THE IMPACT OF THE 2007-2008 CRISIS ON THE EUROPEAN AND ROMANIAN

LEGISLATIVE AND INSTITUTIONAL FRAMEWORK IN THE PROTECTION OF

CONSUMERS OF FINANCIAL SERVICES

Monica CALU

Abstract
Inadequate consumer protection, especially in the US mortgage market, has not only resulted in considerable consumer
harm, but has contributed substantially to the onset of the global financial crisis. In the EU, the miss-selling of financial
products has also led to major damages to consumers. Given the potential significant detriment that financial services can
cause to individual consumers and to the single market, it has become clear that consumer protection policy needs to be
properly regulated in this area. The global trend is to include the responsibilities of information, financial education, consumer
protection and transparency among the duties of supervisory and regulatory authorities. In the EU, enhanced consumer
protection has resulted in improved transparency of financial products for consumers and better information regarding retail
financial transactions. Stricter regulation of the financial products and services market has resulted in better solutions for
consumers and an increased efficiency of the retail financial products market. The improved European legislation was
gradually transposed into Romanian internal law.
A number of legislative solutions, recommendations and actions to strengthen consumer protection in the area of
financial services are put forward in this study with the aim to demonstrate that one of the aftermath of the financial crisis was
an irreversible change of paradigm regarding the end users and consumers of financial services reflected in consumer
protection legislation.

Keywords: consumer protection, financial services, financial education, digitalisation, European regulation, Romanian
Law.

risks associated with the new saving and investment

opportunities to customers and households. At the same
1. Introduction time we are witnessing a constant increase in the
The global financial crisis has highlighted the complexity of financial products and the rapid
need for more effective and efficient measures to development of the related technical tools. All of these
protect consumers of financial services in the context overlap with adverse conditions for consumers, where
where they are facing increasingly sophisticated offers access to basic financial services and financial literacy
and matching risks. One of the lessons of the 2008 are unsatisfactory in many countries around the world.
mortgage crisis was that it is essential to protect the Basically, technology has developed at a faster
rights of the consumer, while admitting that these rights pace than consumer education and skills and suppliers
also come with responsibilities on both sides of the are developing their products faster than the market can
financial market. adapt to them safely.
The field of financial services consumer Rapid evolutions of market conditions, the pace
protection, as we understand it today, is relatively new of innovation in the financial field, the emergence of
but is developing rapidly and this will probably be the alternative financial services and of poorly regulated or
trend for the following period. In this regard, new completely unregulated suppliers, generate risk factors
approaches to the regulation of business codes of for possible market abuses, miss selling of financial
conduct are constantly being developed and products and services, non-transparent and non-
implemented, and the major challenge is to implement compliant activities, financial exclusion for those less
the best practices and to standardize these approaches, digitalised, fraud, money laundering. In particular,
benefiting from the accumulated experiences as well as lower income or less experienced consumers face
the results of scientific research on consumer behavior. additional difficulties in accessing or using financial
The global trend is to include the responsibilities services and products. There may also be cases where
of information, financial education, consumer compliant financial products are promoted and sold by
protection and transparency among the duties of authorized agents, at the edge or with the breach of the
supervisory and regulatory authorities. 1 law, to unsuitable categories of consumers, causing
At present, international policies and regulatory them significant losses due to information and
efforts are increasingly taking consumer protection into transparency flaws.
account, as companies tend to transfer a broad range of


