When financial harm is invisible – The consumer protection paradox

Information alone does not result in an informed decision, writes Alexandra Hochwarter.

A consumer loses €500 through gambling. The loss is immediately visible: the money is gone. Another consumer puts €20,000 into a savings account. Years later, the balance stands at €20,500. It looks like a gain. In real terms, however, the purchasing power of that money may have fallen.

Both consumers may be financially worse off. But only one sees the loss immediately. That is where the paradox lies: Why are immediate financial losses subject to active regulatory intervention, while long-term financial disadvantages are largely left to individual responsibility?

The comparison between gambling and financial services is deliberately provocative – not because the two should be equated, but because the regulatory contrast is revealing. The two sectors are neither economically nor socially equivalent, and they should not be regulated in the same way. Gambling carries specific risks, including addiction, loss of control and repeated patterns of play. Financial services, by contrast, perform a fundamental role in everyday life: people need bank accounts, to save and invest money, to take out credit and to make decisions about their long-term financial security.

That is precisely what makes the comparison relevant from a regulatory perspective. It highlights two different approaches to a common question: When is information enough – and when should consumer protection go further?

When information is not enough

In gambling, consumer protection does not stop at informing customers about potential losses. Deposit limits, reality checks and self-exclusion systems can intervene directly in consumer behaviour.

A player may lose control over how much time or money they spend. In such circumstances, a warning alone may not be enough. Regulation can therefore go beyond providing information by interrupting decision-making processes or placing limits on behaviour in certain situations.

Financial services regulation has traditionally relied more heavily on information and individual responsibility: consumers should receive relevant information and then make their own decisions. But information alone does not create an informed decision. Between disclosure and actual understanding lies a crucial gap.

A piece of information can be fully disclosed without its economic significance being understood or adequately taken into account in the decision-making process. It can even be understood, yet still fail to carry sufficient weight in the moment that a decision is made.

The problem, therefore, is not necessarily a lack of information. It is the translation of information into a realistic decision-making context. This raises the more fundamental regulatory question:

Is formal disclosure of the required information really enough to enable consumers to make informed decisions?

When a growing balance can still mean a real loss

A look at many bank financial products shows how deceptive numbers can be. €20,500 looks better than €20,000. But if prices have risen more sharply over the same period, the purchasing power of that money has fallen. The account balance may be growing, but that does not necessarily mean the wealth itself is.

Ultimately, what matters is not the number on the account, but what that money can actually buy.

Spain: When 3% is not the whole story

For new customers, ING Spain currently offers 3% TAE for three months on the savings product considered here. TAE stands for Tasa Anual Equivalente and refers to the annualised effective interest rate. After the promotional period, the balance is transferred to the standard Cuenta NARANJA, which advertises 0.30% TAE.

The information on the product page is therefore formally clear: the interest rate, promotional period and subsequent rate are disclosed. But assessing what these figures actually mean in economic terms requires the consumer to bring in additional information, such as developments in the general price level.

According to Eurostat, the statistical office of the European Union, Spain’s annual inflation rate, measured by the Harmonised Index of Consumer Prices (HICP), stood at 3.8% in July 2026 and 4.6% in August 2026..

The 3% TAE is an annualised effective interest rate that applies only for three months. The 3.8% inflation rate, by contrast, measures the change in the general price level over a 12-month period. The two figures therefore cannot simply be compared at face value.

And that is precisely where the more interesting question begins: where does transparency end – and where does the responsibility to interpret and contextualise information begin?

France: A negative real return is not a compliance breach

France shows that regulation can, at least in part, attempt to account for the erosion of purchasing power.

The interest rate on the state-regulated Livret A has stood at 1.7% since August 2026. Unlike an ordinary bank account, its rate is not freely determined by individual banks but calculated according to a statutory mechanism that takes, among other factors, inflation into account. The potential erosion of purchasing power is therefore at least partly reflected in the rate-setting process.

Even so, France’s annual inflation rate, measured by the HICP, stood at 2.4% in July 2026 and at 2.6% in August 2026. The real return on Livret A can therefore remain negative despite the inflation-sensitive rate-setting mechanism. The interest earned is also tax-free.

This distinction matters. Regulation can seek to mitigate an economic disadvantage without eliminating it altogether. A negative real interest rate, in itself, is therefore not evidence of inadequate consumer protection.

The more interesting question lies one step earlier: Does the consumer have a realistic opportunity to recognise that an interest rate of 1.7% in an environment of 2.4% inflation can mean a loss of purchasing power, despite the nominal increase in the value of their savings?

Italy: When the information is there – but what does it mean?

The Italian Libretto Smart illustrates another dimension of the problem.

According to the official information sheet for the Libretto Smart, dated 24 July 2026, the annual nominal base interest rate is just 0.001%. The same document lists several higher-yielding Supersmart options. The Deposito Supersmart Plus, for example, offers 3.25% per annum for a term of 181 days.

