The case for educated UK consumers: the National Consumer Council's consultation on consumer education

Consumer education is an integral part of the consumer empowerment mix. Over recent years the importance of consumer education as a vital tool for protecting consumers and making them better informed has been increasingly recognized in the UK. As part of the developing policy debate in the UK, the National Consumer Council (NCC), one of the key consumer champion bodies, has been arguing the case for a national strategy for consumer education. In order to establish whether a national strategy was needed and, if so, how a strategy could be structured and introduced, the NCC carried out a national consultation. In excess of 100 responses were obtained from a very broad range of organizations. This paper provides a review of the secondary data gathered for the NCC research. It was found that although there are many organizations and networks involved in consumer education in the UK, it lacks focus, is fragmented and is not efficient or coordinated. The research highlighted a need for a strategic approach to place educated and empowered consumers at the heart of the marketplace.     

Consumer education in the UK: new developments in policy,strategy and implementation

Consumer education is an integral part of the European Community's consumer policy. It plays a key role in consumer empowerment, helping consumers gain the skills, attitudes and knowledge they need to be able to gear the choices they make as consumers to their economic interests and to protect their health and safety. In its policy statement, the Directorate General for Health and Consumer Protection states that the European Community is aware that joint measures at national and Community levels should be more structured, in order to achieve maximum effectiveness. This paper aims to set out the current policy and strategic context for consumer education and empowerment in the UK; review the role of UK government bodies and other agencies concerned with developments; review recent literature; present the results of interviews with an extensive range of key stakeholders and the results of a survey of service heads for trading standards throughout the UK. It will consider implementation, partnership, resources, ideas and opportunities. The research found that the agenda for consumer education in the UK is at an interesting stage of development. The Enterprise Act 2002 gives the Office of Fair Trading (OFT) a statutory power to carry out educational activities. Consumer education is also moving up the agenda in the trading standards service. In addition, the teaching of citizenship in English schools is already stimulating new developments in consumer education. The paper will consider the need for organizations like these to work together to build on these policy developments and ensure that consumer education gains the profile it needs to influence consumer attitudes and behaviour.     

Entrenchment of New Governance in Consumer Policy Formulation: A Platform for European Consumer Citizenship Practice?

Consumer typologies reveal categories of the consumer that stretch from the vulnerable to the empowered notion of the consumer citizen. At the empowered end of this spectrum, consumers in Europe have a developing, normative, organisational structure that provides channels for the consumer voice to influence consumer policy at the European level. This is an organisational structure with mechanisms for developing an effective consumer empowerment and enforcement framework across all EU Member States. It is a framework that forms a coherent whole with the European-level consumer institutions. This paper examines the integrated nature of these institutions and their role in influencing the development of consumer policy through a multi-level platform of new governance. It discusses the normative processes that, through empowerment and engagement, are encouraging a consumer citizenship practice to exploit these channels of communication in order to influence policy development.     

Low literacy,policy and consumer vulnerability: Are we really doing enough?

A perennial issue in transformative consumer research and public policy is the plight of low‐literate vulnerable consumers. Low‐literate consumers have been observed misinterpreting labels, misusing products and purchasing the wrong item, which leads to devastating outcomes as they continue to make poor decisions out of ignorance. Based on a thorough review of past studies on consumer literacy and vulnerability, we explore how stigma and attribution operate as underlying mechanisms for influencing how low‐literate consumers behave in the marketplace. This paper problematises blanket statements that all low‐literate consumers are vulnerable and addresses the possibility that universal policy actions may inadvertently create further marginalization for those it is meant to protect. Our paper contributes by introducing a new typology of low‐literate consumer vulnerability to challenge conventional understandings of who the vulnerable consumers are in relation to their literacy level and actual marketplace behaviour. From a policy standpoint, the insights gained from our review speak to the need for differentiating low‐literate consumers in terms of their status of vulnerability, which inform public policy initiatives and effective consumer education for their empowerment and protection.     