President of Consumers United Association, mastering at SNSPA, Department of International and European Integration (DRIIE) –
Master's programme International Relations and European Integration (RIIE) (e-mail: monica.calu@consumers-united.eu).
1
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52014SC0261&from=en, page4.
Monica CALU 955
From the perspective of supervisory and to systemic risks, without strict regulation and
regulatory authorities, at a strategic level, the duties supervision of the activity or without implementing
regarding consumer protection and education of clear and transparent ethical rules at the suppliers’
consumers of financial services imply the allocation of level.
a sufficient level of authority and resources to the In order to understand the present role of
specialized personnel as well as the elaboration and consumer protection in ensuring financial stability, we
implementation of clear working procedures integrated must first analyze the moments in the recent history of
into a coherent legislative framework. The rationale of the financial mechanism in which the protection
this strategy is the recognition that only an integrated measures were either non-existent or improperly
approach can contribute to the stimulation of healthy applied.
consumer behaviors into the retail financial market, In the context of a relaxed supervisory and
allowing long-term financial plans of individuals and regulatory framework in mature markets, this
helping to financial stability. At the same time, to imbalance has led to the rapid spread of the high-risk
ensure robust post-crisis recovery, the goal of not (subprime) mortgage crisis in the US, which has since
burdening the market with too much regulation has expanded to the level of the global financial mechanism
been weighed. and then to the entire economic system, culminating in
In light of these aspects, consumer protection the state debt crisis. According to the trigger
measures for financial services have to be integrated mechanism of the crisis2, banks have relaxed the
with other inclusion and financial education policies, security requirements when granting loans, customers
thus contributing to achieving a strengthened financial without sufficient incomes or guarantees thus being
stability. able to qualify for a mortgage loan. With the new
money thus thrown into the real estate market, buying
pressure was created and the price of real estate
2. Consumer protection increased artificially. The more expensive houses
required higher loans, over time. When the price started
Consumer protection is usually one of the main to fall, the loan installments became too high compared
functions of any market regulatory and supervisory to the daily value of the purchased properties. Clients
authority. By extrapolating, we could say that almost stopped paying their mortgages and banks were left
all the measures taken by the authorities are, in essence, with properties that could not cover their debts.
taken with the ultimate purpose of protecting Initially, banks secured insurance coverage against the
consumers. However, the term consumer protection is risk of non-payment through complex financial
consecrated among authorities to describe the direct products. But the risk does not simply disappear from
and domain-specific measures related to: complaints the system, it being taken over by other financial
management, ensuring the transparency framework in entities (usually speculators) and sometimes sold
the activity of suppliers, compensation of the injured, indirectly even to those who were insured in the first
business ethics, supervision and control of abusive place, lured by the attractive yields offered and ignoring
clauses and modalities of selling financial products to the risk for the second time. Thus, everything started
the retail market, issuing public communications such from the chase after profit, from underestimation and
as alerts or recommendations, analyzing the impact of ignorance from both buyers and sellers, who often
niche financial products. failed to fully understand the mechanism of the
The complaints analysis and the conclusions financial products they were selling to ordinary
drawn from their settlement are the main factors customers. In this context, where the suppliers carry,
generating regulation and control actions in the field of perhaps, most of the blame, we cannot ignore the failure
consumer protection. In this context, at European level, of the supervision, control and prevention policies
there is a tendency to harmonize policies and implemented by the authorities, but also of the lack of
regulations in the field as well as measures to collect understanding of the risks by consumers.
and analyze data on petitions. Nowadays, financial products and instruments are
Currently, consumers are at a disadvantage in the becoming more and more complex, especially in
financial market equation, the balance being inclined in markets with a high degree of competitiveness. High
favor of the suppliers. The latter have better access to competition, usually a factor for the benefit of
information, resources and skills to measure. Financial consumers, generator of reasonable prices and high
innovation is most often used to differentiate quality services, works to their detriment. Studies
competition providers by competitive advantage, conducted on both mature systems and developing
sometimes disregarding the limited degree of consumer markets highlight that complex products have higher
understanding, or the potential harms that may arise hidden costs and lower performance for ordinary
from the misuse of financial instruments and services. consumers3, especially when these tools are promoted
Thus, the prospect of increasing profits can even lead to inappropriate groups of customers.4

