Consumer Protection on the Financial Market (2017)

Another is the risk of unsuitable investments, which increases as consumers are forced to make increasingly difficult decisions about their savings. FI also accounts in the report for other observations made in its supervision, for example that digitalisation can lead to better tailored products and more competition, but also to certain risks.

Consumers on the financial markets must make more and more deci-sions while at the facing an increasing number of options. Financial products are difficult to evaluate, and many consumers know little about or have limited interest in financial matters. As a result, con-sumers are generally at an information disadvantage in their interac-tion with financial firms. Regulation is therefore needed to protect consumers and avoid a negative outcome for both individual consumers and the economy at large.

Financial firms must be stable and subject to good control and risk management if consumers are to be able to trust that their investments with these firms are safe. Consumers must also have access to clear, relevant information in order to be able to compare the fees and other terms and conditions associated with different products.
However, simply providing information is not sufficient for ensuring a high level of consumer protection. Even when consumers have access to a lot of information, they may, for a number of reasons, have difficulty interpreting and understanding the terms and conditions of various products. The manner in which the information is presented, for example the alternatives that are pre-selected, has a strong influence on which decisions are made. Furthermore, conflicts of interest within financial firms may lead to the sale of products that are not suitable given the individual consumer's needs and circumstances.

FI presents in this report the risks that it has given the highest priority with regard to consumers on the financial market as well as the measures that FI has taken or plans to take.
The first risk that FI highlights is that consumers may be granted larger loans than what their personal finances can handle. This is a prioritised risk for FI from several perspectives. The risk for consumers is especially large when it comes to consumption loans, which are designed and sold in a way that could give rise to conflicts of interest. This could have large, negative consequences for consumers, and in a worst-case scenario could result in a record of non-payment and over-indebtedness.

Mortgages constitute the majority of household debt. Vulnerable households, i.e. households that have large loans in relation to their income or the value of their home, may need to sharply reduce their consumption if interest rates were to rise or they were to suffer a loss of income. This could have negative consequences for both individual households as well as the economy. There is therefore cause for strengthening households' resilience and reducing the share of vulnerable households from both an economic perspective and a consumer protection perspective.

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