Financial Consumer Protection in Ireland

3. Assessment of the financial consumer protection supervisory functions of the Central Bank of Ireland and recommendations

Abstract

This chapter presents the assessment of the financial consumer protection supervisory functions of the Central Bank. The chapter draws on the detailed mapping set out in Chapter 2 as well as international experience and interviews with representatives of the Central Bank and other relevant Irish institutions to identify areas for improvements. For each area, the chapter describes the relevant practices of the Central Bank and the OECD recommendations.

The financial consumer protection supervisory functions of the Central Bank align closely with the FCP Principles, and they play a crucial role in overseeing Ireland’s financial markets and ensuring their proper functioning by promoting transparency, fairness and trust within the financial sector. The Central Bank has appropriate policies and practices in place to effectively monitor financial markets, identify risks to consumers and improve outcomes for consumers. The Central Bank plays a central role in Ireland’s financial consumer protection landscape and has mechanisms in place to effectively co-operate with other relevant stakeholders where appropriate.

The review focusses on the financial consumer protection supervisory functions of the Central Bank and in keeping with its scope (see section 1.3), the identified recommendations:

• are addressed to the Central Bank (and not other stakeholders)

• focus on the financial consumer protection supervisory functions of the Central Bank (and do not cover its other functions)

• acknowledge the characteristics of Ireland’s retail financial services and of the Central Bank’s financial consumer protection supervisory functions

• provide sufficient details to allow the Central Bank to ensure that they can be implemented, while allowing the Central Bank to choose how to implement them

• are based on best practices in other jurisdictions to ensure they are practical in nature

• are achievable in the medium term.

Based on the detailed mapping set out in Chapter 2, interviews with representatives of the Central Bank and other relevant Irish institutions and international experiences, this chapter sets out the areas for improvement identified by the review. For each theme, the chapter describes the relevant practices of the Central Bank and the OECD recommendations.

The recommendations cover six themes:

• Theme 1 – Ensuring consumers continue to be protected as part of the Central Bank’s integrated supervisory approach

• Theme 2 – Measuring and demonstrating the effectiveness of the financial consumer protection supervisory functions of the Central Bank

• Theme 3 – Engaging with consumer and consumer groups

• Theme 4 – Informing and educating financial consumers

• Theme 5 – Protecting consumers experiencing vulnerability

• Theme 6 – Using data in financial consumer protection supervision.

3.1. Theme 1 – Ensuring consumers continue to be protected as part of the Central Bank’s integrated supervisory approach

Retail conduct supervision is an essential component of financial regulation and aims to ensure that financial services providers and other market participants operate fairly, transparently and efficiently. It plays a crucial role in maintaining the integrity and stability of financial systems by overseeing the behaviour of market participants and enforcing rules and standards. It encompasses various activities to identify, monitor, prevent and mitigate market conduct risks including the risk of misconduct, with the ultimate goals of protecting consumers, fostering trust and ensuring fair competition.

The review of the financial consumer protection supervisory functions of the Central Bank was based on the supervisory framework in operation at the time of the review. In its 2021 Strategic Plan, the Central Bank committed to transforming its approach to supervision so that it is better positioned to meet its objectives to ensure consumers of financial services are protected in all respects in a changing and increasingly complex and interconnected financial landscape (Central Bank of Ireland, 2021[1]).

As set out in section 2.2.4, the Central Bank is evolving its framework to deliver a more integrated approach to supervision, across its overall mandate, and complemented by a revised operating structure. The recommendations in this report are intended to support the Central Bank’s transformation and touch on some of the areas of strategic focus for the Central Bank, including accelerating the evolution of its risk-based supervisory approach. Delivered in conjunction with an integrated supervisory approach, the recommendations represent an opportunity for the Central Bank to drive ever better outcomes for consumers.

Recommendation

In evolving its framework to deliver a more integrated supervisory approach, the Central Bank should ensure that its governance and supervisory structures retain explicit consumer and investor protection objectives, to make retail financial markets deliver good outcomes for consumers.

3.2. Theme 2 – Measuring and demonstrating the effectiveness of the financial consumer protection supervisory functions of the Central Bank (Principle 2)

Measuring and demonstrating the effectiveness of its activity is crucial for an oversight body. It enables a better understanding of what interventions work most effectively by identifying strengths and weaknesses in the approach used as well as opportunities for improvement. Once mechanisms to measure and demonstrate effectiveness become fully embedded, they can increase transparency in the authority’s decision-making process over time and can be used to enhance accountability.

The main objectives of measuring the effects of supervisory activity are to enable supervisors to determine whether intended outcomes of an intervention have been achieved and to increase supervisors’ understanding of what interventions are effective. Over time, it can also show relevant stakeholders the value added by supervisors’ activity, increasing transparency, accountability, and trust in the supervisory activity.

The financial consumer protection supervisory functions of the Central Bank are well aligned with Principle 2 which states that oversight bodies should regularly assess the effectiveness of supervisory tools. There are number of ways in which the Central Bank embeds effectiveness checks in relation to its consumer protection supervisory functions in its ways of working. For example:

• the Central Bank’s Supervisory Risk Committee (SRC) advises on issues central to the management of supervisory risks and on the development and enhancement of risk-based supervision and supervisory engagement (see section 2.2.4).

• the Sector Strategy Governance Panels (SSGPs) assess the appropriateness of the proposed supervisory strategy and supervisory engagement plan for a particular sector in treating identified risks as well as the effectiveness of the previous strategy in delivering the desired consumer outcomes (see section 2.2.4).