2
https://ei.com/economists-ink/special-issue-november-2008/financial-crisis-what-went-wrong-by-jonathan-a-neuberger/
3
https://www.esma.europa.eu/sites/default/files/library/esma50-165-422_trv_-_vulnerabilities_-_investor_protection_corrected.pdf.
4
https://www.thepriceofbadadvice.eu/static-map/.
956 Challenges of the Knowledge Society. Administrative and Political Sciences
The information available to the public in the to increase the complexity of financial services, the
financial field has evolved not only in complexity but pace of evolution of financial markets, the increasing
also in quantity and the pace of change, regarding the number of active consumer-investors as well as the
launch of new services and products, as well as the pace recognition of the limits of the regulatory instrument as
of adaptation of financial services to new technologies, the only consumer protection tool. The definition of
has increased dramatically. financial education developed by the OECD in 2005
From the considerations set out above, consumer and endorsed by G20 leaders in 2012 is used in a
protection has become a term usually associated with majority of countries to refer to: “the process by which
the regulatory and supervisory authorities, the only financial consumers/investors improve their
ones able to ensure the impartiality of the regulations understanding of financial products, concepts and risks
and the actions taken to improve the financial and, through information, instruction and/or objective
mechanism. advice, develop the skills and confidence to become
For instance, into the Report From The European more aware of financial risks and opportunities, to
Commission To The European Parliament And Council make informed choices, to know where to go for help,
on the operation of the European Supervisory and to take other effective actions to improve their
Authorities (ESAs) and the European System of financial well-being.” (OECD, 2005a). In addition,
Financial Supervision (ESFS) COM(2014) 509 final, it OECD statuates:“financial education is a process that
is provided: „(ESAs) have been assigned regulatory, covers and takes into account the varying needs of
supervisory, financial stability and consumer protection individuals in different socio-economic contexts.
roles.” At part v. Consumer protection, is stated: Financial literacy that is the outcome of this process is
Consumer and investor protection is one of the defined as a combination of financial awareness,
statutory tasks assigned to the ESAs, which so-far is knowledge, skills, attitude and behaviours necessary to
perceived as not being given sufficient priority in the make sound financial decisions and ultimately achieve
work of the authorities. 5 financial well-being (OECD/INFE, 2012).”6
Another point of view regarding the goals of the
financial education is emphasized into the
3. Financial education Communication from the Commission COM (2007)
808 final on Financial Education, from 18.12.2007. As
Some authorities regard financial education as a recognition of the economic and social benefits of
part of the broader field of consumer protection, on the providing financial education is mentioned that
preventive side, others treat it separately and “financial education should be seen as a complement
complementarily. to adequate consumer protection and to the responsible
It is certain that the recent economic crisis has behaviour of financial services providers. It can in no
highlighted the need for adequate information, way be seen as the only solution to remedy information
education and tools to make the right financial asymmetries between consumers and providers.” 7
decisions in an increasingly complex financial system. While financial institutions are obviously familiar
The financial difficulties of consumers and of their with the contractual terms and conditions of their own
families can affect the development of communities financial products, they may be non-transparent or
and of the market as a whole. The crisis has shown that difficult to decipher by the clients to whom they are
the financial well-being of individuals is fundamental addressed. Thus, financial education must aim at
to the financial stability at national level and that the rebalancing information symmetry, on both sides of the
lack of financial education is one of the reasons that can balance, so that consumers can ultimately make
lead to a decrease in the standard of living. informed decisions. To do this, in most cases, suppliers
Financial education has become a complementary must be required by law to provide product information
element to the policies of prudential regulation and in a wording accessible to their customers.
supervision of business conduct in the financial field. Currently, it is recommended to implement
In many countries of the world, it is considered a long- programs only after the clear identification of the needs
term priority policy aimed at improving individual of the population, of the target groups and of the most
financial behavior. efficient ways of transmitting the messages, following
Thus, at the epilogue of the financial crisis, surveys and analyzes that can last, according to the
financial education has begun to be recognized as one World Bank estimates, up to 3 years8. In the meantime,
of the major individual skills in most economies of the pilot programs can be organized which can then be
world. As in the case of the consumer protection field, refined and calibrated on a large scale, following a clear
the basic reasons for the increasing importance of this plan, preferably set according to a national strategy in
field include the tendency to transfer an increasing the field. The evaluation stage is deemed to be
range of (financial) risks to the population, the tendency absolutely necessary, allowing policies and programs

