Executive summary
Consumers of financial products and services face a complex landscape with a range of evolving issues, opportunities and risks. In this context, it is critical for policymakers, national authorities and international bodies responsible for financial consumer protection to identify and monitor the risks affecting financial consumers, track consumer detriment and share effective approaches that can help address these risks and harms. The Consumer Finance Risk Monitor (the Monitor), developed by the G20/OECD Task Force on Financial Consumer Protection, synthesises the perspectives of 43 jurisdictions on risks to financial consumers in 2022 and 2023. The Monitor covers current and emerging risks stemming from the operating environment; demand-side risks; conduct-related risks; tools used to monitor risks; products and services giving rise to consumer detriment; consumer complaints; and financial scams and frauds. To address risks to financial consumers, policymakers should ensure the full implementation of comprehensive financial consumer protection frameworks in line with the G20/OECD High-Level Principles of Financial Consumer Protection to strengthen supervisory capacity, empower financial consumers and protect those who may be vulnerable.
Jurisdictions identified key risks to financial consumers in three broad categories: conduct-related risks, demand-side risks, and risk stemming from the operating environment. In most cases, it was anticipated that the significance of these risks would remain the same, or increase in 2023.
The most significant risks arising from the conduct of financial institutions include poor-value financial products and services, ineffective disclosures and dishonest sales practices.
The most significant risks related to the characteristics and circumstances of consumers (demand-side risks) include a lack of financial literacy, over-indebtedness and a lack of digital capability. More broadly, jurisdictions shared concerns relating to various forms of consumer vulnerability.
The most significant risks stemming from the broader operating environment include inflation and rising interest rates, financial scams and frauds, and new business models and digital innovation.
The following areas also emerged as significant risks: increasing incidence and complexity of scams and frauds; new credit products and risk of over-indebtedness; innovation in digital technology and business models; increasing access to crypto-assets, which may be unregulated in some jurisdictions or issued and traded in a manner not compliant with applicable domestic regulations in others; alternative sources of financial advice; and greenwashing and other risks linked to sustainable finance.
Financial scams and frauds continue to be a major concern among jurisdictions. Most jurisdictions (72%) noted that the reported incidence of financial scams and frauds increased in 2022 compared to 2021. In jurisdictions where data are available, the total amount of financial losses due to scams and frauds also increased from 2021 to 2022. This growth in financial losses ranged from a 5% increase in Singapore to a 79% increase in Australia. The most common types of scams and frauds by number of people affected were tricking consumers into providing personal identification information and fake schemes designed to tempt consumers to transfer, pay or invest money or buy fake insurance.
Data gathered through consumer complaints about financial products and services can signal gaps in financial consumer protection frameworks and highlight areas that may need to be addressed by policymakers and regulatory and supervisory authorities tasked with administering and enforcing financial consumer protection laws, regulations and other measures. In around three quarters of responding jurisdictions, complaints filed directly with firms or with alternative dispute resolution mechanisms increased from 2021 to 2022. Complaints filed with supervisory authorities also increased in more than half of responding jurisdictions.
Transaction accounts, debit cards, mobile banking and digital wallets gave rise to the greatest consumer detriment in the banking and payments sector, primarily due to harms linked to financial scams and frauds and blocked accounts. Detriment arising from these products was expected to increase in 2023 as inadequately regulated digitalisation may increase consumers’ exposure to scams and frauds.
Mortgages and home loans gave rise to the greatest consumer detriment in the credit sector in 2022, primarily due to interest rate hikes and cost of living increases that, while not necessarily the result of misconduct by financial services providers, still negatively affected consumers’ budgets.
Motor and life insurance gave rise to the greatest consumer detriment in the insurance sector in 2022. Jurisdictions noted that certain business practices in the sector, such as bundling or tying products, risk causing consumer detriment in the absence of effective disclosures and transparency. Authorities also reported confusion among consumers about insurance coverage and dissatisfaction with claims handling and compensation.
Crypto-assets gave rise to the greatest consumer detriment in the investments sector. Jurisdictions expected that the harm from crypto-assets would increase in 2023 along with detriment from self-directed investments, equity and sustainable financial products.
Benefits payments and management of assets gave rise to the greatest consumer detriment in the pensions sector in 2022, in part linked to volatility in financial markets in 2021/22 that caused the performance of some pension funds to deteriorate. In addition, jurisdictions noted that detriment arose from commission structures that create incentives for distributors to persuade consumers to purchase products with high commissions, even if they are not in line with outcome expectations and risk appetites.
Jurisdictions have undertaken and planned a range of initiatives to address current and emerging risks. Effective approaches start from the basis of implementing and improving comprehensive financial consumer protection frameworks in line with the G20/OECD High-Level Principles of Financial Consumer Protection, the leading international standard for effective and comprehensive financial consumer protection frameworks. In addition, addressing consumer-facing risks requires strengthening supervisory capacity, empowering financial consumers and paying special attention to consumers who may be vulnerable.