• the Central Bank’s Supervisory Quality Assurance assesses, using a risk-based approach, whether reasonable assurance can be given that the quality and depth of supervisory engagement has been effective in identifying and mitigating key risks and achieving outcome-focused supervision.

• the Central Bank’s Internal Audit systematically evaluates the effectiveness of the Central Bank’s risk management, control and governance processes, including in relation to the Central Bank’s supervisory functions (Central Bank of Ireland, 2024[2]).

• the Central Bank’s Guidance on Consumer Protection Risk Assessment sets out the expectation on firms’ risk management frameworks, including firm monitoring to ensure that fair outcomes are being achieved.

• when seeking to enhance its approach in a particular area, the Central Bank may seek to learn from other leading consumer protection authorities, either through bilateral engagements, or by carrying out research to identify whether more effective approaches are possible in relation to a particular aspect of its role (see section 2.2.11).

• the Central Bank is subject to peer reviews by the European Supervisory Authorities, which seek to strengthen consistency in supervisory outcomes across the EU.

• as part of delivering its Strategy, the Central Bank has undertaken a review of its approach to supervision, seeking to ensure its approach remains risk based, effective and agile in the context of an evolving financial system. Supervision in this regard refers to the full life cycle of financial services providers from authorisation to ongoing supervision to revocation/resolution and including enforcement action.

• the Central Bank conducts work to assess the impact of its supervisory activity. For example, as described in section 2.6.4, in December 2023 the Central Bank published a report on the impact of the ban of price walking in the home and motor insurance markets, finding that consumers who remain with their current provider are no longer paying a loyalty penalty (Central Bank of Ireland, 2023[3]).

While the Central Bank embeds a number of effectiveness checks in relation to its consumer protection supervisory functions in its ways of working and has in the past assessed the impact of its supervisory activity on an ad-hoc basis (e.g. on the assessment of the introduction of the ban of price walking described above), the Central Bank could evolve its supervisory framework by embedding an approach to assess the impact on consumer outcomes of its financial consumer protection functions, as part of its risk assessment and prioritisation process.

Moreover, some industry representatives interviewed by the OECD discussed the use by the Central Bank of “Dear CEO” letters. “Dear CEO” letters are a flexible tool that allow the Central Bank to quickly communicate changes to all financial services providers in a sector, including in a changing landscape, or that can be used to highlight both good and bad practices to all financial services providers within a sector following a thematic review of a sample of providers. However, while some industry representatives interviewed by the OECD noted the usefulness of “Dear CEO” letters in clarifying the Central Bank’s expectations, others have stated that “Dear CEO” letters have become more frequent, covering more topics at once, which increases the burden especially for smaller financial services providers.

Recommendations

The Central Bank should:

• Build on existing initiatives to embed the evaluation of the effectiveness of its financial consumer protection supervisory activities on consumer outcomes in its supervisory framework.

• Assess and review the effectiveness of “Dear CEO” letters as a supervisory tool.

3.2.1. International experience

Measuring the impact of supervision is an emerging priority for financial oversight bodies (Bank for International Settlements, 2015[4]). Different jurisdictions have implemented a range of practices to demonstrate how their activities (including retail conduct supervision) contribute to the overall health of the financial system and several authorities have frameworks in place to assess the impact of their activity on consumer outcomes. However, conducting such analysis is not without complexities, as oversight bodies face significant methodological challenges, and no single method or indicator can be used to address these challenges. This section provides examples from selected jurisdictions to provide points of comparison.

Measuring the impact of supervision is considered an integral part of the supervisory process by the Autoriteit Financiële Markten (AFM), Netherlands’ financial oversight body, and the De Nederlandsche Bank (DNB), Netherlands’ central bank (Hilbers et al., 2013[5]).In 2024 the UK Financial Conduct Authority (FCA), the UK’s market conduct oversight body, published a Rule Review Framework (Framework) describing how the FCA sets, measures and monitors the outcomes of its rules or interventions (Financial Conduct Authority, 2024[6]).

Challenges when measuring effectiveness of supervisory activity

Hilbers et al. (2013[5]), the Bank of International Settlements (2015[4]) and FCA (2024[6]) identify the most common challenges relating to measuring the effectiveness of supervisory actions. These include identifying and isolating the causal effect of interventions, communicating to the public the effects of interventions that may be aimed at individual institutions and may not be in the public domain, considering an appropriate time horizon to assess impact, focussing on certain performance metrics and, finally, ensuring the availability of resources to conduct such assessments. These challenges are described below.

• One of the most significant challenges in evaluating supervisory performance lies in demonstrating a clear and direct relationship between supervisory activity and the resulting outcomes. This difficulty arises in part from the need to find a reliable counterfactual scenario of what would have happened in the absence of the intervention or a control group against which to measure the impact of the intervention taking into account external factors and controlling for the changing market environment. Furthermore, the nature of risk-based supervision adds another layer of complexity. Since this approach focusses on areas and institutions where risks are most pronounced, there is an inherent selection bias. Institutions under the strictest supervision may be those already facing significant challenges, which may lead to worse outcomes. Therefore, the difficulty in assessing supervisory effectiveness is compounded by the challenge of separating the influence of supervision from the broader context in which it operates.

• Another challenge is represented by confidentiality requirements that may make it difficult for oversight bodies to communicate and demonstrate the effectiveness of their activity, as often oversight bodies face limitations in the amount of information that can be publicly disclosed about individual financial services providers.

• Defining the time horizon poses another significant challenge when evaluating the impact of supervisory activities. Supervisory interventions may take a significant time to produce a visible effect, but the longer the time between intervention and evaluation, the more market conditions may change and make it harder to establish a causal relationship.

