How unfair commercial practices in finance put consumers at risk

The misleading practices harming consumers of financial services

Unfair commercial practices are shaping the financial decisions of consumers across Europe. 

From influencer marketing and personalised advertising to greenwashing and risky pyramid schemes, today’s digital marketplace is full of tactics that mislead, pressure or confuse. Often, these methods push people towards financial products that don’t meet their needs – and may even harm them. 

Unfair commercial practices are a threat to consumer protection and financial inclusion. What’s more, by targeting the less digitally savvy and those with limited access to clear, unbiased information, they undermine trust in the financial system. 

Certain EU laws and regulations, such as the Unfair Commercial Practices DirectiveThe Unfair Commercial Practices Directive is a European consumer law that regulates unfair business practices in the EU. It is intended to reduce trade barriers across borders and level the single market playing field while providing a high level of consumer protection. As a Directive, it requires each EU Member States to incorporate into its legal system. However, its implementation is far from uniform., are intended to protect consumers, but gaps in its current form mean it often fails to make the retail marketplace safer.

This blog explores the practices harming consumers and why stronger rules are urgently needed to make the financial system fairer for everyone.

Influencer marketing

Across Europe, financial firms are increasingly turning to influencers, especially to reach younger consumers. 

Data from the UK’s Financial Conduct Authority shows that nearly two-thirds of 18-29-year-olds follow social media influencers. Of those, 9 in 10 have been encouraged to change their financial behaviour. 

Finfluencers hold the trust of their followers – often young and vulnerable consumers attracted to the lifestyle they flaunt. 

But there’s a catch. Finfluencers often lack the sector expertise to safely guide consumers and may be driven by undisclosed conflicts of interest, such as compensation by the product provider.

Image credit: Adobe Stock

The consequences can be serious. Calling for the regulation of influencer marketing, the European Consumer Organisation (BEUC) documented several examples of individuals suffering significant financial harm due to influencer promotions of crypto assets. 

In France, a consumer collective filed a complaint against influencers for pushing risky investments with promises of unrealistic gains. 

Meanwhile, the Dutch Financial Supervisory Authority has received numerous complaints from consumers who have lost money as a result of influencer tips. 

Without strong regulation of the influencer marketing space, consumers will continue to face risks in the retail financial marketplace.

Algorithmic pricing practices that target the vulnerable

In the digital financial marketplace, companies are increasingly turning to manipulative, data-driven price optimisation practices. This personalised pricing isn’t based on risk or service cost, but on how much the consumer is willing to pay. It’s more than just deceptive, it’s harmful. 

Using algorithms, firms analyse behavioural data, like shopping habits or how likely someone is to switch providers. They then charge different prices to different individuals for the same product.

According to the European Insurance and Occupational Pension Authority’s 2023 Consumer Trends Report, price optimisation often affects insurance pricing, such as home, health or auto insurance. 

The result? Consumers who tend to stick with the same provider end up paying more simply because they’re less likely to notice – or challenge – the pricing. 

Data-driven pricing is particularly unfair to the vulnerable, like the elderly or those with limited access to digital tools, who may not have the resources or ability to compare offers. 

Ultimately, experts and consumer protection bodies agree: pricing should be based on fair, transparent criteria and not on what a business thinks it can get away with. 

Deceptive user experience patterns

Websites commonly use deceptive design tactics, known as dark patterns or black user experience (UX) practices. Increasingly employed in the retail financial services sector, dark patterns exploit human psychology to push consumers towards decisions that may not be in their best interest. 

A 2022 European Commission study found that 97% of popular websites and apps in the EU deploy at least one dark UX pattern, taking a variety of forms: 

• Creating a false sense of urgency 
• Hiding details about risks or additional costs
• Making cancellations more difficult than signs-ups
• Giving prominence to certain options over others to steer decisions
• Repeating requests for the same choice even after the user has declined

Image credit: Adobe Stock

In the context of financial products, these misleading approaches manifest themselves in various ways. For example, in 2023 in the EU, consumers lost €30 billion in hidden fees when sending and spending money internationally. 

