TUAC - TRADE UNION ADVISORY COMMITTEE TO THE OECD

13/10/2011

Financial consumer protection is a top priority for trade unions. The 'subprime' crisis in 2007 that triggered the current global economic recession was fuelled by widespread abusive and deceptive sales practices by banks and their middlemen. It is working families but also city councils and small businesses who paid the hard high price for lax consumer protection regulation across many OECD and G20 jurisdictions.

The OECD proposal of Principles falls far short of trade unions expectations. The text lacks ambition in ensuring proper protection for consumers and is filled with caveats in favour of bankers' interests. According to the Principles, bankers and mortgage sellers should "endeavour to avoid" conflicts of interest. The Principles are "voluntary" and "non-binding". This means that anyone across G20 economies - regulators and bankers included - have all liberty to ignore the Principles altogether. If anything the global financial crisis shows that self-regulation by bankers and voluntary approaches have failed, and will fail in the future.

The TUAC and its trade union partners, the ITUC and UNI Finance made know their deep disappointment about the OECD process last August when a draft version of the Principles was disclosed for public consultation: "at best the Principles will have very limited impact on the ground and, at worst, they could serve to undermine efforts to strengthen financial regulation and supervision by giving uncritical support for self-regulation and voluntary approaches". Trade unions made concrete proposals to rebalance and improve the text, including:

• Enhancing the powers of regulators, including the power of sanctioning;
• Developing higher standards for disclosure and transparency of financial products and services to customers;
• Ensuring that working conditions within credit and insurance institutions and their sales agents are conducive to equitable and fair treatment of customers;
• Recognising the role of trade unions in promoting financial consumer protection;
• Committing G20 countries to support independent and representative civil society consumer groups;
• Ensuring that the Principles are binding on G20 regulators, bankers and insurers.

These proposals by trade unions have not been taken on board in the final version of the Principles which in fact has been further downgraded compared with previous draft versions.

Moving on, the TUAC calls upon the OECD to engage further work on financial consumer protection in close cooperation with the Financial Stability Board.

links

• 30/08/2011| Joint contribution by the TUAC, the ITUC & UNI Finance to the OECD public consultation on “Draft G20 High-Level Principles on Financial Consumer Protection”