Bank of Russia proposes common format for informing consumers about financial products

When organisations fail to provide consumers with adequate information on the specifics and risks of purchased products, this may involve misselling, touting, and other unfair practices. Moreover, financial institutions often inform consumers of the same products differently; and when it comes to complex products offered in various market segments, the diversity of data provided using special terms perplexes consumers even more, making it hard for them to select the best decision.

The Bank of Russia believes it critical to create the environment where consumers will be able not only to comprehend the key features of products they are going to purchase, but also to compare similar products offered by different financial institutions, and thus make a well-informed choice. In order to fix this issue, the Bank of Russia proposes common KIDs on financial products.

According to the consultation paper, a KID should not exceed 2–3 printed pages, and the information therein should be explained in plain language without abundant financial and legal terms, using a sufficiently large font size. The consultation paper also lists financial products that should be explained in KIDs to consumers before they sign their contracts. A KID in no way substitutes the rules and conditions of an agreement, but is provided solely for information purposes.

In addition, the consultation paper proposes that the market community discuss possible sanctions against financial institutions failing to provide KIDs to consumers.

The consultation paper’s authors believe that higher transparency of relations between consumers and sellers of financial products, instruments and services will enhance consumers’ satisfaction with financial products offered to them and their confidence in the financial market in general.