Easy credit and poor oversight -- as exemplified by subprime mortgages in the U.S. -- have been a key catalyst for our global financial crisis. It is now very clear how ineffective regulation of financial consumer lending practices has contributed to the creation and worsening of a crisis that has spread across the globe, threatening livelihoods, savings and social stability.
The upcoming G20 summit in Seoul would be an ideal place to start the process of hammering out international standards for financial consumer protection in order to both protect consumers and help avoid the next financial crisis.
Unfortunately, at a recent meeting of the G20 finance ministers, they made no commitment to protecting citizens from abusive financial services industry practices. The meeting communiqué notes that "uncoordinated responses will lead to worse outcomes for everyone," and yet there is barely a mention of a unified approach to the needs of the actual consumers who use financial services every day. Without an international commitment to ensuring that consumers are protected from financial abuses, we are setting ourselves up for more problems down the line.
Consumers Union is a member of Consumers International, a worldwide federation of consumer groups that provides an independent and authoritative voice for consumers. Consumers International's 220 member organizations urgently want the G2O to establish an Experts Group on Consumer Financial Protection. This group, which would help to ensure that consumers everywhere have access to stable, fair and competitive financial services, should be charged with reporting to the next meeting of the G20, in France, in 2011.
An international focus on the issues will strengthen national efforts to address this problem. Due to the interconnected nature of financial services markets, poor consumer protection in one country can undermine stability in other countries, and all financial market regulators around the world now face similar issues and challenges. It's essential for regulators to have a common platform where they can compare notes on consumer protection and share best practices. A visible international organization whose role is to protect consumers and ensure transparency, accountability and good practice could go a long way toward restoring consumer confidence.
Each year, the global economy creates up to 150 million new consumers of financial services, most of whom are in countries where consumer protection and financial literacy are still in their infancy. Governments have a duty to consumers to show that they are not simply a means for the financial services industry to make a profit at all costs. World leaders must take responsibility for reviving consumer trust while they attempt to rebuild faith in the financial markets.