Banks blame uneducated customers as crisis hits

Consumers should be trained to distinguish bad loans as easily as unhealthy food on shopping shelves, argues Giuseppe Zadra of the European Banking Federation (EBF). In an interview with EURACTIV, he says better informed consumers might have prevented the financial crisis in the US.

Ensuring consumers develop a better understanding of the basics of banking and debt should be a priority for policymakers, argues Zadra, who is also director general of the Italian Banking Association (ABI).

According to Zadra, the financial crisis illustrated how US consumers lacked “common sense” when taking mortgage loans that they could not pay back. “They took on too much debt. If your instalments are double your monthly income, I think it is easy to understand that something is wrong.”

“I do not think that requires education. It is just common sense.”

Zadra rejects the notion that banks themselves should play a greater role in informing their customers about the risks of their products. “We think that improving the way financial information is presented is only as useful as the person who receives it is able to use it.”

“We do not want to turn consumers into financial professionals, but make them able to distinguish financial products and services as they do in other sectors, for example with food. Consumers are not dieticians, but they know how to use information on food products. They know that vegetables are better than fat, and they make their choices accordingly. We have to reach similar levels in finance too.”

But consumer organisations blame banks for their dubious advice to naive consumers who bought loans that they were unable to pay back. 

Despite the opposing views, banks and consumer organisations seem to agree that increasing financial education would empower consumers to make better informed choices.

Several projects are in the pipeline to increase financial education across the EU. At European level, a team of national experts on financial education was created by the European Commission. As of October, it will contribute by sharing best practice in improving teaching methods across the continent (see LinksDossier).

To read the interview in full, please click here.

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