Swinburne University, on behalf of the Director of Consumer Affairs Victoria, has finished a research project into the effectiveness of mandatory comparison rates in guiding consumer choices (The Final Report is "The Effectiveness of Mandatory Comparison Rates: Information, capacity and choice"). The results of the research will feed into the national review of comparison rates that is being undertaken by Hawkless Consulting (see their Preliminary Report (pdf)).
The results of Swinburne’s preliminary research consisted of a literature review (First Issues Paper) and the results of the consumer survey (Consumer
Research Issues Paper).
Swinburne’s final report says their research suggests that there are three broad approaches available to regulators for improving information provision to consumers of credit:
• Setting out broad parameters for suppliers in terms of what information is to supplied and relying largely on industry self-regulation;
• More prescriptive approach with more detail requiring information to be provided as an attempt to make comparison easier (this is where the MCR regime would fit);
• Direct collection and provision of information in a comparable form. This is the approach adopted, for example, by the Financial Services Authority in the UK in developing an online mortgage comparator.
But they have not made a recommendation:
"Ensuring that consumers negotiating complex markets have access to comprehensible and comprehensive information is an endemic issue for public policy. Whether the MCR is retained or not, the issue will remain. In this review we have found that the MCR is a useful tool for consumers and have made some pragmatic suggestions for improving its usefulness, as well as pointing to the need for more research on how consumers go about information search and, in particular, testing different approaches to information provision with consumers."