• Identifying and focussing on certain performance metrics can create perverse incentives by focussing supervisory attention on that specific metric, diverting resources from activities that are measured less easily or less frequently. For example, the existence of a simple indicator based on the number of supervisory interventions may increase the number of interventions, but it may not necessarily help in addressing the underlying risk.

• Finally, reliable measures of the effects of supervisory intervention typically require significant amount of resources. To obtain credible estimates of the effects of supervisory activity there is typically a need to develop a robust methodology, collect ad-hoc data from financial services providers and ensure adequate expertise is available, either in-house or externally (for example from consultants or academics expert in evaluation techniques). Given the limited resources available, measuring the effectiveness should be explicitly incorporated in the supervisory process and the interventions whose effects are evaluated should be selected based on transparent criteria (e.g. based on the novelty of the approach or the significance of the intervention).

Ways to address these challenges

While the challenges described above may increase the uncertainty of the measurements and the costs incurred to obtaining them, there are practical steps that can be taken to obtain reasonable estimates of the effects of supervision.

(Hilbers et al., 2013[5]) argues that oversight bodies can increase the plausibility of the measurements by identifying more specific objectives of a supervisory intervention at a “micro level”. This can make it easier to draw a causal link between intervention and objectives and to measure the effects of the intervention. The example used by (Hilbers et al., 2013[5]) is the supervisory activity to protect retail investment from high-risk, complex investment products. An indicator of the effectiveness of such supervisory activity could be a measurement of the capital inflows from retail investors, as lower capital inflows (potentially compared to capital inflows of similar products, to attempt controlling for market conditions) could mean that the supervisory activity is achieving its objectives.

Another way to obtain a reasonable estimate is to develop a plausible theory of change to link the intervention to the observed outcome. This is sometimes called “contribution analysis” (Mayne, 2012[7]). A tool to build such a theory of change is a results chain or a logic chart, which distinguishes between effort indicators, such as the resources used and the supervisory intervention, and effect indicators, such as the output of the intervention (e.g. the number of individual firms subject to the supervisory activity), the compliance effect (i.e. the increase compliance with a standard or regulation) and the societal effects (i.e. an improvement of outcomes for consumers).

Finally, (Hilbers et al., 2013[5]) argues for the need of having a range of indicators to measure the impact of supervisory activity. This is important because a portfolio of indicators may better capture complex objectives such as those of supervisory activity. A range of indicators may also be less sensitive to the challenges highlighted above compared to a single indicator. Consistent with this, the framework designed by the FCA (Financial Conduct Authority, 2024[6]) describes three main types of reviews that the FCA can undertake, depending on the nature of the intervention: i) evidence assessment, ii) post-implementation review and iii) impact evaluation.

• an evidence assessment is designed to be a low resource intensive process, suitable where a less in-depth review is sufficient to assess if the intervention has achieved its intended outcomes, and whether there have been market developments that may have affected the effectiveness of the intervention.

• a post-implementation review seeks to assess whether the intervention i) was implemented as intended, ii) has achieved its objectives, iii) has caused unintended consequences, and iv) whether there were obstacles to its implementation.

• finally, the FCA conducts impact evaluations to identify, isolate and quantify the causal effect of discrete interventions on consumer outcomes and to estimate their costs and benefits. (Financial Conduct Authority, 2024[8]) describes the methodological approaches that can be used.

Other approaches

Some authorities have trialled a customer outcomes-based approach, whereby rather than just complying with rules and regulations, regulated financial services providers are required to monitor consumer outcomes when using their products. One example is the pilot study conducted by the Financial Sector Conduct Authority (FSCA), South Africa’s financial services regulator (CGAP, 2022[9]). As part of the pilot, the FSCA identified, in collaboration with the financial industry, a range of indicators of consumer outcomes, and required financial services providers to monitor such indicators and submit regular data to the FSCA.

3.3. Theme 3 – Engaging with consumers and consumer groups (Principle 2)

Financial oversight bodies have a range of ways to engage with consumers. For example, oversight bodies can solicit feedback from the public and consumer advocacy groups on prospective rules and regulations, establish committees to provide regular input on market and/or regulatory development, conduct surveys to gather data on consumer experiences, needs and attitudes towards financial products and services, and monitor complaints and social media. These activities are important to improve understanding of the needs of consumers, identify potential issues early, improve decision-making process, increase transparency, and build trust in the regulatory and supervisory process. The FCP Principles underscore the importance of engagement with relevant stakeholders and engagement with stakeholders is discussed under Principle 2 on the role of oversight bodies. This section discusses engagement with consumers and consumer groups and small businesses in their capacity as consumers of financial services.

Consistent with Principle 2, the Central Bank has a range of mechanisms in place to engage with stakeholders, including consumers or entities that can provide an insight into the consumer experience and small businesses, that align well with the FCP Principles. Ensuring the involvement of these groups is crucial for creating effective and equitable financial consumer protection policies and practices, and the Central Bank works to provide them with necessary resources, information and opportunities to participate meaningfully in discussions and decision-making processes and ensure that the perspective and needs of consumers are adequately represented and addressed. For example, in July 2024, the Central Bank published an “Open and Engaged” Charter setting out its approach to stakeholder engagement (Central Bank of Ireland, 2024[10]). This reflects the Central Bank’s ambition to expand its reach and impact by building relationships with a wider range of stakeholders, including the public and participants in the real economy. The recommendations in this section may support the Central Bank to achieve this ambition.

