June 6, 2023 | Maria Fritzsche
Estimated reading time: 4 minutes
The global importance of consumer protection
Consumer protection is an important matter all around the world. It ensures fair and responsible treatment of customers. It allows customers to make informed, unbiased decisions when purchasing and using products and services.
The importance of consumer protection was further solidified when the G20 Leaders adopted high level financial consumer protection principles, which were adopted by the Financial Stability Board (FSB) in December 2022. The principles are designed to support the development of effective and comprehensive financial consumer protection frameworks. This global and cross-sectoral applicable guidance underlines “public trust and confidence in the financial system, [to] support the financial inclusion and resilience of individuals and households.”
UK Consumer Duty
In the UK, the Consumer Duty rules have been finalized and the implementation timeline is keeping firms busy. In a recent publication, CUBE issued a step-by-step guide to successfully comply with the new Consumer Duty regime. It covers the UK’s objectives, what firms are affected by the Duty, what the specific regulatory requirements are and most importantly what changes firms should expect in the FCA’s supervisory approach.
US Consumer Protection
In the US, the Consumer Financial Protection Bureau (CFPB) is responsible for the protection of customers in the financial sector. It oversees customer-related financial products and services with the aim of preventing harm to customers. It was created out of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which in turn followed the 2008 financial crisis.
For more than a century, consumer protection has been regulated on a federal level in the US. Alongside the CFPB, the Federal Trade Commission (FTC) promotes consumer protection. The FTC was established in 1914 to prevent unfair business practices, eliminate unfair competition and regulate monopolies. In recent years, the FTC has focused on rulemaking to address unfair and deceptive business practices in several areas such as, but certainly not limited to, marketing, privacy concerns, telemarketing, and manipulations of customers online.
The list of Federal laws focusing on the protection of consumers is a long one. To name a few:
- Gramm-Leach-Bliley Act (GLB Act)
- Truth in Lending Act (TILA)
- Fair Credit Reporting Act (FCRA)
- Fair Debt Collection Practices Act (FDCPA)
- Equal Credit Opportunity Act (ECOA)
- Consumer Product Safety Act (CPSA)
- Securities Exchange Act (SEC Act)
The federal legislations ensure a US-wide general standard for consumer protection. However, several states have additional requirements to protect their customers, for example California and New York.
New York’s General Business Law paragraph 349 states that: “Deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service” are unlawful. The legislation was enacted in 1970 and the New York State Consumer Protection Board was established in the same year. More recently, in May of 2023, the New York Attorney General Letitia James announced a proposed law to protect customers from the mostly unregulated cryptocurrency industry. Regulation of the cryptocurrency industry aims to protect investors, consumers, and the broader economy.
For more than a century, the US has consistently demonstrated its unwavering commitment to consumer protection, both at the federal and state level. The consequences of investigations and fines are another indication, for example TitleMax was ordered by the CFPB to pay a $10 million penalty for unlawful title loans and overcharging military families. Another example, is the order given to OneMain Financial to pay $20 million in redress and penalties for failing to refund interest.
Benefits to firms and the importance of consumer protection in financial services
The protection of consumers is not only a benefit to the consumers, but also to firms. Businesses that comply with consumer protection policies and prioritize the wellbeing of their customers not only establish a positive reputation but also gain a competitive advantage, making them highly sought after in the marketplace, which in turn will lead to economic growth.
The policies, laws and rules protect and help both businesses and consumers by regulating a competitive financial market. Firms need a dynamic and effective environment in order to thrive and expand. Consumer protection laws facilitate that by preventing the occurrence of unfair competition. The need for businesses to keep their prices and quality of products and services in check boosts economic growth and spurs innovation.
How can CUBE help?
CUBE’s regulatory change management software empowers organizations to maintain a cutting-edge position by staying on top of ever-evolving rules and regulations. It can specifically highlight what the obligations are under the new rule on a global scale. This will allow the compliance teams to process information quickly, enabling them to spend more time on seamless implementation. By ensuring consumer protection rules are effectively implemented, CUBE’s regulatory technology ensures benefits for both consumers and businesses alike.
Find out how CUBE can help your firm to keep up to date on consumer protection.