**Consumers should receive information in a standardized format, that is clear, concise and that employs plain language with limited use of jargons.** For EU countries the content and format of the information to be provided to customers of consumer credit are set out in detail in the Consumer Credit Directive which prescribes the use of the Standard European Consumer Credit Information. However these provisions do not apply to mortgage credit, unless the EU member state expressly decides to do so. Such types of standardized format should be developed in all countries at least as self regulatory instruments at the level of professional associations. The format and content of such standardized document would need to be revised based on extensive testing with consumers, to ensure that it presents only the most useful and relevant information in a way that is easy for borrowers to understand.

**A Key Facts Statement would give consumers a simple summary of the important terms and conditions of their financial contract.** Use of a Key Facts Statement was developed in the United Kingdom to help consumers understand the terms of their financial contracts.<sup>31</sup> These Statements have proven to be effective mechanisms for consumer disclosure. The Key Facts Statements should be developed by the professional associations, which should recommend their use by member financial institutions. The Statements should be written in plain language and summarize in a page or two the key terms and conditions of the specific financial product or service provided. Such a standard format would allow consumers to compare across products provided by different financial institutions before they make a purchase—and provide a useful summary for later reference during the life of the financial product.

**For consumer credit, for example, a Key Facts Statement should include** : (1) the total amount of the credit; (2) the amounts of monthly payments; (3) the final maturity of the credit or investment; (4) the total amount of payments to be made; (5) all fees—particularly prepayment and overdue penalty fees— and any other charges that could be incurred; (6) any required deposits or advance payments; (7) if the interest rate is variable, the basis on which the calculation is made; and (8) if any additional insurance (such as personal mortgage insurance) is required to maintain the credit. If the credit is used to finance a consumer product, such as a television or washing machine, the consumer should be advised of the cash price of the product without financing charges. A Key Facts Statement for a consumer credit should also disclose any prepayment penalty which in some countries can be as high as the original cost of the loan. In most of the countries studied, existing regulations specify in some detail the information to be provided to retail borrowers, however there is no clear standard format used by credit institutions.

**Simple and standard disclosure would help consumers compare offers by different financial institutions.** Such comparison shopping would allow households to find the best financial product or service to meet their needs—and encourage financial institutions to compete for customers on a transparent basis. Financial supervisors should encourage such “comparison shopping” by asking the professional associations to develop a standard format and methodology for financial institutions to offer such standard products as motor third-party liability insurance.

**Simple and standard consumer disclosure would also help consumers understand complex financial products.** As more sophisticated financial products become available, the consumer well-being may become threatened by regulatory arbitrage in packaging the products. Before the recent financial crisis started, large financial conglomerates in many countries were able to pick and choose between regulators to sell consumers the financial products which were least regulated and frequently not suitable for the consumers’ needs, especially in the securities market. One example where common rules would significantly benefit the consumer is unit-linked insurance, which often has limited disclosure requirements compared to strict disclosure for investment funds. Similarly the same information should be provided and the same rules applied for mortgages and mortgage alternatives, such as building savings loans or specific consumer credit related to home building or renovation.

> 31 A similar approach is taken in the US with a focus on “plain language” and the use of the “Schumer Box” for credit card disclosure.

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