Financial Consumer Protection in Ireland

Executive summary

Effective financial consumer protection helps ensuring that individuals can participate in the financial system with safeguards against unfair practices, frauds and exploitation. Financial consumer protection is essential to prevent over indebtedness, ensure transparency in financial products and empower consumers to make informed decisions.

This report presents the findings of the review of the financial consumer protection supervisory functions of the Central Bank of Ireland (Central Bank). The review assesses the alignment of these functions with the G20/OECD High-Level Principles on Financial Consumer Protection (FCP Principles), the international standard for financial consumer protection. The review also identifies areas for improvement and sets out a series of recommendations.

Key findings

The Central Bank’s financial consumer protection supervisory functions are well aligned with the G20/OECD High-Level Principles on Financial Consumer Protection.

The Central Bank is a mature and sophisticated oversight body and 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 crucial role in overseeing Ireland’s financial markets and ensuring their proper functioning by promoting transparency, fairness, and trust.

The Central Bank is strongly committed to fostering and upholding the G20/OECD High-Level Principles on Financial Consumer Protection.

The Central Bank’s strong commitment to fostering and upholding the FCP Principles reflects its recognition of the increasingly global and interconnected nature of financial markets, where consumers engage with a wide and growing range of products and services. To ensure that consumers are adequately protected, the Central Bank aligns its policies and practices with the FCP Principles, it meets the expectations outlined by the FCP Principles, and its practices are consistent with the practices of its peer oversight bodies.

The Central Bank is committed to transforming its approach to supervision.

As the financial services industry has undergone, and continues to undergo, significant transformation due to a combination of rapid technological innovation and changes in macroeconomic conditions, the Central Bank is committed to transforming its approach to supervision. Technological and macroeconomic changes have fundamentally altered the landscape in which financial consumer protection oversight bodies operate, presenting both new opportunities and challenges. Advancements in financial technology, such as digital payments, have revolutionised the way financial services are delivered to consumers. While these innovations provide consumers with greater convenience, access, and efficiency, they also introduce new risks. At the same time, the higher interest rate environment has increased the cost of borrowing for consumers and may lead to financial strain for those with significant debt obligations.

In this changing landscape, the Central Bank, in its 2021 Strategic Plan, sets out the commitment to transforming its approach to supervision so that it continues to be well-positioned to meet its objective of ensuring consumers of financial services are protected in all respects in a changing and increasingly complex and interconnected financial landscape.

The Central Bank could further strengthen its financial consumer protection supervisory functions in some areas.

While the Central Bank’s policies and practices are well aligned with the FCP Principles, it could further strengthen its financial consumer protection supervisory functions to support its transformation and accelerate the evolution of its risk-based supervisory approach. Delivered in conjunction with an integrated supervisory approach, these improvements would help the Central Bank drive ever better outcomes for consumers.

Recommendations

The recommendations of the review are grouped under six themes:

• Theme 1. Ensuring consumers continue to be protected as part of the Central Bank’s integrated supervisory approach. As the Central Bank evolves its framework to deliver a more integrated approach to supervision across its overall mandate, and complemented by a revised operating structure, it should ensure consumers continue to be protected as part of its new integrated supervisory approach.

• Theme 2. Measuring and demonstrating the effectiveness of the financial consumer protection supervisory functions of the Central Bank. Although the Central Bank embeds a number of effectiveness checks regarding its consumer protection supervisory functions in its ways of working, it could evolve its supervisory framework by embedding an approach to assess the impact on consumer outcomes of its financial consumer protection functions.

• Theme 3. Engaging with consumers and consumer groups. Interviews with the Central Bank and 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, the Central Bank should continue to innovate in how it engages with consumers.

• Theme 4. Informing and educating financial consumers. As part of Ireland’s National Strategy for Financial Literacy developed by the Department of Finance, 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 educate and inform financial consumers.

• Theme 5. Protecting consumers experiencing vulnerability. Given the new requirements proposed as part of the review of the Central Bank’s Consumer Protection Code, the Central Bank should continue to develop its financial consumer protection supervisory functions to ensure enhanced protection of consumers in vulnerable circumstances.

• Theme 6. Using data in financial consumer protection supervision. As financial markets continue to evolve and grow in complexity, the Central Bank should continue to adapt its data policies and practices.