As set out in section 2.2.11, the Central Bank has mechanisms in place to engage with consumers and consumer representatives, such as public consultations, regular meetings with the Consumer Advisory Group (CAG), roundtables with civil society organisations and regular engagement with consumer associations about risk drivers identified in the Central Bank’s Outlook Reports. Challenges faced by and risks to consumers are also raised with the Central Bank via public contacts (section 2.2.4), protected disclosures (section 2.2.9), media queries and Parliamentary Questions (section 2.2.1) and may also be identified through the Central Bank’s social media monitoring (section 2.2.11).

However, interviews with the Central Bank and other stakeholders suggested that it may be challenging for the Central Bank to obtain the consumer perspective on the broad range of financial consumer protection matters within its remit. Therefore, it is important that the Central Bank continues to innovate in how it engages consumers.

The CAG is a valuable source of expertise and provides helpful feedback on the activity of the Central Bank to protect consumers in financial markets. As set out in section 2.2.11, the Central Bank consults the CAG about its multi-year Sectoral Strategies, which set out sectoral priorities, desired outcomes and high-level activities to address sectoral risks. This provides the CAG with an explicit opportunity to raise with the Central Bank any additional risks that CAG members may be aware of. In addition, the Central Bank presents to the CAG the risks identified from the Sectoral Risk Assessment (SRA) process each year. However, the CAG is not a source of structured data on emerging risks to consumers.

Currently, the CAG includes members that can provide a perspective on the Irish consumer landscape, such as the representatives of MABS and Social Justice Ireland, as well as a former Chair of the CCPC and current Chair of Safeguarding Ireland. The Central Bank also has mechanisms in place to support and facilitate the work of CAG members. The Central Bank also makes available to CAG members a Secretariat that proactively engages with members and the Chair to set out an annual plan of activity and a forward-looking agenda of issues. CAG agenda is driven by CAG members, with a focus on informed discussions on identified issues. Central Bank experts on the topics attend meetings and are available to discuss with the CAG members.

The Central Bank has mechanisms in place to engage with small businesses that are consumers of financial services where appropriate, including recently in the context of the consolidation in the retail banking market (see section 2.2.11).

Finally, while the Central Bank carries out consumer research, the Central Bank does not conduct periodic surveys of adults’ financial behaviour and experiences of financial services. As described in section 3.3.1, such surveys could be a valuable source of data on emerging risks to consumers.

Recommendations

The Central Bank should:

• Enhance the Consumer Advisory Group (CAG) to ensure that it includes the consumer perspective on the broad range of financial consumer protection matters within the remit of the Central Bank. This could be done, for example, by reserving some space on the CAG for representatives of consumers or consumer associations. This would build on the valuable role that the CAG already plays in advising the Central Bank and would help the CAG to provide a broader view of the Irish consumer experience.

• Conduct periodic surveys of Ireland’s adult population to evaluate and track consumer behaviours and attitudes towards financial products and services and to build consumer segmentation models.

• Conduct more regular engagement with small businesses in their capacity as consumers of financial services. This could be done, for example, by including representatives of small businesses in the current structure for consumer engagement.

3.3.1. International experience

The Central Bank’s practices to engage with consumers and small businesses are broadly aligned with the practices of other oversight bodies. This section provides examples on the use of consumer advisory panels and surveys of financial consumers’ attitudes and behaviour from selected financial consumer protection oversight bodies.

Consumer Advisory Panels

Consumer advisory panels can be an effective way of capturing the perspective of consumers and facilitating the early identification of risks for consumers (Newbury and Duflos, 2022[11]). Such panels have been established to advise financial oversight bodies in many jurisdictions. For example, in the United Kingdom, the Financial Services Consumer Panel (Consumer Panel) provides advice and challenge to the FCA in relation to its statutory duties and its consumer protection objective. The Consumer Panel is independent and represents the interests of consumers of financial services (including small businesses). Members of the Consumer Panel are recruited through a process of open competition and currently include individuals with experience of consumer advice, campaigning, communications, market research, journalism, law, the financial services industry, financial inclusion, financial regulation and compliance, and later life issues. The FCA Board agrees a Budget for Panel members’ fees, expenses and any consultancy or research work it commissions. The Panel is supported by a Secretariat of 5 FTE staff.

The United States’ Consumer Financial Protection Bureau (CFPB) has established several advisory committees for different purposes. Two of these committees advise the CFPB on consumer matters:

• the Consumer Advisory Board includes experts, industry representatives, consumers, community leaders, consumer advocates and representatives of underserved communities. The Consumer Advisory Board is a source of intelligence and advises the CFPB on the impact of emerging products, practices, or services on consumers and other market participants (Consumer Financial Protection Bureau, 2024[12])

• the Academic Research Council is composed of economic experts and academics with strong research or practitioner background and a record of involvement in research and public policy.  The committee advises the CFPB on its research agenda and provides feedback on research methodologies, data collection strategies, and methods of analysis (Consumer Financial Protection Bureau, 2024[13]).

The Australian Securities and Investments Commission (ASIC) established the ASIC Consumer Consultative Panel (ACCP) in 1998. The objectives of the ACCP are to provide insight on emerging consumer issues in financial services, to provide feedback on proposed regulatory changes and to inform the development and delivery of ASIC’s strategic and operational objectives. ASIC remunerates members and the Chairs of the ACCP by paying a sitting fee for each full day meeting and covers any reasonable travel costs for each full day meeting attended in person (Australia Securities and Investment Commission, 2024[14]).

Survey of consumers’ financial behaviour, experiences and attitudes

Several oversight bodies conduct periodic surveys of adults’ financial behaviour and experiences of financial services. The objectives of these surveys are to provide insights on consumer attitudes towards financial products and services and on the factors that drive consumer behaviour. For example, the UK FCA conducts an online and face-to-face survey of UK adults called Financial Lives survey (FL survey). The first FL survey was conducted in 2017 and included a sample of 13 000 adults. The sample is representative of the UK adult population. The second, third and fourth FL surveys were conducted in 2020, 2022 and 2024, respectively (Financial Conduct Authority, 2024[15]). The Dutch AFM has been conducting a survey of financial consumers’ behaviour and attitudes (Autoriteit Financiële Markten, 2021[16]).