5
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52014SC0261&from=en.
6
https://www.oecd.org/finance/financial-education/G20_OECD_NSFinEd_Summary.pdf, page 11.
7
file:///D:/My%20Documents/APC/CKS%202021/COM_2007_0808_FIN_EN_TXT.pdf, page 4.
8
http://documents1.worldbank.org/curated/en/638011468766181874/pdf/296720PAPER0100steps.pdf page 40, page 57.
Monica CALU 957
to be calibrated and adjusted in accordance with the certainty that they represent the current concerns and
field reality. the global trends in the matter of consumer protection.
At the same time, taking into account the secondary
intention of elaborating these principles, namely their
4. International context implementation in a form as uniform and comparable
as possible by the states, it is advisable to integrate them
The change of paradigm started in 2010, at G20 in any strategic document in the field, respecting the
summit in Seoul, where participants called for stronger specificity of the local systems and markets.
protection of consumer interests in financial markets. Important to mention is the joint statement of the
As a result, under the 2010 Dodd-Frank Act, the United G20 leaders, at the Cannes summit, which shows the
States established the Federal Deposit Insurance level of involvement and importance of this aspect, at
Corporation, FDIC. After three years, in the United international level: “We agree that integration of
Kingdom was created a separate independent financial consumer protection policies into regulatory
supervisory body to protect the interests of consumers and supervisory frameworks contributes to
of financial services - Financial Conduct Authority, strengthening financial stability, endorse the FSB
FCA. report on consumer finance protection and the high
In EU, consumer protection and information also level principles on financial consumer protection
fall within the framework of Community legislation in prepared by the OECD together with the FSB. We will
the field of financial services. The Articles 114 and 169 pursue the full application of these principles in our
of the Treaty on the Functioning of the European jurisdictions and ask the FSB and OECD along with
Union9 are the legal basis for the protection of other relevant bodies, to report on progress on their
consumers in European Union, including consumers of implementation to the upcoming Summits and develop
financial services, from which is derive the further guidelines if appropriate.”
Community’s commitment to promoting consumers’ The need to standardize the practices in this field,
right to information, education and to organise in the context of globalization, has led to the correlation
themselves in order to safeguard their interests. between the materials elaborated by the OECD and the
The Cannes Summit, held in 2011 seeking existing or planned regulations at EU level, in the field
measures to counteract the negative effects of the of financial services.
financial crisis has addressed, among others, the need The World Bank has also played a pivotal role in
for better regulation of the protection of consumers of the field of consumer protection and financial
financial services, central bank governors in the G20 education, dealing with these areas in an inter-
states and finance ministers and have appealed to the dependent manner. The institution has issued numerous
OECD and the Financial Stability Board (FSB) studies and researches in the field as well as specific
together with any other relevant international recommendations applicable both at international level
organizations to develop a set of common principles of and in particular, to the states under review. For
consumer protection in the field of financial services 10. example, the World Bank has prepared the document
An international working group was established, Good Practices for Consumer Protection and Financial
focused on the effective implementation of the three Literacy in Europe and Central Asia: A Diagnostic
priority objectives set out in the Action Plan, regarding Tool. The paper reviewed the good practices and made
transparency and provision of information for necessary annotations, being elaborated in order to
consumers, responsible behavior and business ethics stimulate the debates in the field. The recommendations
for financial service providers and authorized contained in this analysis are valuable in the light of the
intermediaries and procedures to manage and settle fact that they were not limited to incorporating the
complaints. principles and recommendations contained in EU
At the time of drafting the strategy, the directives and European Commission
international working group involved in monitoring the recommendations, but went further with the
implementation of the objectives was in the process of comparative analysis of good practices used
drafting effective methods and guidelines in this regard, worldwide.
meant to stimulate the implementation at national level.
The approaches take into account the best practices
identified so far in different states and the
circumstances of each financial sector and the materials
5. European post crisis context of
developed include experiences identified in many parts consumer protection
of the world following consultations with stakeholders: The first aspects of increasing EU consumer
national regulatory and supervisory authorities, confidence and strengthening their position were
employers' associations, the academic environment, addressed in the Green Paper on Retail Financial
and consumer associations. Considering the high level
of the works elaborated in this context, we can say with