Effective Paths for Consumer Empowerment and Protection in Retail Energy Markets

Consumer empowerment and protection are frequently discussed in contemporary energy policy debates. The process of consumer empowerment through information and consumer education has great potential, yet consumer switching as the concomitant outcome of this process remains low. Additional protection for vulnerable consumers is called for. This article is centred on the path to achieving consumer empowerment and protection. In particular, it stresses that empowerment should be viewed as a long-term process. Regulators should not focus on the mere outcome of switching and adopt remedies aimed at changing consumer behaviour in the short term. The discussion highlights how attempts to protect vulnerable consumers through an ancillary application of competition law distort the competitive process and should be avoided. Personal vulnerabilities, such as low income, can be better tackled with targeted social policy measures, whereas instances of vulnerabilities pertaining to the market context, such as difficulties in assessing different energy offers, are better phased out through the market mechanism.     

Adult consumer education across Europe – redressing the market or reaching the vulnerable consumer

Consumer education is an important EU and United Nations priority. In most countries’ formal education systems, it is not a single discipline in its own right, but a cross‐curricular subject involving many areas of the school curriculum. Adult consumers are expected to be critical and informed consumers but may not know how to acquire the appropriate skills. The formal school system in many countries has failed to deliver these skills and values and adults need consumer education through both formal and informal means. With increasingly varied societies consumer education will help to produce active socially responsible citizens and citizenship is an essential element of the delivery of consumer education to adults. It is particularly important that consumer education should reach the vulnerable groups in society. Increasing globalisation and business power necessitate ethical and sustainable business practices; an informed, educated and empowered consumer will strengthen the market place to the benefit of both consumers and business. Unlike school education, adult education across Europe is fragmented with a mixture of formal education, including training for vocational qualifications, continuing and community education, and informal education, an essential contributor to life‐long learning delivered through media, women's groups, consumer groups and many other large and small organisations. The issues have been addressed by the EU Socrates supported CEA (Consumer Education for Adults) project which has 10 partners from 7 European countries drawn from non‐government organisations, teacher training and adult education institutions, universities and research institutes. The project has produced a training manual for adult consumer education, a training module, piloted in Vienna, which includes a handbook of teaching materials and a video, and has initiated a dialogue between consumers, consumer educators, business and producers.     

Saving for Retirement—A Case for Financial Education in Germany and UK? An Economic Perspective

Demographic changes, tight public budgets, and reduced generosity of occupational pension plans shift the responsibility for an adequate retirement provision towards the individual. Applying the theoretical perspectives of Behavioural Finance and New Institutionalism to the domain of retirement provision offers insights into the difficulties individuals are facing in planning for retirement, carrying out, and revising plans. Lacking financial literacy seems to lie at the heart of the problem and points to a possible solution: providing financial education to consumers through non-governmental organizations and state-related agencies. This article is examining which role consumer education and consumer advice can play to enhance financial literacy with regard to pensions and old-age provision. As two case studies Germany and the UK are compared because the institutional set-up of the pension systems and the approaches towards consumer policy are very different. The case studies show that financial education with regard to old-age provision can be successful if it reaches consumers in their environment at life-stages where important decisions need to be made. To achieve that considerable efforts have to be taken in terms of funding and organizational set-up. However, evaluation is necessary to prove the effectiveness of the education especially for vulnerable consumer groups. If evaluation reveals that these groups cannot be targeted effectively or that consumers are not taking action subsequently to attending financial education, there might be a case for changing behaviour through the institutional set-up of pension schemes (i.e., through automatic enrolment) and using financial education as a supportive policy instrument.

Consumer education and empowerment in Europe: recent developments in policy and practice

This article develops the findings of an evaluation of European Commission consumer education, information and capacity building actions conducted in 2011, with an examination of action taken by 2016 to address the recommendations. Based on empirical research of documents, in‐depth interviews, focus groups and semi‐structured surveys of Directorate General for Health and Consumers and Directorate General for Education and Culture policy networks, it discusses the journey taken to improve consumer education and empowerment throughout Europe. Implementation of the recommendations aims to transform consumer education and empowerment in Europe, with integrated and updated resources for the maximum number of teachers across the European Union, where teachers can focus the resources on consumer education activities relevant for their learners. A key focus of the new developments is to deliver higher European Union (pan‐European) added‐value, better coordination and synergies with national activities.     