The Consumer Protection Federal Bureau (CFPB) conducts a survey of US adults called “Making Ends Meet” to understand consumer experiences and decisions relating to financial products and services. (Consumer Financial Protection Bureau, 2023[17]). A key characteristic of the “Making Ends Meet” survey is that the survey samples are drawn from the CFPB’s Consumer Credit Panel (CCP), which is a comprehensive sample of credit records maintained by one of the three nationwide consumer reporting agencies. The association with the CCP allows the CFPB to identify characteristics of individuals who do not respond to the survey and to supplement survey responses with insights on actual consumer behaviour.

The Financial Consumer Agency of Canada (FCAC) conducts a monthly Financial Well-Being Survey to gather insights on the determinants of financial well-being such as the social and economic environment, financial knowledge and experience, psychological factors, and financially capable behaviour (Financial Consumer Agency of Canada, 2024[18]).

South Africa’s Financial Sector Conduct Authority released in 2023 the inaugural edition of its Financial Customer Behaviour and Sentiment Study. The study evaluates how customers engage with and perceive the financial sector in South Africa, and whether consumers’ experiences indicate that financial institutions are upholding the Treating Customers Fairly (TCF) outcomes (Financial Sector Conduct Authority, 2023[19]).

3.4. Theme 4 – Informing and educating financial consumers (Principle 4)

Financially literate consumers can take more informed decisions about spending, savings and investing, increasing their financial resilience and well-being (Bottazzi and Oggero, 2023[20]; Vaahtoniemi et al., 2023[21]; OECD, 2023[22]). To help consumers develop the knowledge, skills, behaviours and attitudes to understand risks in financial markets and to make more informed choices, Principle 4 of the FCP Principles advocates for the promotion of financial literacy and awareness by all relevant stakeholders as part of a wider national financial inclusion and/or literacy strategy.

Consistent with the FCP Principles and the OECD Recommendation on Financial Literacy, Ireland’s Department of Finance (DoF) is currently developing a national strategy for financial literacy (national trategy). In April 2024 the DoF published a mapping report to identify relevant stakeholders, emerging gaps and potential initiatives and outcomes to include in the national strategy (Department of Finance, 2024[23]), and the DoF plans to publish the national strategy in early 2025. The survey conducted by the DoF as part of the mapping report shows that a large number of stakeholders (44 of the 56 respondents to the survey) deliver financial education programmes to several target groups. These stakeholders include public bodies, adult education organisations, the financial services industry, charities and NGOs.

Although the Central Bank does not have an explicit statutory function relating to financial literacy and awareness, as described in section 2.4, the role played by the Central Bank in providing information to consumers within the scope of its mandate is relevant to Principle 4. As part of this role, the Central Bank co-operates with the CCPC and other stakeholders on financial literacy initiatives and regularly conducts consumer awareness and educational initiatives. Among these, the Central Bank:

• established the Consumer Hub to provide guidance on various topics and promotes the content across digital channels and media,

• publishes warnings about developments in financial services and educational resources targeted to younger people, and

• conducts public awareness campaigns and monitors the extent to which the public engages with such campaigns. For example, the Central Bank publishes warnings about developments in financial services, including scams and frauds (see section 2.4.1) and about unauthorised financial services providers (see section 2.2.8).

Moreover, the Central Bank also made changes to the Code to introduce provisions to make switching easier and undertook consumer research to understand how to make it easier for customers to compare mortgages and identify potential cost savings. The Central Bank also promoted a better switching environment in insurance markets (see section 2.5.2).

Finally, the survey conducted by the DoF in the context of the development of Ireland’s national strategy, identified topics where more financial education initiatives are needed. Frauds and scams were the second most important topics identified by the respondents to the survey (62% of respondents), after digitalisation of financial services (65%). At the same time, the DoF’s mapping report also showed that, despite being a priority for many stakeholders, frauds and scams were covered only by 23% of the initiatives (Department of Finance, 2024[23]).

Recommendations

Recognising that the Central Bank does not have an explicit statutory function relating to financial literacy and awareness, and in line with its mandate to ensure the proper and effective regulation of financial service providers and markets while ensuring that consumers of financial services are protected, the Central Bank should:

• Continue to collaborate and co-ordinate with other stakeholders on the development and implementation of the forthcoming National Strategy for Financial Literacy. This is important to share information and best practices across stakeholders, avoid duplication and use resources efficiently.

• Consider the use of financial literacy as a supervisory tool and conduct initiatives aimed at increasing consumers’ awareness about their rights when dealing with financial services providers, for example by enhancing the Central Bank’s Consumer Hub.

• Ensure that communication to consumers about financial scams and frauds remains a priority, given the increasing prevalence of scams and frauds in Ireland (as in many other jurisdictions).

• Continue to identify and seek to address impediments to consumers switching financial products (taking into account the potential benefits for consumers).

3.4.1. International experience

The practices of the Central Bank relating to the provision of information to, and raising awareness of, consumers are consistent with those of other authorities. An approach commonly used by the Central Bank and other authorities to protect consumers against frauds and scams is conducting information and awareness campaigns. Such campaigns often target certain categories of consumers that may be more vulnerable to risks.