9
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:12012E/TXT.
10
https://www.oecd.org/daf/fin/financial-markets/48892010.pdf.
958 Challenges of the Knowledge Society. Administrative and Political Sciences
Services in the single market11, which overlaps with the (a) collecting, analysing and reporting on
onset of the 2008 global financial crisis. consumer trends;
The necessity of better regulation of financial (b) reviewing and coordinating financial literacy
market, including the adequate supervision of the retail and education initiatives by the competent authorities.
financial services market for consumers have been Therefore, according to article 9 of the ESMA
reflected in the new Community institutions created in Regulation no. 1095/2010, consumer protection and
2011, the European Supervisory Authorities (ESAS) financial activity related tasks are delegated to the
system, which consist of the European Systemic Risk European Authority.
Board (ESRB), the European Banking Authority In coordination with the European Securities and
(EBA), the European Insurance and Occupational Markets Authority (ESMA) and in specific and well-
Pensions Authority (EIOPA) and the European defined circumstances, supervisory authorities may
Securities and Markets Authority, (ESMA). The prohibit certain products, services or practices in the
European financial supervisory authorities, EBA, case of threats to investor protection, financial stability
EIOPA and ESMA carry out activities in the field of or proper functioning of markets ESMA Regulation no.
financial education and each of them has in their 1095/2010 (12)14.
operating regulations similar provisions regarding In this respect, at 27th March 2018, ESMA, along
consumer protection and financial education. “EIOPA with National Competent Authorities (NCAs),
has a key role in promoting consistent supervisory concluded that there exists a significant investor
practices on consumer protection issues, working protection concern in relation to CFDs and binary
together with national competent authorities on the options offered to retail investors and prohibited the
tools they can use and measures them can take to marketing, distribution or sale of binary options to
identify, assess and solve consumer protection retail investors. Also, imposed a restriction on the
problems”.12 marketing, distribution or sale of CFDs to retail
„The role and tasks of the EBA related to investors.15
consumer protection and financial activities include: Another European Authority, EIOPA, more
collecting, analysing and reporting on consumer trends recently, pursuant to Article 18(2) of the PRIIPs
in the EU; reviewing and coordinating financial literacy Regulation, EIOPA announced that partially supports a
and education initiatives; developing training standards planned prohibition of some unit-linked life insurance
for the industry; contributing to the development of products by the Polish Financial Supervision Authority
common disclosure rules; monitoring existing and new and calls for coordinated action across Europe, for
financial activities; issuing warnings if a financial identified risks for policyholders buying unit-linked
activity poses a serious threat to the EBA's objectives insurance products in Poland.16
as set out in the its funding Regulation; and temporarily One more example: making use of its active role
prohibiting or restraining certain financial activities, in consumer protection, the European Banking
provided certain conditions are met.”13 Authority (EBA) issued a statement in relation to
ESMA's activity in the field of consumer consumer and payment issues in the context of the
protection is not limited to legislative improvements. COVID-19 pandemic, which acknowledges the need to
According to article 9 of the ESMA Regulation no. adopt appropriate measures to protect consumers and
1095/2010, in Chapter II Article 8, Tasks and powers the orderly functioning of payment services across the
of the Authority, is provided "(i) develop common EU.17
methodologies for assessing the effect of product With regard to the European policy in the field of
characteristics and distribution processes on the financial education, in May 2012, the European
financial position of financial market participants and Commission adopted a new European Consumer
on consumer protection". Agenda18 to boost confidence and development by
Also, Article 9, Tasks related to consumer placing consumers at the center of the single market
protection and financial activities is stated: concerns. Built around four main objectives, the
1. The Authority shall take a leading role in European Consumer Agenda aimed to increase
promoting transparency, simplicity and fairness in the consumer confidence by increasing security, improving
market for consumer financial products or services their knowledge, intensifying law enforcement and
across the internal market, including by: ensuring the possibility of obtaining compensation as

