FCA: EU disclosure rules confuse consumers

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The FCA is warning onerous European disclosure requirements risk disengaging consumers and damaging their ability to make decisions.

In the regulator’s response to the European Commission’s call for evidence on Europe-wide regulation, it says firms are forced to disclose an ever-increasing amount of information.

Regulations such as Mifid II and Priips risk “confusing and discouraging customers”, the regulator says, with “little attention apparently given to how the information included in the various disclosures interacts”.

It says: “As legislation is reviewed, revised and updated, disclosure is typically added rather than removed.”

It adds: “A key lesson from behavioural economics is that the more information given to consumers, the less able they are to engage and use the information to make effective decisions.

“Therefore, every time EU legislation requires more disclosure, the less effective this disclosure and pre-existing disclosure may be at empowering consumers to make effective decisions.”

The FCA also warns standardised disclosure regimes – including the Mortgage Credit Directive – can “unintentionally constrain the best content and format for disclosures required in local markets in respect of local products and issues”.

The FCA adds “repeated but uncoordinated changes” also hit providers and recommends aligning implementation deadlines to avoid disruption.

The regulator is conducting consumer testing, including on how providers issue wake-up packs to customers, as revealed by Money Marketing in June 2015.