Mak and Jurgen Braspenning, ’Errare humanum est: Financial Literacy in European Consumer Credit Law’ (2012) 35 JCP 307, 307-332. The authors call for extensive duties to warn and a duty to prevent particular consumers from entering into overly risky agreements.