Do not swipe the small stuff: A randomized evaluation of rules of thumb-based financial education

We perform the first rigorous test of a rules of thumb-based approach to financial education on consumer behavior and outcomes. We test two rules of thumb that are targeted at reducing credit card revolving and deliver them in a randomized fashion via e-mail, online banner, and physical mailer. Using monthly administrative data and pre and postintervention credit data on almost 14,000 consumers, we find that the “Do not swipe the small stuff” rule of thumb reduces participants' targeted credit card balance by an average of 2% at a cost of around $0.50 per person. The “Credit keeps charging” rule shows a decline as well but the impact is not significant.     

Correlates of responding to and becoming victimized by fraud: Examining risk factors by scam type

Consumer fraud reports in North America have been increasing each year along with median fraud losses. Using survey data from 1375 American and Canadian consumers who previously reported a scam to a North American consumer complaint organization, this study examines the correlates of responding to and losing money to four categories of consumer fraud: opportunity-based scams, threat-based scams, consumer purchase scams, and phishing scams. Relative to opportunity-based scams that offer the promise of rewards, consumers were less likely to respond to and report losing money when solicited by threat-based scams and phishing scams. The odds of victimization were highest for consumer purchase scams. Risk factors, including gender, race, education, income, loneliness, financial fragility, and financial literacy, differed across scam categories, suggesting that victim profiles differ across fraud types. Some of the risk factors associated with responding to the scam solicitation (vs. ignoring it outright) were different from risk factors associated with victimization. Having advance knowledge of fraud prior to being exposed was protective across nearly all scam types. Results suggest that awareness about specific scams helps protect against financial loss. Additional research is needed on how to effectively deliver fraud awareness messages to those who are most susceptible.     

Competing Online: Studying Consumer Choice Drivers for Online Financial Services

ABSTRACT

Given the rapid increase in the consumer use of online services and the increase in competition between firms that compete online, firms are faced with a crucial challenge. Having invested significant resources in transitioning consumers from using offline services to using online services, they now need to understand what drives consumers to choose between competing online services. Our study seeks an exploratory answer to the above challenge. Specifically, we consider, “what role do factors that drive consumers into using online services play in assisting firms better compete in the online space?” This paper explores the above question by quantifying the value that consumers of an online financial service place on having access to in-depth product information, an affordable online service, an easy to use online service, access to offline capabilities, and available marketing promotions. The results reported in this paper are based on a web-based discrete choice experiment in which 2,209 consumers were asked to compare various online financial service offerings, differing from each other in terms of the relative availability of our critical factors. The results demonstrate that consumer preferences (relative utilities) for various factors of an online financial service are different. Our results enable practicing managers to understand the factors that drive consumer choice when faced with competing online services. We believe that these results have both managerial and research implications for design, management and operations strategy formulation for online services.     

Consumer financial education and financial capability

The purpose of this study was to explore potential effects of financial education on the financial capability of American consumers. Data from the 2012 National Financial Capability Study were used to test the hypothesis that financial education is positively associated with financial capability. Four financial literacy and behaviour variables were used to form a financial capability index. Multivariate linear regression results showed that, after controlling for demographic and financial variables, respondents who ever received financial education had higher scores in all financial capability indicators (objective financial literacy, subjective financial literacy, desirable financial behaviour, perceived financial capability and the financial capability index). In addition, high school, college and workplace financial education variables showed positive associations with these financial capability indicators. Additional state comparison analyses provided evidence suggesting high school financial education may have direct impacts and spillover effects on consumer financial capability.     

What’s in a Score? Differences in Consumers’ Credit Knowledge Using OLS and Quantile Regressions

Credit literacy depends, in part, on understanding credit reports and scores. The U.S. Government Accountability Office conducted a study in 2004 to assess consumers’ knowledge of credit reports, credit scores, and the dispute resolution process. This study uses the Government Accountability Office data and estimates a series of ordinary least squares and quantile regressions to identify specific subgroups of the population that could benefit from more targeted consumer policies and financial education. The findings from this research have important implications for consumer educators, financial professionals, and policy makers, especially with respect to national strategies designed to improve consumers’ financial well‐being.     

