In projects related to changes in essential services, we have repeatedly stated that services required by everyone should be priced fairly. Price determination may not be left to the market when there is sure to be plenty of demand. There have been discussions on how to ensure fair pricing in the market for electricity, telecommunications services and – most recently – motor vehicle inspections. It is surprising how difficult it has been for some to let go of their belief in the market's ability to set prices at a level that is fair to consumers. Why would companies voluntarily set low prices for products or services that everyone has to buy?
Credit is, and has been for some time now, another product that is practically essential to consumers; the credit society is here to stay. This being the case, markets have responded with an increased supply of credit. The fairness of prices, however, leaves a lot to be desired. Serious thought must be given to how fair prices can be ensured for those consumers who are not targeted by several competing providers, who are not able to put up collateral but who still need credit due to intermittent employment or the need to make necessary purchases. Financial institutions should therefore work to improve the supply of small, low-interest credit. This need is also reflected in recent OECD recommendations. Efforts must also be made to improve the supply of social credit and ensure that those with low incomes don't always end up paying too much.
The changes planned for payment services, which are also becoming necessary to everyone, will bring about a number of new service options which are often portrayed in marketing communications as a necessary evil for consumers: you must begin using e-invoices, you must change your debit card to a credit card and you can no longer get a hard copy of your bank statement. But is that really the case? Direct debit options should continue to include other alternatives to e-invoices, there are international debit cards and a printed bank statement can still be delivered to the home address, hopefully at no extra charge. These older service alternatives, which make life easier for many consumers, are just no longer marketed and the consumer has to put in an extra effort to keep using them. Competition, for its part, appears to once again fail to ensure a broad selection of services to choose from.
The European Commission is arranging a consultation on responsible lending in early September. There has been a significant step forward from earlier discussions where the focus was always on how to educate consumers. Before the financial crisis, the responsible nature of financial institutions was taken for granted and rarely questioned. In Finland we went through our own recession in the early 90s, which for its part created a solid tradition of taking the debtor's position into account. In Finland several appropriate measures have been developed to ensure that debtors don't suffer from exclusion and that credit terms are fair to begin with.
On August 31st 2009
Anja Peltonen Director