In September 2022, Alin Iacob was elected the new chairman of the Financial Services User Group (FSUG), which provides advice to the European Commission and represents almost half a billion EU citizens. Since 2013, he has been chairman of the Association of Romanian Financial Users (AURSF), and has been a board member of public interest organization Better Finance, a member of EIOPA’s Insurance and Reinsurance Stakeholder Group, and a member of the EBA Banking Stakeholder Group.  He talks about the work of the FSUG in the area of retail financial services, and what he thinks the main priorities will be in the months ahead.

Some say that what is good for businesses is good for consumers too. Do you agree?

Businesses are first of all profit-making organisations and maximising profits is their primary objective. What it is good for business may be good for consumers, but it is not always the case. And this is why the FSUG is here, to inform and advise the Commission and to be sure that the voice of financial services users is well heard in Brussels.

Let me give you some examples. In the area of advice to retail investors, inducements are strongly defended by businesses, but do not necessarily benefit consumers. In its opinion issued in November 2022, the FSUG argued in favour of banning them. So, we were of course happy to hear that Commissioner McGuinness is considering it as a serious option when discussing the Retail Investment Strategy, which we hope will be adopted very soon. However, we are also aware that there is significant lobbying from industry against such a ban.

Another example is in sustainable finance. While the Commission and co-legislators may come up with measures to make the loan books of credit institutions greener as part of the negotiations on the Energy Performance of Buildings Directive, those policies should not come at the expense of the most vulnerable consumers by reducing their access to mortgage credit. Good policies need to take consumers’ interests sufficiently into account, and I hope this will be the case.

Last, but not least, let’s look at the impact of increasing interest rates. Due to unfavourable economic and political developments, including the war in Ukraine, the real income of an average EU consumer has gone down, while the interest rates that consumers are charged for their variable rate loans, particularly mortgage loans, have gone up. At the same time, in some Member States consumers continue to receive close to zero interest rate for their deposits, while bank profits have sharply increased. President von der Leyen, in the 2022 State of the Union Address, stressed that ‘it is wrong to receive extraordinary record profits benefitting from war and on the back of consumers’. We closely monitor the concrete actions taken at a Member State or the EU level, but certainly more needs to be done to better protect consumers.

What are your main goals with the work of the FSUG going forward? And what are your main concerns?

First of all, our mission is to have European consumers at the forefront of Commission policies in the area of retail financial services. We should always remember that if there were no consumers, there would be no businesses. It is as simple as that.

The FSUG’s work mainly focuses on the Commission’s ongoing and upcoming initiatives on retail financial services, while proactively identifying other relevant issues. We are closely following the policy work on retail investments, the implementation of the Capital Markets Union action plan, the ongoing Payment Services Directive 2 review, the Instant Payments initiative, the review of the Consumer Credit Directive and Mortgage Credit Directive as well as other topics like personal insolvency, open finance, and sustainable finance. We also have a sub-group that focuses on access to cash for all EU consumers, especially elderly and vulnerable ones.

The Commission services are continually assessing the impact of their proposals and in general they take into account consumer interests in their policy making. Unfortunately, the FSUG has no way to effectively interact with the other co-legislators (the EU Council and EU Parliament), to argue in favour of consumers’ interests.

That’s an important observation. Could you give any specific examples?

Yes, of course. The most recent one that comes to mind is the strengthening of the forbearance measures in the Mortgage Credit Directive (MCD), which were introduced via the adopted Credit Servicers, aka non-performing loans (NPL), Directive. While it has been announced as a great achievement by co-legislators, one that will better protect consumers, I have serious doubts about it.

The change introduced to Article 28 of the Mortgage Credit Directive would hardly have any effect, in my view. There is only a requirement for credit providers to consider the list of forbearance measures, which I believe they have already been doing. What I am really concerned about is whether, in the current cost-of-living crisis in the EU, consumers facing difficulties repaying their mortgage loans will be better protected. I do not think so. We need to see more effective measures.

To get a better picture of this, we will discuss in the FSUG whether a study needs to be carried out to specifically examine this aspect of the NPL Directive (amending Article 28 of the MCD), to assess whether consumers will be better off or if mortgage credit providers will continue their business as usual.