Critical consumer issues in St. Lucia: an examination of consumer challenges and related learning among rural adults according to income levels

Consumer education is a relatively new and growing interest in St. Lucia. Neither the government nor the National Consumer Association has established a consumer education programme to address the growing consumer concerns in the country. The purpose of this study was to examine critical consumer issues, related learning challenges and strategies among rural adults in St. Lucia according to income levels. Rural adult consumers are most disadvantaged in terms of levels of education, income and access to resources, which may help to prevent and mediate consumer concerns. The specific research questions examined were: (1) What is the nature of problems experienced by rural St. Lucian adult consumers in the marketplace? (2) How do rural St. Lucian adult consumers solve the challenges they encounter in the marketplace? (3) What is it like for rural St. Lucian adult consumers as they go about trying to learn to solve the consumer issues they face? and (4) What do rural St. Lucian adult consumers perceive to be the requisites for effective decision making in the marketplace? Data were collected using a questionnaire comprising of 29 questions divided into four sections (problems, strategies, solving consumer problems and making effective decisions) and two biographical questions. A total of 500 rural adult consumers were surveyed verbally through door‐to‐door contact. The findings of this study revealed that middle‐income rural adult consumers experience more problems in the marketplace than those with each lower or higher level of income. Middle‐income rural adult St. Lucian consumers in particular seek more information and are comfortable with using more strategies than the lower‐ and higher‐income rural adult consumers. This research gives us a better understanding of the problems faced by rural adult consumers based on their income. Research results will be useful to the government of St. Lucia and the National Consumer Association when they decide to establish an adult consumer education programme for St. Lucia.     

A SYSTEMATIC APPROACH TO ANALYSING CONSUMER COMPLAINTS *

In conjunction with local authorities, and Citizens' Advice Bureaux, the Office of Fair Trading (OFT) has set up a system for recording and classifying consumer complaints. OFT aggregates statistical returns that are made quarterly to produce national figures showing the pattern of consumer complaints, classified both by type of goods or service and by trading practice. Over 400,000 consumer complaints were recorded and classified for the first full 12-month period during which the system operated, ending in September 1975. The system has two uses. First, it signals areas of difficulty for consumers which should be studied by OFT. Second, the records of individual consumer complaints held by local authorities provide a data base which can be drawn on when OFT is carrying out detailed studies.     

An investigative study of adult consumer education and lifelong learning needs in the United Kingdom and Latvia

Consumer education in Latvia is in the early stages of development and should be seen in the context of the rapidly changing society in the post‐Soviet era and the increasing influence of the marketplace, and Latvia's position as a new accession country. The Latvia University of Agriculture is in the process of developing an adult consumer education programme. A comparative study between the UK and Latvia was designed to test the hypothesis that many adult consumers lack knowledge and understanding of their consumer rights and responsibilities. A sample of adults in both countries completed a consumer rights questionnaire investigating attitude, knowledge and critical thinking ability. The UK questionnaire was modified, taking into account the different consumer environment in the two countries, to compare the need for adult consumer education in Latvia and the United Kingdom. In the United Kingdom results showed that the group overall were not confident that they knew enough about consumer rights and legislation or to resolve consumer problems and were unsure about their consumer responsibilities. Levels of knowledge were poor, leaving adults vulnerable to exploitation in the marketplace, uninformed about their responsibilities to voice dissatisfaction about goods and services, and unaware of how their consumer behaviour can affect the wider community. Adult participants in Latvia thought that they lacked education in consumer legal rights and responsibilities and did not have the necessary skills, knowledge and understanding to manage consumer problems effectively. Results in both countries indicate that adult consumer education is needed, supplemented by a comprehensive package of adult consumer education. Despite the cultural differences between the two countries, the analysis showed that similar adult consumer skills and attitudes were needed. This joint research has shown that this methodology could be used to determine adult consumer and life‐long consumer education needs in other European countries and internationally.     

Learning to fail: resilience and the empty promise of financial literacy education

The requirement to build economic resilience in people has become a concern for the UK Government, regulators, and the financial services industry. Transposed to the realm of financial literacy education (FLE), the resilience doctrine performs particular effects in relation to the naturalisation and individualisation of financial market relations. At the same time, it tends to speak of the inevitability of market failures and crashes. I argue that based on these features, the effect of the resilience doctrine is to mask the “empty promise” of FLE programmes: the irreconcilable gap between the empowerment discourse surrounding what such agendas are meant to achieve for ordinary people and the latter's actual success in securing their security and well-being through financial markets. The paradoxical element of resilience talk is that it at once serves to further legitimise financial education attempts, while providing an opportune reason for failures judged even on its own terms.     

