Financial services and consumer protection after the crisis

Abstract

PurposeThe purpose of this paper is to examine the approaches to consumer protection in UK financial services before and after the global financial crisis.Design/methodology/approachThis paper reviews the literature on behavioural economics and psychology, and uses it as the basis for a critique of the UK's approach to the supervision of financial services firms and the protection of their consumers.FindingsNon‐interventionist approaches to consumer protection, which are based on the traditional theories of the law and economics movement, have failed. As a result, there is now a shift in thinking towards more interventionist approaches.Research limitations/implicationsBy understanding the likely impact of the regulatory reforms the academic research community can assist the regulator to understand the best way to ensure desirable outcomes for users (consumers) of financial services.Originality/valueThe moves to reform UK financial regulation after the crisis have only recently got under way and a lot of the reforms have not been widely debated or written on.

Is meta-regulation all it's cracked up to be? The case of UK financial regulation

“…It is characterized by reluctance, on the part of the regulator, to interfere with how the regulated firms conduct their business, and a preference for its regulation to be implemented in a business-friendly manner (34). This idea of light touch regulation has however been criticized as one of the contributors to the regulatory failures in the run-up to the crisis (22,35) and as a consequence it has now been done away with.…”

“…In light of the failure of this approach to supervision the FSA has replaced it with a new approach which has been described as Intensive Supervision. This is a more intrusive and interventionist regulatory style, whereby the regulator is more willing to question the senior managements of the regulated firms on their business models and business strategies, and to compel them to take appropriate remedial actions where their business models or strategies are found to constitute risks to the regulator's objectives (34,47). This necessarily involves more intrusive inspections and mitigation of risks inherent in the regulated firms' business models (48).…”

Financial Consumer Protection Regime in Malaysia: Assessment of the Legal and Regulatory Framework

“…The GFC also revealed other weaknesses in the consumer protection regimes such as inadequate transparency and disclosure of various risks, opacity of products sold, and a failure to protect consumers (Akinbami 2011;Avgouleas 2009;Worrell 2010). The need to protect consumers is a concern for regulators as it is not only appropriate to shield consumers from fraudulent practices but also because it is considered moral and ethical to do so (Harvey and Parry 1992).…”

“…While some studies explore the theoretical underpinnings of regulations related to protecting consumers, others examine institutional developments. 1 In the latter category, several studies have appeared on the newly created Consumer Financial Protection Bureau in the USA (Acharya and Richardson 2012;Braucher 2012;Graham 2010;Kennedy et al 2012;Levitin 2012Levitin -2013Mierzewski et al 2010;Worrell 2010Worrell -2011Zywicki 2013) and the approaches taken to protect financial consumers in the UK (Akinbami 2011;Consumers International 2013).…”

Lack of Consumer Awareness: A Major Challenge for Electricity Consumer Protection in Nigeria

“…In business circle, morality and virtuous conducts such as honesty and integrity are not so important (McKecnie & Akinbami, 2011;Barry, 1991;Cheffins, 1997). Profit at all cost is the driving motive (Zubizarreta & Lang, 2015;Ponlanyi, 1997).…”