11
europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P6-TA-2008-0261+0+DOC+XML+V0//EN.
12
https://www.eiopa.europa.eu/browse/consumer-protection_en.
13
https://www.eba.europa.eu/regulation-and-policy/consumer-protection-and-financial-innovation.
14
https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:331:0084:0119:EN:PDF.
15
https://www.esma.europa.eu/press-news/esma-news/esma-agrees-prohibit-binary-options-and-restrict-cfds-protect-retail-investors.
16
https://www.eiopa.europa.eu/content/eiopa-partially-supports-planned-prohibition-of-some-unit-linked-life-insurance-products_en.
17
https://www.eba.europa.eu/sites/default/documents/files/document_library/News%20and%20Press/Press%20Room/Press%20Releases/
2020/EBA%20provides%20clarity%20to%20banks%20and%20consumers%20on%20the%20application%20of%20the%20prudential%20fr
amework%20in%20light%20of%20COVID-
19%20measures/Statement%20on%20consumer%20protection%20and%20payments%20in%20the%20COVID19%20crisis.pdf.
18
https://ec.europa.eu/commission/presscorner/detail/en/IP_12_491.
Monica CALU 959
well as adapting consumers' rights and policies in the can be devastating for consumers, since investments are
field to changes which have occurred in society and the often the essential element of their life-long savings. In
economy. the context where the EU retail investment market
Consumer expenses, which amounted at the level stands at 10,000 billion euros, buying wrong or
of 2011 to approx. 56% of the EU's GDP 19, reflects the inadequate products can quickly become a major
huge power of consumers (about 500 million problem.
consumers at European level) to drive the European In order to strengthen consumer confidence and
economy. And consumers need to enjoy their rights and economic growth in the medium and long term, solid,
be confident in order to fully exploit the potential of the well regulated retail markets that are focused on
single market and stimulate innovation and growth. The consumer interests are needed. As part of its reporting
agenda replaces the EU Consumer Policy Strategy activity in 2012, the Commission assessed the need to
2007-2013. According to the Agenda, the Commission strengthen current rules on combating unfair practices
aims, among other things, to recognize the importance in the financial services sector and to optimize their
of the role of national consumer organizations and to application, including for vulnerable consumers.
support them through capacity building and assistance Thus, in the last decade, the European
in the field. European institutions recognize the Commission has focused its attention on taking
transformation of the financial crisis into a crisis of concrete legislative measures to address deficiencies in
consumer confidence. consumer protection, while helping to restore the level
Nowadays, financial literacy is becoming of trust. That is why, in 2012, the Commission
increasingly vital for individuals, and it should be presented a legislative package that tried to raise the
considered, in the context of the European Pillar of standards in the field and eliminate legislative gaps.
Social Rights, Principle 20 on the right to access to More specifically, the package was made up of three
essential services: „Access to essential services: legislative proposals: a proposal for a regulation on key
"Everyone has the right to access essential services of information documents for packaged retail investment
good quality, including water, sanitation, energy, products (PRIPS), a revision of the Insurance
transport, financial services and digital Mediation Directive (IMD), and a proposal to increase
communications. Support for access to such services protection for those who buy investment funds.
shall be available for those in need."20 With the aims of strengthening the consumer
Due to the lack of transparency, the low level of protection and empowering the consumers of financial
information on risks and the inappropriate treatment of services, EU Member States have transposed EU
conflicts of interest, consumers across the EU have directives regarding to the protection of consumers of
repeatedly been sold investment and insurance products financial services to their national law, namely, the
that were not suited to their needs. Consumer Markets for Financial Instruments Directive (MIFID),
confidence in the financial sector has been shaken here the Consumer Credit Directive, and the Payments
and there. In addition, the existing legislation has not Directive. Regarding the protection of investors at
developed fast enough to reflect the increasing European level, the most important ones to mention is
complexity of financial services. the revised Markets in Financial Instruments Directive
The consequences of taking too many risks can be (MiFID), proposed in October 2011: a revised directive
devastating for consumers, since investments are often - MiFID II and a new regulation – MiFIR (the Markets
the essential element of their life-long savings. In the in Financial Instruments Regulation).
context where the EU retail investment market stands The new rules contained in MiFID II offer
at 10,000 billion euros, buying wrong or inadequate increased protection to consumer which act as investors
products can quickly become a major problem. by imposing requirements for financial institutions and
There are three types of financial abuse at strengthening the rules of professional conduct.
European level: (1) the poor performance generated by Over the past decades, household debt in Europe
the incompetence of the providers or the poor quality of increased tremendously: between 1997 and 2017, it
the services; (2) misinformation or overselling, i.e. the increased from 39.3% to 50% of nominal GDP. 21 Main
sale of inadequate financial products in the context of a components were mortgage credit and consumer credit.
low financial literacy of consumers, misinformation or In 2017, the outstanding amount of consumer credit in
abusive sales practices; (3) fraudulent trading, that is, EU28 was around EUR 1,800 billion, according to
abuse and direct fraud performed by financial service EBA Consumer Trends Report 2018/2019.
providers. The consequences of taking too many risks

19
https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52012DC0225&from=EN.
20
https://ec.europa.eu/info/strategy/priorities-2019-2024/economyworks-people/jobs-growth-and-investment/european-pillar-social-rights/
european-pillar-social-rights20-principles_en.
21
https://www.ceicdata.com/en/indicator/european-union/household-debt--of-nominal-gdp.
 Regarding consumer credit, the same report A Commission study estimated that, in 2016,
found that “the main issues arise from the cost of short- the total financial damage for EU consumers in the
term credit, the misuse of consumer credit, poor market for loans, credit and credit cards was EUR 12.84
creditworthiness assessment and insufficient billion.
contractual and precontractual information.” 1

Among the major drivers of irresponsible lending supervision and enforcement by competent authorities.
that may cause consumer detriment are inappropriate 

product design, misaligned sales incentives, even In the context of the existence of a high degree of
conflict of interest on credit or financial advice, indebtedness of the European population even after a
unsolicited credit offers, risks related to online decade of the previous recession, the European
distribution of credit, inadequate creditworthiness Commission considers amending the Consumer Credit
assessment by creditors, product cross-selling, Directive 2008/48.
financial products bundle, lack of a harmonised EU
personal bankruptcy scheme and lack of effective


https://www.eba.europa.eu/sites/default/documents/files/documents/10180/2551996/75e73a19-d313-44c9-8430-fc6eca025e8b/
Consumer %20Trends%20Report%202018-19.pdf.

