Global consumer movement sets out conditions for a new financial order

· Consumer education not enough, protection is vital

· Measures to restrict emerging monopolies needed

· Ringfence retail banking to protect consumer deposits

· No bailouts without essential services investment obligations

Consumers International (CI), the global federation of consumer organisations, today set out its solutions to the financial fix calling for effective, affirmative, preventative consumer protection as an essential foundation for moving beyond the economic crisis.

Following worldwide consultation with its membership, CI is submitting its position to the UN Conference on the World Financial Crisis, 24-26 June. This follows ongoing contributions to the UN’s Stiglitz Committee and the OECD.

Joost Martens, Director General of Consumers International, stated that “While CI research has shown most consumers manage their finances responsibly, they have been unfairly blamed by governments, media and industry for creating this crisis through irresponsible borrowing, and then prolonging it through insufficient spending. It is high time the so-called experts start listening to consumers, rather than blaming them for the mess the bankers and governments have created.”

In mapping out the consumer movement’s call for a new financial order, CI argues that the financial crisis began with a failure to protect consumers from bad loans in the US and other mortgage markets. A viable fix for the global economy must include greater regulatory oversight of a far more transparent banking industry.

However, whilst transparency is important, more information for consumers is not enough. The system is simply too complex at present and needs regulatory intervention to remove incomprehensible financial products and services.

Robin Simpson, Senior Policy Advisor at Consumers International, has hinted that “Consumer education is a right, but avoiding financial ruin in the current climate takes more than access to information. No doubt the clients of Bernie Madoff thought their money was in good hands, but the billions he embezzled shows we are all susceptible to the faults in the financial system. Better law, as well as better understanding, is needed”.

The meltdown of the financial industry has also led to bank mergers being hurried through by competition authorities. CI is gravely concerned that the banking monopolies emerging from this crisis pose a danger to consumer choice and protection. We therefore call for strict monitoring and reporting requirements to be established to ensure the new financial services landscape works for the consumer.

There must also be a clear distinction between retail and investment banking activities. Only then can consumer deposits be protected from the irresponsible behaviour and risky speculation of the investment bankers.

CI is also concerned that the current seizure of bank activity is denying millions of poor consumers access to basic bank account services and starving critical public utility developments of investment. This is of particular concern in the developing world where the flow of funds is a vital means of achieving improved consumer access to electricity, water, sanitation and financial services.

CI is therefore demanding that taxpayer bailouts come with mandatory obligations to provide basic consumer banking services and investment in major social infrastructure projects.

According to Robin Simpson “The banking sector has elbowed its way to the front of the public expenditure queue as a result of the threat of collapse, effectively holding a gun to the head of government. They cannot simply swallow taxpayer money and carry on as before; firm commitments to provide for basic consumer needs and services must accompany these bailouts. ”

For more on CI’s work in this area, visit www.consumersinternational.org/financialcrisis