Many jurisdictions, including Ireland, have witnessed a significant increase in the number and sophistication of financial scams and frauds. For example, the number of fraudulent payment transactions in Ireland increased by 7.7% between 2022 and 2023, from around 325 000 to around 350 000 , and fraud losses increased by 16.4% to almost EUR 100 million over the same period (Banking and Payment Federation Ireland, 2024[24]). Other countries have experienced similar trends, with fraud losses totalling more than USD 10 billion in 2023 in the US (Federal Trade Commission, 2024[25]) and over GBP 1.2 billion in the UK (UK Finance, 2024[26]).

In 2022, the Scam Prevention Research Committee, a committee established by the US Federal Trade Commission (FTC), published a report identifying the key challenges faced by oversight bodies when designing messages to prevent scams, and strategies to overcome these challenges. The research suggests that effective warnings should i) be memorable, actionable and repeated, ii) persuade consumers of the value of following the warning, iii) take into account individuals’ beliefs and inner narratives, iv) be about specific types of scams or general tactics used by fraudsters, and v) be designed to work in the moment (Fletcher et al., 2024[27]).

Like other authorities, the Central Bank also publishes a list of unauthorised financial services providers (see section 2.2.8). Other examples include the FCA, which publishes a Warning List of unauthorised financial services providers. To encourage consumers to check the FCA Warning List before investing and to increase awareness about the tactics used by fraudsters to help consumers spot fraud attempts, the FCA also launched a webpage called ScamSmart where consumers can find information related to the most common scams and the activity of the FCA. Finland’s FIN-FSA publishes a list of warnings about unauthorised services providers. The webpage includes the name of the companies and a description of the concerns of the FIN-FSA (Finanssivalvonta, 2024[28]).

3.5. Theme 5 – Protecting consumers experiencing vulnerability (Principle 3 and 6)

Enhanced protection for consumers who may be experiencing vulnerability is an important element of financial consumer protection frameworks. Consumers may experience vulnerability in the context of financial transactions or be exposed to risks such as financial scams and frauds due to a combination of personal characteristics (e.g. disability, age, gender, level of education, linguistic proficiency), behavioural biases (e.g. overconfidence, information overload, impulsiveness, cognitive limitations) and market conditions (e.g. unemployment) (OECD, forthcoming[29]). Consumer vulnerability is relevant for Principle 3 (Access and Inclusion), Principle 6 (Equitable and Fair Treatment of Consumers) and Principle 12 (Complaints Handling and Redress).

Vulnerability is typically defined as an increased susceptibility to harm, rather than the actual experience of financial harm, hardship or detriment (O’Connor et al., 2019[30]). Consumer vulnerability can take different forms and being vulnerable is not a permanent state that applies to all consumers with a shared characteristic, and belonging to a certain category of consumer is not sufficient to make a consumer vulnerable (Hill and Sharma, 2020[31]). A forthcoming OECD report on understanding and responding to financial consumer vulnerability, developed via the Task Force on Financial Consumer Protection, discusses effective approaches to consumer vulnerability (OECD, forthcoming[29]).

The Central Bank has a number of mechanisms to support consumers in vulnerable circumstances. These include:

• in carrying out its sectoral risk assessment, the Central Bank considers a number of factors in assessing the impact of a particular risk, including whether consumers in vulnerable circumstances are impacted. Indicators of vulnerability can relate to factors such as language barriers, cognitive impairment, elder abuse, family or domestic violence, financial exploitation or abuse, mental illness, serious illness and/or circumstances such as bereavement, relationship breakdown or job loss.

• the Central Bank requires that firms act in the best interests of their customers and treat them fairly. Firms are required to apply this standard to all their customers, including those who are in vulnerable circumstances. The Central Bank also sets out its expectation in its Outlook reports and “Dear CEO” letters that firms consider the impact of their decisions on vulnerable customers and provide assistance where necessary.

• as part of the ongoing review of the Code, a new proposal under consideration refers to “consumers in vulnerable circumstances” to indicate a consumer that is a natural person and whose individual circumstances make them especially susceptible to harm, particularly where a regulated entity is not acting with the appropriate levels of care and vulnerable circumstances shall be construed accordingly (see, for example, section 2.1.3).

• the Code also requires that where a firm has identified that a consumer is vulnerable, it must ensure that the vulnerable consumer is provided with reasonable arrangements and/or assistance that may be necessary when dealing with the firm. As part of the review of the Code, the Central Bank published draft guidance for firms on how to approach consumers in vulnerable circumstances, including the broad range of vulnerable circumstances (Central Bank of Ireland, 2024[32]).

• in its Risk and Supervisory Outlook, the Central Bank stated that digital distribution channels may increase the risk that some consumers face financial exclusion through lower access to, and choice of, suitable products. Moreover, as part of the revision of the Code, new requirements are proposed to require firms to ensure that digital technology to provide services is designed and implemented with a customer focus. Moreover, where firms move from traditional to digital business models, they must carefully consider customer impacts and mitigate against customer issues identified. Consumer research conducted as part of the review of the Code identified consumers’ concerns about the digital transformation. These include issues related to access to basic financial services, support for consumers, appropriate use of personal data and protection in place from unfair practices when providers use new technologies that may take advantage of consumers’ behaviours and biases (Central Bank of Ireland, 2024[33]).

The practices of the Central Bank relating to consumer vulnerability and the changes proposed in the review of the Code align well with the FCP Principles. The Central Bank’s Guidance on Protecting Consumers in Vulnerable Circumstances (Central Bank of Ireland, 2024[32]) explicitly refers to the FCP Principles, and the definition of consumers in vulnerable circumstances included in the proposed revised Code reflects the approach of the FCP Principles. Consistent with the FCP Principles, the Central Bank highlights the importance of paying special attention to the treatment of consumers who may be in vulnerable circumstances, to ensure that they are not excluded from the financial system.