https://op.europa.eu/en/publication-detail/-/publication/b0f83749-61f8-11e7-9dbe-01aa75ed71a1/language-en.

https://www.thepriceofbadadvice.eu/static-map/
Monica CALU 961
6. Romanian post crisis development of amended by Law no. 288/2010, published in the
consumer protection Official Gazette of Romania no. 888 of 30.12.2010.
The provisions of Directive 2014/17/EU on credit
The economic crisis has led consumers to look agreements for consumers relating to residential
more closely at credit agreements and to become more immovable property were implemented into national
aware of their rights, thus iscovering the benefits of the law through Government Emergency Ordinance no.
existence of EU legislation and the regulation of retail 52/2016 on credit agreements offered to consumers for
financial services. Many of them discovered not only immovable property and for amending and
that they were mislead by the banks, by incorrect supplementing the Government Emergency Ordinance
practices and terms, even from the pre-contractual no. 50/2010 on credit agreements for consumers („GEO
stages. Credit institutions hide some fees or 52/2016”) and it was after passed the transposition term
commissions or by splitting the real percentage of the of 21 March 2016 established by the Directive. The
loan interest so they can advertise offers with a very new legislation entered into force on 30 September
low interest, while in contracts was provided clauses 2016.
which introduced the duty for the consumer to pay a In Romania, Regulation No. 32/2006 regarding
certain percentage sum of money to the ballance as a financial investment services transposed MiFID I
commission under different terms (credit management Directive, Directive implementing Market abuse
fee or risk commission). The legal battle started and Directive, Distance marketing of consumer financial
thousands of them referred their credit contracts to the services Directive. Regulation No. 15/2004 regarding
National Consumer Protection Authority establishing a the authorisation and functioning of investment
dark history of the relationship between consumer and management firms, collective investment undertaking
banks and creating a litigation culture. The and depositories, as amended and supplemented,
examination in Romanian courts of the applicable transposed UCITS Directive.
legislation of consumer protection though rised issues MiFID II has been transposed into Romanian
related to the transposition in national law and legislation by Law No. 126/2018 on markets of
interpretation of the directives on consumer protection, financial instruments, and by several regulations issued
which in several cases was asked to the European Court by the FSA and the NBR.
of Justice. In Romania, the major obstacle to the Romania was one of just a few European
development of an adequate legal framework for countries without a personal bankruptcy regulation in
protection of consumer of financial services was place. Law no. 151/2015 on insolvency of natural
generated by the great inertia of the authorities persons was adopted by the Romanian Parliament in
regarding the adoption of modern instruments of June 2015 after numberless postponement entered into
safeguarding and prevention in the financial field. The force on 1 January 2018. After the 2008 financial crisis,
Consumer Credit Directive (CCD) was agreed by the the stable core of the consumer protection sector in
Council and Parliament and published in the Official Romania is represented by solid regulations mainly due
Journal in May 2008. The CCD was designed to to transposition of the EU directives into internal
harmonise the regulation of consumer credit across legislation. Several central government institutions
Europe and to increase consumer protection. Member with continuity in the field, together with some NGOs
States were asked to transpose the Directive into that have proven a sustained and consistent activity in
national law before 12 June 2010. In 2010, the EU the field of financial services carried out programs and
Directive 2008/48/EC on credit agreements for actions of financial education and popularization of
consumers was transposed in Romania by Government consumer rights. As regards financial education, in the
Emergency Ordinance no. 50/2010 on credit first stages the initiatives came mostly from the civil
agreements for consumers after months of debates, society and private sector, but sometimes their actions
fortunately with an application to a wider array of were with a strong commercial character, promoting
contracts - including mortgage credit, which has been credit cards or investment plans, for instance. Among
shown to be a source of relief for the debtors affected the public institutions the programs developed by the
by the recession beginning to be felt in Europe. This National Bank of Romania and the financial
ordinance is the main regulation on consumer credit supervisory authorities of the non-banking sectors
protection and implemented EU requirements on the stood out. Especially with regard to public information,
obligations of creditors. Even this Directive was aimed efforts towards the transparency of financial
at unsecured lending such as credit for the purchase of institutions and dully informing consumers have often
consumer goods or leasing contracts, the Romanian been regarded as a burden or a mere obligation to align
Parliament adopted the law with a higher level of with European standards without fully understanding
protection than in the Directive, providing stronger the usefulness of these measures for society in the long
information obligations, a prohibition post-contractual term. Thus, the divergent views of the leaders of
changes and extended them to mortgage loans. financial institutions and national competent authorities
Government Emergency Ordinance no 50/2010 was


