Consumer Protection in Financial Services

by Cartwright, Peter

• ISBN13: 9789041197177
• ISBN10: 9041197176
• Format: Hardcover
• Copyright: 1999-03-01
• Publisher: Kluwer Law Intl

Summary

The question of how financial services should be regulated in the interests of consumers has never been more topical. The structure of the financial services industry is changing rapidly And The need For The law to keep pace with these changes has never been greater. This book examines the role of the law in the protection of the consumer, In particular the ways in which the law is, and could be, used to protect consumers when purchasing financial services. A prominent panel of contributors first examines the role of the European Union And The ombudsmen schemes operating in the United Kingdom in improving consumer protection. Eight expert papers present a detailed analysis of aspects of the various legal mechanisms protecting consumers in the banking, financial services, investments and insurance industries. The final part of the book is concerned with the important and controversial area of consumer credit. This unique work is a welcome contribution to a rapidly developing area of law, which has so far received little attention from commentators. it will be of great interest to those at the cutting edge of banking, financial services and consumer law, whether practicing lawyers or in-house counsel, and all those involved in advising consumers.

Table of Contents

Foreword	v
Lord Borrie
Sponsoring Organisations	xv
Editor's Preface	xvii
List of Contributors	xix
Table of Legislation	xxiii
Table of Cases	xxxi
Introduction
Consumer Protection in Financial Services: Putting the Law in Context
Peter Cartwright
Introduction	3	(1)
Consumers, Investors and Citizens	4	(3)
The Law and Theory of Consumer Protection in Financial Services	7	(3)
Consumers and Information	10	(2)
Consumers and Non-market Goals	12	(3)
Consumer Law, Regulation and Enforcement	15	(2)
The Scope and Content of this Book	17	(8)
PART I THEMES AND TRENDS IN FINANCIAL SERVICES
The European Union, Financial Services, and the Consumer
Anna Morner
Introduction	25	(1)
The Consumer in the European Union	26	(4)
The early years	26	(1)
The New Approach	27	(3)
Financial Services	30	(9)
Creating an internal market in financial services	31	(1)
Freedom to provide services across borders	31	(1)
Residual regulatory powers	32	(2)
The `freedom to buy'	34	(1)
Measures specifically aimed at consumers	35	(1)
Cross-border credit transfers	35	(2)
Consumer credit	37	(1)
Distant selling	38	(1)
Conclusion	39	(4)
The Ombudsmen and Consumer Protection
Philip Morris
Gavin Little
Background: the Proliferation of Ombudsmen and Problems Posed by Growth of the Ombudsman Technique	43	(2)
The Banking Ombudsman Scheme	45	(8)
The Building Socieites Ombudsman Scheme	53	(10)
The IMRO Investment Ombudsman Scheme	63	(6)
Conclusions	69	(1)
Addendum	70	(7)
PART II BANKING
Bank Confidentiality and the Consumer in the United Kingdom
Andrew Campbell
Introduction	77	(3)
The Common Law Duty	80	(1)
The Review Committee's Report and the Government's Response	81	(3)
The Code of Practice	84	(3)
The Four Qualifications to the Duty	87	(5)
`Under compulsion by law'	87	(3)
`Duty to the public to disclose'	90	(1)
`Where the interests of the bank require disclosure'	90	(1)
`Where the disclosure is made by the express or implied consent of the customer'	91	(1)
What Information is Covered by the Duty of Confidentiality?	92	(1)
Black Information	93	(1)
Remedies for Breach of the Duty	94	(1)
Conclusion	94	(5)
Unilateral Variation in Banking Contracts: An `Unfair Term'?
Eva Lomnicka
Introduction	99	(1)
Unilateral Variation in General	99	(8)
The Unfair Terms in Consumer Contracts Regulations	107	(15)
Keeping outside the grey list	108	(1)
General	108	(2)
Schedule 3, paras 1(j) and (k)	110	(2)
`Valid reason'	112	(1)
`Specified in the contract'	113	(1)
The derogations	114	(1)
General	114	(2)
Schedule 3, para. 2(b): the first derogation	116	(1)
Scope	116	(2)
The proviso	118	(2)