Furthermore, Dave Inc., a fintech firm offering cash advances via its mobile app, faced enforcement action from the U.S. Federal Trade Commission. Although the company advertised no hidden fees, users often couldn’t access the full advance and paid extra for instant transfers — all while a deceptive interface nudged them into paying a tip to receive the service.

Unsolicited personalised advertising

With the help of artificial intelligence, financial services providers are increasingly using consumers’ data to deliver highly targeted ads. 

Known as unsolicited personalised advertising, these ads aren’t just tailored, they’re designed to tap into unconscious behaviours and emotional triggers.

For example, someone with a pattern of compulsive spending might be shown ads promoting consumer credit, subtly nudging them to borrow money and spend beyond their means. Over time, this can lead to serious hardship, including debt and over-indebtednessOver-indebtedness is when households regularly struggle to keep up with their financial commitments, such as loan repayments, rent, utility bills, or other household expenses. Signs of over-indebtedness can include missing payments, defaulting on credit, or needing to enter consumer insolvency proceedings..

What makes this practice especially unfair is that consumers don’t actively agree to this profiling – it happens behind the scenes without clear consent. And it’s becoming more common as digital tools grow more powerful. 

By exploiting psychological vulnerabilities, unsolicited personalised advertising raises serious questions of fairness, transparency and consumer protection in the digital financial world.

Greenwashing

As consumers seek to ensure their investments support a fair economy, but also don’t harm the planet, financial services providers have been quick to cater to this growing demand. Yet regulatory shortcomings, inconsistent standards and vague terminology mean these offerings often fall short of clients’ expectations. 

This discrepancy is called greenwashing. It’s when businesses market products as green or sustainable when in fact they’re not. 

Research commissioned by consumer organisations from the BEUC network found that greenwashing is particularly pervasive in the retail investment space. Sustainable investment opportunities remain limited and, as a result, marketing efforts often outpace the environmental or social impact of the products being sold. 

So-called green investment products may feature images of nature, use unverifiable language that evokes greenness or a green feel, or promise positive impact with little supporting evidence. Some restrictions exist, but they rely on vague concepts, leaving leeway for asset managers to develop their own definition of sustainable investment. 

Image credit: Adobe Stock

Additionally, many financial institutions subscribing to sustainable initiatives, like the Paris Climate Agreement, continue to finance fossil fuel extraction and other unsustainable business activities. 

Many EU countries already recognize greenwashing as an unfair commercial practice, but clearer rules are needed to ensure a common understanding across the bloc. 

Ultimately, products that don’t live up to their promises mislead consumers, undermining the credibility of sustainable finance.

Pyramid Schemes

Pyramid schemes are deceptive arrangements where consumers pay to join in exchange for the opportunity to receive compensation. The compensation, however, comes from bringing new individuals into the scheme, and not from the actual selling or consumption of products. 

In retail finance, a growing area of concern is the cryptocurrency space. Cryptocurrency schemes lure consumers into investing in fake or misleading digital assets, highlighting their secure, easy and lucrative nature. 

According to the Belgian Financial Services and Markets Authority, crypto fraudsters present themselves as experts, claiming invested funds are guaranteed and can be withdrawn at any time. They bolster their claims with fake online content – fabricated press articles and interviews with public figures – circulated by fake news websites and paid social media ads. 

Recently, authorities from several European countries, supported by Eurojust and Europol, busted a cryptocurrency pyramid scheme promising returns of 70%. 

The setup involved investing in server storage and the subleasing of crypto exchange machines. However, the leased systems and machines didn’t exist, while the revenue for early investors came from more recent investors. 

Finance Watch is urging a revision of the Unfair Commercial Practices Directive

Unfair commercial practices erode trust in financial institutions and push people towards unsuitable products and services, often leading to debt and over-indebtedness. These exploitative tactics harm individuals, undermining financial inclusion and consumer protection. 

Finance Watch – a non-profit association dedicated to reforming financial regulation to serve people and the planet – is calling for stronger EU rules to protect consumers, especially the most vulnerable. Revising the Unfair Commercial Practices Directive would be a crucial step in ensuring a fairer, more inclusive digital financial marketplace for all. 

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