https://www.digi24.ro/stiri/economie/capcanele-creditelor-bancare-eliminarea-clauzelor-abuzive-destul-de-greu-de-pus-in-practica-124366.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2261915.
962 Challenges of the Knowledge Society. Administrative and Political Sciences
on the usefulness of financial information, retail market of the financial education programs so far in this field.
data or regarding competition and sanctions for the Among the first conclusions of the 2007-2008 crisis,
breach of legislation on consumer protection has often the European Commission said that economic and
created lack of trust on behalf of consumers and users financial education should be complementary to legal
of financial services. and regulatory measures aimed at providing consumers
with relevant information and adequate protection.
Another conclusion of the previous recession is
7. Conclusions that a well-functioning consumer credit market is
beneficial to households, not just producers and sellers
The financial crisis of 2007 began with a failure
of goods and services, and stimulates economic growth.
to protect consumers of financial services, especially
But if credit is misused and the debt burden becomes
those with mortgage debts. A growing number of
unbearable, it harms not only debtors but also creditors,
member states, like Austria, Belgium, Czech Republic,
endangering economic stability. Consumer confidence
France, Hungary, Ireland, Lithuania, the Netherlands,
in a well-functioning financial market creates the
Portugal, Romania, Spain and Slovakia have already
premise of financial stability and is a trigger for
developed national strategies in order to clarify the
continuous development and improvement of the
roles, competences, mode and level of involvement of
efficiency and innovation characteristics for the entire
each player, in order to identify and prioritize the needs
financial system.
of different social groups and in order to rationalize the
Without supervising and effectively enforcing
available resources. Despite of measures taken both
regulations, consumer protection of financial services
locally and at the highest international level, since 2007
risks being superfluous. It is essential to ensure that
there has been limited progress in most Member States
national and EU public authorities in the field are well
in Europe in ensuring a sufficient level of financial
equipped with clear competences, the ability to
capacity and education and an adequate response to the
monitor, investigate and sanction in order to effectively
problem of financial illiteracy in Europe that prevents
supervise the business behavior of financial service
people from understanding basic financial services and
providers and tackle consumer protection issues.
products and making informed and knowledgeable
Consumer protection is generally considered to
decisions. This somewhat limited progress and effect of
be a regulatory response to a market failure. (Eisner,
the programs so far in the field is widely accepted at
Allen, Worsham & Ringquist, 2006). In the context of
international level and officially recognized by the
the new Covid-19 crisis the review of EU consumer
Report of the Directorate-General for Internal Market
protection legislative framework and the transposition
and Services of the European Commission of March
into the respective national member states law may
2011, Review of the Initiatives of the European
address early a foreseeable financial failure of the
Commission in the Area of Financial Education.
European househols by providing alleviating measures
Numerous international surveys have demonstrated
to repair or restructure the economic situation of the
consumers' generally low level of understanding of
concerned persons, and allow them to return to a
financial matters and of basic economics and shows
financially sustainable or sociably acceptable situation.
that even under conditions of full disclosure, many
Therefore, regulators need to timely understand the
consumers of financial services are unable to make
consumer perspective in order to establish effective
adequate and reasonable decisions. Therefore, these
regulation and supervision regimes.
explains somewhat the limited progress and effectivity

References
▪ Roger Martin, David Beatty, Lawrence Booth, Kieth Ambachtshee, Wendy Dobson, Peter Dungan, Keith
Ambachtsheer, The Finance Crisis and Rescue. What Went Wrong? Why? What Lessons Can Be Learned?
Published 2009 by Rotman-Utp Publishing;
▪ https://www.oecd.org/daf/fin/financial-markets/48892010.pdf;
▪ http://www.oecd.org/daf/fin/financial-education/49373959.pdf;
▪ http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2011:318:0024:0031:RO:PDF;
▪ http://ec.europa.eu/internal_market/finservices-retail/docs/capability/information_note_en.pdf;
▪ https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=LEGISSUM:l22031;
▪ https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:52007DC0808;
▪ https://www.beuc.eu/publications/beuc-x-2019-019_review_of_the_consumer_credit_directive.pdf.


https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:52007DC0808.
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