Savers and individual investors are one of the most vulnerable groups of consumers due to the nature of financial markets, the limited financial literacy of households and the growing complexity of investment services and products. When breaches of consumer rights occur in this sector, losses are high and usually difficult to compensate. BETTER FINANCE’s research estimated that, in the period 2005-2018, the largest cases of consumer detriment in financial services amounted to damages of at least €73.5 billion for more than 13 million financial consumers.
On the back of the recent financial crises and decreasing consumer trust in capital markets, EU and national financial regulatory frameworks have become more complex, providing a wide array of rights for consumers.
However, seeking injunction or redress and compensation can prove difficult, lengthy, costly, or a combination of those. In response to this, the EU harmonised (or required Member States to adopt) civil procedures for consumer class actions against traders, which also cover financial services. The collective redress Directive constitutes an important tool for consumers to gather their claims against the same provider of services and/or products and enforce their rights. Nevertheless, in BETTER FINANCE’s view, statistically, most breaches of consumer rights in financial services are individual, thus concerning a single client, and small(er) in value. In these cases, each individual client or prospective client must “take on” the financial services provider by him-/herself.
This prompts the question of which individual redress tools consumers dispose of, by virtue of EU or national law, to enforce their rights and obtain compensation from financial services providers, as well as their efficiency. Our research found a series of such redress tools and procedures, but not all functioned as planned.
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