Recommendations

Given new requirements proposed as part of the review of the Consumer Protection Code (Code), the Central Bank should:

• Focus on the implementation of the new provisions of the Code by

  • developing a supervisory approach to ensure that financial services providers adapt to the new requirements and that consumers in vulnerable circumstances are treated fairly, and

  • clarifying to financial services providers how the Central Bank views their treatment of consumers in vulnerable circumstances from a risk tolerance perspective.

• Develop an evidence-based understanding of consumer vulnerability by undertaking research to identify the main drivers of vulnerability for Irish financial consumers and their prevalence. This could be done, for example, by including relevant questions in the survey about consumer behaviour and attitudes towards financial products and services of Ireland’s adult population.

• Ensure regulated financial services providers continue to support consumers, especially those in vulnerable circumstances, during the digital transformation to make sure that digital tools and practices are designed and implemented with a consumer focus.

3.5.1. International experience

Protecting consumers in vulnerable circumstances is a crucial element of effective financial consumer protection regulation (see, for example, the forthcoming OECD report on understanding and responding to financial consumer vulnerability (OECD, forthcoming[29])). Like the Central Bank, several financial consumer protection oversight bodies factor in consumer vulnerability in their risk prioritisation and mitigation strategies. For example, Germany’s Federal Financial Supervisory Authority (BaFin), embeds an analysis of consumers’ circumstances in its supervisory strategy. This section provides examples of relevant approaches from selected jurisdictions.

Develop an evidence-based understanding of vulnerability

Several oversight bodies carry out research on consumer vulnerability (OECD, forthcoming[29]). The periodic data collections described in section 3.3 include questions to understand consumer vulnerability. For example, the Financial Consumer Agency of Canada (FCAC)’s Monthly Financial Wellbeing Monitor collects data across four categories, including financial vulnerability (Financial Consumer Agency of Canada, 2024[18]). In the Netherlands, the AFM’s Consumer Monitor collects data on consumers’ perception of their financial situations, for example whether consumers would be able to continue to live in their home if they lost their job or their relationship ended (see, for example, (Autoriteit Financiële Markten, 2021[16])). The US CFPB’s Making Ends Meet survey collects data on financial wellbeing and whether consumers face difficulties in repaying their debts (Consumer Financial Protection Bureau, 2023[17]), and the UK FCA’s Financial Lives includes questions about consumers’ financial resilience.

Some financial consumer protection oversight bodies also conduct ad-hoc data collection with a focus on vulnerability. For example, in 2021 the AFM conducted exploratory work on the provision of financial products and services to Dutch consumers with a migrant background, estimated to be the 25% of the total population in 2021 and expected to increase to 36% in 2050. The AFM found that Dutch nationals with a migrant background are on average more financially vulnerable than Dutch nationals with no migrant background (Autoriteit Financiële Markten, 2021[34]).

New Zealand’s Financial Markets Authority carried out a survey in 2022 to understand consumers’ experiences with financial services. The survey also collected data to build demographic and psychographic profiles of a range of consumers, including adults with characteristics of vulnerability (New Zealand’s Financial Markets Authority, 2022[35]).

Guidance to financial services providers on how to treat consumers in vulnerable circumstances

Like the Central Bank, other authorities have published guidance for financial services providers on how to approach consumers in vulnerable circumstances. For example, in 2021 the FCA published a Guidance for Firms on the Fair Treatment of Vulnerable Customers (Vulnerability Guidance) (Financial Conduct Authority, 2021[36]). The Vulnerability Guidance recognises that i) there may be factors limiting consumers’ ability to take responsibility for their choices and decisions and that ii) consumers may have additional or different needs limiting their ability or willingness to make decisions and choices or to represent their own interests and that these consumers may be at greater risk of harm.

The Vulnerability Guidance expects financial services providers to provide their customers with a level of care that is appropriate given the characteristics of the customers. The Vulnerability Guidance also recognises that the level of care that is appropriate for vulnerable consumers may be different than for others and financial services providers should take particular care to ensure they are treated fairly. Finally, the Vulnerability Guidance sets out that individuals in senior positions have the responsibility to help create and maintain a culture that enables and supports staff to take responsibility for reducing the potential for harm to vulnerable customers.

Impact of digitalisation on access to financial products

Digitalisation of financial services and related distribution channels can create risks of excluding certain consumers from financial markets. Digitalisation can also increase consumers’ exposure to frauds and scams and increase the complexity of financial products, increasing the risks that consumers purchase unsuitable products. Financial consumer protection oversight authorities address risks generated by digitalisation in various ways.

For example, in 2023 the Dutch Central Bank conducted a study on digital banking (with a focus on payment services). The study found that digitalisation made it more difficult for certain segments of the population to access and manage basic banking products. Building on the known factors leading to consumer vulnerability, the Dutch Central Bank collected data to estimate the prevalence of such factors and the difficulties faced by individuals when managing digital payment services (De Nederlandsche Bank, 2023[37]).

3.6. Theme 6 – Using data in financial consumer protection supervision (Principle 2)

The use of data is an essential component of the risk prioritisation framework of financial oversight bodies. As financial markets continue to evolve and grow in complexity, supervisory technology tools can enable oversight bodies to efficiently sift through vast amounts of information, identifying patterns and anomalies that may indicate emerging risks.

The Central Bank already uses data to support its supervisory functions, including data obtained from regular data collections from financial services providers, statistical data collections, consumer complaints data and social media monitoring (see section 2.2.5). All these data sources are used for example to inform the Central Bank’s Sectoral Risk Assessment process and therefore its Sectoral Supervisory Strategies (see section 2.2.4). In addition, the Central Bank has used statistical analysis to identify unfair outcomes for consumers in specific cases, for example in the context of its work on price walking (see section 2.6.4).

