This chapter focuses on the issues confronting retail consumers (individuals and households) when they engage with the financial sector. Some of the issues discussed are also relevant to many small businesses. In some cases, small businesses are similar to retail consumers in their level of sophistication and bargaining power. This chapter specifically discusses loans for small businesses, and the Funding chapter considers the funding needs of businesses in general.

To meet consumer needs, the Inquiry considers the financial system should deliver five outcomes:1

  1. Consumers should have access to products and services that help them meet their individual financial needs. Consumers need to be able to make and receive payments, borrow, invest and manage risk. Products should be designed to meet the needs of consumers.
  2. Consumers should have access to the information, advice and education necessary to make effective decisions about products and services that help them meet their financial needs. Informed consumers can better stimulate effective competition, driving system efficiency.
  3. Consumers should have confidence and trust in the financial system and be able to expect fair treatment. Effective regulation that minimises misconduct and promotes fair outcomes will drive confidence and trust in the financial system.
  4. Financial services and products should meet the purposes for which they are sold. Products and services should be accurately described, and perform as they are described, especially in the trade-off between risk and return.
  5. Consumers should have access to timely, low-cost and efficient dispute resolution and remedies when problems arise. Effective avenues for redress provide access to justice for consumers and promote confidence and trust in the system.

In this chapter, consumer outcomes will be assessed against these five outcomes.

1 Similar high-level principles were endorsed by the G20 Finance Ministers and Central Bank Governors in 2011. In addition to the outcomes discussed in this chapter, these principles recognise the importance of competition in driving consumer outcomes, as discussed in the Competition chapter, and the protection of consumer data and privacy, discussed in the Technology chapter.