Financial information for consumers: A future strategy for consumer organisations

The consumer is faced with increasingly complex decision-making in relation to financial services. His or her information needs are growing more sophisticated and comprehensive. At the same time, the supply of many financial services to consumers is becoming increasingly internationalised. It is suggested that national consumer organisations should work in collaboration to identify consumers' financial information needs, to develop a shared testing programme for internationally available financial services and to share experience in developing information and communications technology-based personal financial advice.

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Verbraucherinformation über Finanzdienstleistungen: Eine zukünftige Strategie für Verbraucherorganisationen

Zusammenfassung Verbraucherentscheidungen in finanziellen Fragen sind schwieriger, der Informationsbedarf der Konsumenten ist umfassender und komplexer geworden. Da gleichzeitig viele finanzielle Dienstleistungen in internationalem Rahmen angeboten werden, schlägt der Beitrag vor, daß die nationalen Verbraucherorganisationen in internationaler Kooperation den Informationsbedarf der Konsumenten zu finanziellen Fragen erfassen. Außerdem sollte ein Programm zur Prüfung und Bewertung von international angebotenen finanziellen Dienstleistungen entwickelt werden.

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Jeremy Mitchell was until the end of 1986 Director of the National Consumer Council (UK) and now works independently as Consumer Policy Adviser to voluntary and consumer organisations at 214 Evering Road, London E5 8AJ, UK. The paper was given to the Thirtieth Anniversary Seminar of Association des Consommateurs/Verbruikersunie at Louvain-la-Neuve, Belgium, on 11 June 1987.     

Getting Cinderella to the ball: putting education at the heart of financial education

The recent banking collapse has called into question all activity related to financial services, from regulation to consumer protection, to financial education. Since the Organisation for Economic Co‐operation and Development's 2005 ‘Recommendations on Principles and Good Practices for Financial Education and Awareness’, there has been an increase in financial education activity, yet the world is a different place. The role of financial education, its scope and its potential, must now be critically analysed to help ensure its efficacy in supporting financial rectitude in challenging times. The authors draw on several years’ experience in the design and delivery of financial education programmes and debt prevention interventions, informed by their perspective as educationalists. In this theoretical commentary, they seek to influence the discourse on financial education, and position education as a foundational discipline in financial education. The authors identify potential risk to the future of financial education, engaging with the literature that questions the validity of financial education as an endeavour in consumer protection, which points to the dearth of empirical evidence to support its effectiveness, and which queries the efficacy of resourcing such initiative development. They argue that financial education focused on consumption cannot serve the citizen; rather, financial education must be rooted in the needs of the individual. Through these analyses, the authors highlight areas of further research, which when undertaken, can lead to more effective outcomes for all. This article introduces the concept of financial edification as an approach to financial education, predicated on the needs of the individual. In repositioning financial education as a pedagogical endeavour, the article asserts that financial education, when not driven by education, cannot achieve its true potential; it is time for Cinderella to go to the ball.     

Consumer Support Networks: improving consumer advice in the UK

In 1999, Central Government launched an initiative to establish Consumer Support Networks (CSNs) throughout Scotland, England and Wales. The purpose of the networks is to improve access to high quality consumer advice services. Information and advice agencies will join together to provide expert, accurate and timely advice for consumers. By April 2002, 191 networks had been established covering in excess of 99% of the population. Only one local authority area in England has yet to establish a network. This paper reviews the development of consumer information and advice provision in the UK and considers the context for establishing CSNs. It also examines the need for consumer advice, the role of Central Government and the quality framework. Each CSN will conduct a gap analysis and assess the need for consumer advice in the local area. This will enable the network to develop a good understanding of consumers in the area and to take a more strategic approach in planning service developments to meet the identified needs. Consumer Support Networks aim to improve the provision of consumer information, education and advice. The literature suggests that consumers who are well educated regarding their rights are empowered through an increased ability to exercise them. Clearly branded advice services, marketed effectively to the public should result in higher levels of consumer awareness and, consequently, improve access to services. It is also expected that better flows of information between agencies will result in greater protection for consumers. Sharing ‘best practice’ nationwide should stimulate service improvements throughout.