institutions. Sociedades Financieras de Objeto Multiple (SOFOMs) only offer credit products as they are not permitted to collect deposits.<sup>8</sup> SOFOMs were nevertheless included in the savings audit to verify that they were indeed not accepting deposits.<sup>9</sup> Finally, institutions that offer savings products include banks, cooperative societies (Cajas de Ahorro), and Popular Financial Societies (SOFIPOS). All these institutions offer both checking and fixedterm accounts with an initial deposit as low as 1 peso.

Despite the diversity of institutions offering financial services, there are two related indications that there is little competition at least in cost, similar to other countries: lack of product information made available to the consumer, and high cost of credit and savings products.

Focus groups conducted with low-income clients recruited from the study areas around the time of the audit study revealed that terms advertised in marketing materials and communicated by sales representatives did not accurately reflect the actual costs of the credit products they selected, making it hard to assess the true cost of a product before signing the contract. In addition, few of the participants understood the concepts of total annual cost and total annual earnings (CAT and GAT, respectively), and therefore did not use these terms in their decision to purchase credit or savings products. Similarly, participants cited several cases where they had lost a significant fraction of their savings balance due to fees assessed on their accounts that were not known at the time when the savings account was opened. The fees responsible for the reductions in savings balances were mostly avoidable fees such as the minimum balance requirement fees, activity fees (charged when a certain number of withdrawals per month is exceeded), and inactivity fees (for not depositing additional funds over a certain period of time).

From a policy perspective, mistakes in financial decision-making due to limited information would be less of a concern if all financial products offered were relatively cheap. However, despite the recent entry of new players in the Mexican market, the cost of financial products in Mexico remain average when compared to other countries and it varies drastically depending on whether the fees just described are incurred (World Bank, 2008). According to the Bank of Mexico (2013), competition in consumer credit markets remains low especially when compared to mortgages or business loans.

[TABLE 1 HERE] Table 1 reports summary statistics for all credit and savings products that could have been offered by all 26 financial institutions in the audit study to clients between June and August 2012, the period in which

> 8 SOFOMs are divided between regulated and non-regulated SOFOMs, and the latter do not have to report financial information to the National Banking Commission (CNBV), but must comply with consumer protection regulations set forth by CONDUSEF. 9 While SOFOMs accounted for only 1.3% of all complaints registered by consumers made with the financial consumer protection agency in Mexico (CONDUSEF) in 2011, the number of cases leading to a fine being assessed were nearly twice as many for SOFOMs as any other provider type, despite being a relatively small share of the market and only offering credit products (CONDUSEF, 2012).

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