The relevant information is therefore formally available. That alone, however, does not answer how accessible or decision-relevant that information is to the consumer. It would be wrong to infer problematic conduct by the provider simply from the difference between the interest rates.

A consumer must do more than identify the base rate. They must also recognise what alternative rates are available, understand the conditions attached to them, and consider the corresponding term. The challenge therefore lies less in the availability of information than in how that information is understood and weighed within the actual decision-making process.

According to Eurostat, Italy’s annual inflation rate – measured by HICP – stood at 2.9% in July 2026 and 3.2% in August 2026.

The 0.001% base rate therefore sits against an inflation rate of 2.9%. That gap illustrates why simply stating an interest rate does not necessarily give consumers a complete picture of what a savings product means in economic terms.

And this is where the perspective shifts from the individual product to the role of supervision: What happens when information gaps of this kind do not affect just one consumer, but systematically contribute to poor financial outcomes?

Beyond disclosure: What regulators say

European banking supervision is also increasingly treating consumer harm as something that needs to be identified and monitored systematically. The European Banking Authority (EBA) has developed so-called Retail Risk Indicators to capture potential consumer detriment in banking. The indicators cover areas including mortgages and consumer credit, deposits, payment accounts, and payment services. They are intended to help the EBA and national supervisory authorities identify risks and set supervisory priorities. The EBA does, however, explicitly caution that these indicators are proxies for potential consumer detriment rather than precise measures of individual consumer harm.

How easily can a consumer move from formally correct information to a realistic understanding of its economic significance?

The OECD Consumer Finance Risk Monitor 2026 points to a similar problem. It identifies ‘ineffective disclosures’ as the most frequently cited behavioural risk in the financial sector: 44% of responding jurisdictions ranked ineffective disclosure among the three most significant conduct risks to consumers. At the same time, the report highlights factors such as low levels of financial and digital literacy, noting that unclear or ineffective disclosures can exacerbate risks to consumers’ financial well-being.

Taken together, these developments suggest that the regulatory question is no longer simply whether information is disclosed, but whether it is presented in a way that enables consumers to understand it and act on it.

For this article, the European Securities and Markets Authority (ESMA) also commented on how investors actually perceive and process information. In its statement, the EU authority refers to its work on investor protection and digitalisation and emphasises that effective investor protection requires more than simple information disclosure.

As Matteo Rava, Team Leader in the Protection Retail Investors team at ESMA, explains: ‘Investor protection cannot be reduced to whether the required information has formally been disclosed’. In its statement, ESMA further explained that, in digital environments, the manner and timing of information presentation, as well as the way choices are structured, can affect what investors notice, understand and ultimately do.

This is why ESMA, among other things, looks at information overload, choice architecture, gamification, nudging and dark patterns. At the same time, the objective is not to remove investors’ freedom of choice, but rather to ensure that digital interfaces support informed decision-making and do not exploit behavioural biases or steer investors towards outcomes that are not in their best interests.

From disclosure to consumer outcomes

When considering consumer outcomes – and the role of financial services providers in achieving them – key questions may arise at each stage of the consumer decision-making process, between disclosure and outcome. For example:

• Disclosure: Was the relevant information provided?
• Understanding: Could the consumer understand its economic significance?
• Decision: Was that information sufficiently visible and usable at the point when the decision was made?
• Behaviour: Did the design of the decision-making process inappropriately influence the consumer’s behaviour?
• Outcome: Did a material and foreseeable detriment arise that could have been reduced or avoided through a proportionate intervention?

This chain does not mean that regulation should guarantee positive financial outcomes. Consumers may legitimately place a higher value on liquidity than returns, security than growth, or consciously choose to take on greater risk.

The relevant regulatory boundary lies elsewhere: where several factors come together. Is the detriment material? Is it difficult for consumers to recognise, influenced by the design of the decision-making process, and potentially reducible through a proportionate intervention?

Consumer protection would therefore not seek to prevent every poor decision. Instead, it would place greater emphasis on the quality of the decision-making process.

The harder question: When does disclosure stop being enough?

This is where the line between consumer protection and paternalism becomes particularly important: the attempt to protect consumers even from decisions they are capable of making themselves, simply because those decisions turn out to be disadvantageous in hindsight.

If every poor financial outcome were treated as evidence of inadequate consumer protection, there would be a risk that consumer protection becomes consumer control.

That would be neither realistic nor desirable. Regulation cannot guarantee that consumers will always make the economically optimal decision; even a fully informed consumer can make the wrong choice under conditions of uncertainty.

Where a significant disadvantage is difficult for the average consumer to recognise, where informational or design power is significantly asymmetric, and where a proportionate intervention could improve the quality of the decision-making process, however, a genuine consumer protection issue arises.

This could mean clearer presentation, better opportunities for comparison, or a different design of digital decision-making environments. It does not necessarily mean removing the underlying choice.

A regulatorily compliant disclosure does not automatically amount to an informed decision. Consumer protection should therefore not seek to guarantee the right decision. It should ensure that the conditions are in place for a decision to be genuinely informed.