Principle 2 advocates for oversight bodies to have capability, flexibility and the appropriate range of tools to carry out their functions. Technological developments may present a range of challenges for financial consumer protection oversight bodies, including ensuring that supervisory tools are adequate to supervise markets and monitor risks, that staff have the right mix of resources and capabilities (including capabilities that may not have been traditionally part of a supervisor’s capability requirements) and that oversight bodies are able to understand and respond to emerging business and distribution models. The Central Bank’s Data Strategy and the ongoing transformation aimed at enhancing the Central Bank’s use of data described in section 2.2.5 is well aligned with the FCP Principles.

The Central Bank’s strategy sets out data-related objectives such as improving organisational capabilities in the use of information in decision-making and enhancing the value of the Central Bank’s work by deploying more effective and efficient tools, methods and ways of working (see section 2.2.3). Consistent with this, a key component of the Central Bank’s Data Strategy is to improve the way data is used. The operating model includes both a governance and delivery structure, leveraging a cross-organisation approach.

As set out in section 2.2.5, the Central Bank ambitions to enhance its use of data to support its consumer protection supervisory functions including through evolving its use of existing data through robust data governance, new tools and capabilities, as well as through targeted additions and enhancements to the data it currently receives. This will be achieved in the context of the Central Bank’s Data Strategy, as well as a broader ongoing effort to ensure that supervisory teams working to deliver across the Central Bank’s mandates are able to access all the supervisory tools and services they need through a single internal system or workbench.

Recommendations

The Central Bank should:

• Continue to ensure that all information collected for financial consumer protection supervisory purposes adheres to data and governance standards in line with the wider Central Bank Data Strategy. This information should be used alongside data more broadly already available to the Central Bank and assessed to be relevant to identifying and articulating consumer protection risks. The combined sources should be presented in an easily accessible, consistent, usable, and digestible manner for relevant supervisory teams so that it can support the Central Bank’s consumer protection supervisory functions in an efficient manner on an ongoing basis.

• Ensure that the functionality necessary to support the Central Bank’s financial consumer protection supervisory functions is identified and incorporated in the single supervisory workbench throughout all stages of its evolution.

• Where necessary, continue to make targeted additions and refinements to the data that the Central Bank collects from financial services providers on an ongoing basis, in order to inform the Central Bank’s financial consumer protection supervisory functions on a firm-specific, sectoral or cross sectoral basis.

• Continue to invest in staff training so that supervisory teams with responsibility for financial consumer protection supervision evolve their knowledge and abilities in order to support their use of the enhanced tools and increased data available to them.

• Continue to enhance the way in which data from the Central Credit Register (CCR) is used. CCR data could provide insights on risks to consumers, enhancing the Central Bank’s risk identification capabilities and complement consumer research, subject to compliance with the requirements of the Credit Reporting Act and data protection legislation.

3.6.1. International experience

Effective use of data allows for more informed decision-making processes that let oversight bodies allocate resources more efficiently, focusing on areas of higher risk, fostering a more resilient financial system. Many financial consumer protection oversight bodies have invested significant resources in improving their use of data, for example by developing technology and suptech solutions to make supervisory processes more efficient. A 2021 World Bank report identifies four categories of suptech solutions: i) solutions for regulatory reporting, such as web portals, application programming interfaces (APIs), automated dataflows (ADFs), and supervision information systems (SISs) to collect, validate, and store data, ii) solutions to collect and process complaints data, particularly unstructured data, iii) solutions for non-traditional market monitoring, such as tools to monitor social media, online news and websites, and iv) solutions for document and business analysis, such as natural language processing solutions (World Bank, 2021[38]).

Although efficient use of data presents significant benefits, using data in the context of financial consumer protection supervision also comes with significant challenges, such as ensuring that the authority has adequate capabilities to efficiently use data and the need for a strong data governance, i.e. the arrangements in place to create, collect, store, use and share data.

Many public authorities including financial oversight bodies are making efforts to enhance their data governance. For example, the Bank of England has recently implemented new policies and guidance for its staff to make it easier, quicker and safer to work with and to make it easier to collect and manage data (Bank of England, 2024[39]). Moreover, the FCA is working with the Bank of England to improve data collection and regulatory reporting. In March 2024 the FCA and the BoE announced future work to ensure that data collections are proportionate and meet the needs of oversight bodies, to improve internal process for creating data collections, to create more efficient processes and support to meet regulatory obligations to make data definitions clearer and more consistent and to modernise data collection systems (Financial Conduct Authority and Bank of England, 2024[40]).

The European Central Bank is collaborating with European national central banks and commercial banks to improve the quality of data collected from financial services providers, foster co-operation between oversight bodies and industry, and reduce reporting burden. This is done by creating a common reporting dictionary called Bank’s Integrated Reporting Dictionary (BIRD) to make it easier for financial services providers to understand reporting requirements (European Central Bank, 2024[41]).

Finally, many financial regulators use data on consumers’ credit history and credit holdings to carry out their supervisory activity, although data protection requirements in different jurisdictions may impact what is possible for different oversight bodies. For example, the US CFPB uses its Consumer Credit Panel which includes credit records of a sample of the US population, to enhance its periodic surveys of consumer experiences and decisions relating to financial products and services. Credit files are also used to evaluate interventions (see for example the work of Peru’s financial oversight body to assess the impact of financial literacy programmes (Frisancho, 2023[42])) or to provide insights on risk to consumers.

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