Schedule 3, para. 2(b): the second derogation	120	(2)
Present Practice	122	(3)
Deposit Guarantees and the Individual Bank Customer
Peter Cartwright
Introduction	125	(1)
Deposit Guarantees: Definitions and Types of Scheme	125	(2)
Deposit Guarantees and Consumer Protection	127	(3)
Deposit Guarantees, Bank Safety and Moral Hazard	130	(3)
Depositor Protection and Co-Insurance: The European Approach	133	(1)
Deposit Guarantees and Informed Consumers	134	(1)
The Future of Depositor Protection	135	(1)
Conclusions	136	(5)
PART III FINANCIAL SERVICES AND INVESTMENTS
Financial Services Regulation: Can History Teach Us Anything?
Sharon Chin
Introduction	141	(1)
A Little History	142	(5)
The corporatist system of regulation	142	(1)
Reasons for the demise of the corporatist system	143	(1)
The `Big Bang'	144	(2)
The Gower Committee	146	(1)
The Financial Services Act 1986	147	(6)
The regulatory structure	147	(1)
The scope of the Financial Services Act 1986	148	(1)
Regulation of investment firms	149	(1)
Problems with the Financial Services Act 1986	150	(3)
The Way Forward	153	(6)
The Financial Services Authority: background and scope	153	(3)
Policy considerations	156	(3)
Conclusion	159	(4)
Pensions and the Consumer: Lessons from Overseas
David O. Harris
Susan P. Jones
Introduction	163	(2)
Regulation	165	(3)
Distribution	168	(3)
Product Design	171	(2)
Redress	173	(2)
Disclosure	175	(2)
Public Education	177	(8)
Some Consumer Problems Relating to the Sale of Long-Term Insurance
Richard J. Bragg
The Scope of Insurance	185	(2)
The Consumer Problem	187	(1)
The Independent Financial Adviser and the Tied Agent	188	(3)
The Financial Services Act and regulation	188	(1)
The independent financial adviser	189	(1)
The tied agent	190	(1)
The Perceived Failure of IMRO and the Industry Response	191	(1)
How Can the Insurers Prevent Problems?	192	(1)
Sanctions	193	(1)
Conclusion	194	(5)
PART IV INSURANCE
Insurance Law Reform for the Benefit of the Consumer: Some Lessons from Australia
John Birds
Introduction	199	(1)
The Need for Law Reform	200	(2)
The Reform Process in Australia	202	(1)
Consumer Protection Provisions in the Australian Legislation	202	(9)
Intermediaries	203	(1)
Non-disclosure and misrepresentation	204	(1)
Utmost good faith	205	(1)
Formation issues	206	(1)
Prohibition of contract terms	206	(1)
General restriction on the insurer's right to avoid a claim	207	(1)
Standard cover	208	(2)
Protection in non-prescribed contracts	210	(1)
Other Australian reforms	210	(1)
Reactions to the Australian Legislation	211	(2)
Self-regulation in Australia	213	(1)
Lessons from Australia	213	(6)
Consumer Protection in Insurance Contracts
Chris Willett
Norma Hird
Introduction	219	(1)
The Common Law	219	(7)
Risk and price terms, procedural terms and terms giving a discretion	219	(2)
Warranties	221	(2)
Rules	223	(3)
Legislative Approaches to Fairness	226	(3)
Self-regulation	229	(3)
The Statements of Practice	229	(1)
Warranties	229	(1)
Duty of disclosure	230	(1)
Insurance Ombudsman	231	(1)
The Way Forward	232	(7)
PART V CONSUMER CREDIT
Seeking Social Justice for Poor Consumers in Credit Markets
Geraint Howells
Introduction	239	(1)
Low Income Consumers and Markets	239	(1)
The Particular Problems of the Credit Market for Low Income Consumers	240	(2)
Doorstep Moneylenders	242	(2)
High Interest Rates and Consumer Protection	244	(3)
Challenging Assumptions about the Existing Values of the Market	247	(1)
Justifications for Intervention	248	(3)
Competition	248	(1)
Market re-organisation	249	(2)
Alternative institutions	251	(1)
Solutions	251	(12)
Competition	252	(3)
Prudent lender	255	(3)
Interest rate ceilings	258	(2)
Alternative institutions	260	(2)
Credit unions	262	(1)
Social fund	263	(1)
The Consumer Lawyer's Task	263	(4)
Racial and Gender Equality in Markets for Financial Services
Iain Ramsay
Toni Williams
Introduction	267	(3)
Freedom from Contract: Exclusion and Exploitation	270	(1)
Responses to Discrimination in Access to Credit and Capital: Human Rights Law	271	(3)
Redlining	274	(2)
Community Reinvestment and Beyond	276	(2)
Conclusion	278	(3)
Index	281