**In the country reviews, the most difficult issue is the institutional structure for financial consumer protection.** In some countries, the financial supervisory agencies view consumer protection as part of their mandate for financial stability. In others, it is a general consumer protection agency that takes on the responsibility of dealing with financial services. This Working Paper suggests that whatever institutional structure is chosen, financial consumers should have just one agency for complaints and inquiries.

**Several institutional models are available to achieve the desired outcomes** . As one option, financial supervisory agencies may adopt consumer protection as part of their mandate (preferably as part of legislation). However in this case, they need to address the inevitable conflicts of interest that arise between prudential and business conduct supervision—and ensure that consumer protection receives sufficient focus. As a second option, economy-wide consumer protection agencies may take on financial services. However the agencies need to find a way to build the expertise—and confidence—to handle the complex technical issues related to financial services. In the US, the current administration has proposed a third approach, creating a special purpose Consumer Financial Protection Agency, such as that established in Canada. Whatever structure is chosen, financial consumer protection authorities could benefit from participation in an international network, such as FinCoNet, that promotes the exchange of information on supervisory and regulatory issues as well as market developments.

**Simple and easy-to-understand consumer disclosure lies at the heart of robust consumer protection.** One way of achieving such disclosure is through the use of a Key Facts Statement, providing all key terms and conditions in simple and plain language, for all retail financial products and services. Standard contracts for retail financial services—or at least standard basic contract provisions—would also help consumers understand their legal obligations.

**At the same time, abusive business practices should be prohibited.** All financial institutions that deal with the public should be registered with a financial supervisory agency. All who solicit funds from the public for investment (or speculative) purposes should be licensed—and those who engage in pyramid schemes and financial fraud should be prosecuted by experts in financial services. All sellers of retail financial services should be qualified and certified to ensure that they understand the products and services that they sell to the public. Ex-ante review by regulators of all financial products sold to the public could be required, similar to the Federal Drug Administration’s approvals for all medications sold in the US. Unfair or deceptive practices should be explicitly prohibited. Personal data should be carefully protected so that consumers are aware when their personal data has been shared with outside institutions.

**Special attention should be paid to consumer complaints.** Where complaints are not addressed effectively, consumers will become cynical and shy away from using financial services. Each financial institution should have a customer complaint department. Complaints about financial services should be consolidated in one location and statistics published about the number and type of complaints. The analysis of complaints should differentiate between inquiries (for which consumers should receive financial education) and disputes (for which a court process, mediation or arbitration is needed to resolve the issue at hand.) A fast and inexpensive out-of-court mechanism—such as a financial ombudsman—is needed to resolve legal disputes about consumer financial services.

**Financial education can potentially be an effective form of consumer protection (but cannot substitute for regulation).** Building financial literacy is a long-term investment, whose effectiveness should be carefully measured and evaluated. Focus should be placed on “teachable moments” such as the first time a consumer takes a mortgage or starts to plan for retirement. Children should be taught that financial health is important to their long-term well-being. Interactive stock market computer games and investment clubs are also effective in teaching high-school students about financial investments.

**Middle- and high-income countries should develop national strategies for financial education, starting with national financial literacy surveys.** The surveys should review not just the ability of consumers to evaluate different financial products but also how consumers spend their paychecks (or set

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