BANKS IN Ireland and across Europe are to be investigated for the accuracy of the advice they give to customers and their willingness to facilitate people wanting to switch financial institutions.
The European Commission is planning to carry out a “mystery shopper” investigation of banks later this month to address concerns about the quality of the advice financial institutions are providing to customers.
Announcing the initiative, EU consumer affairs commissioner John Dalli described banks failure to provide customers with good advice as a “sorry state of affairs” and said consumers had found themselves poorly protected and ill-educated in the wake of the financial crisis.
In one German survey, he pointed out, 24 out of 25 banks were found to have provided bad advice to a customer seeking to invest a sum of money.
The crisis showed the need for consumers to be provided with clear and comparable information, suitable advice and financial education, Mr Dalli said. “It’s not enough to give consumers information; you have to train them to interpret that information.”
He was speaking at a conference in Brussels on financial literacy, which has become a priority for the EU since the financial crisis.
Training was provided for educators using the commission’s Dolceta consumer website, which includes information on financial issues and consumer rights for teachers, students and the wider public.
The site also includes practical information, lesson plans for all age groups and quizzes and interactive games aimed at improving financial literacy.
Surveys have revealed high levels of perplexity and ignorance about financial matters among the general public. As Mr Dalli pointed out, half of all European consumers think financial products should be simplified and 40 per cent do not even know what interest is.
From later this month, all banks in the EU will be required to use a standardised pre-contract information form containing essential information such as the Annual Percentage (APR) rate, which shows the true cost of borrowing. The commission is also considering a requirement for banks to provide a yearly breakdown of all charges and the creation of an online comparator to encourage people to switch to cheaper providers.
The mystery shopping exercise will also examine whether banks have implemented a code introduced last year to facilitate account switching.
Research has found the consumers are far less likely to switch their current account than other financial products and far less likely to switch financial products than other products such as utility bills. One survey carried out by the Commission found that seven out of 10 financial websites did not show the costs involved in operating a current account.
Mr Dalli, who is from Malta, admitted the commission has no power to penalise banks that breach its rules but he promised to name and shame offending institutions.