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Financial Consumer Vulnerability BFR Week 6 Flashcards | StudBud
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Financial Consumer Vulnerability BFR Week 6
Financial Consumer Vulnerability BFR Week 6
20 terms
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Flashcards
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Questions
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Answers
1
What is a potential downside of strict product regulation?
It eliminates all financial fraud
It may reduce financial innovation and consumer choice
It ensures all products are identical
It prevents economic growth
2
Why is financial education important for consumers?
It guarantees financial success
It prevents all fraud
It replaces the need for financial regulators
It helps them manage their money and avoid financial risks
3
The Financial Ombudsman Service provides compensation for consumers when financial firms go bankrupt.
False
True
4
Behavioural economics assumes that all consumers always make rational financial decisions.
True
False
5
Product regulation in financial services aims to create completely risk-free financial products.
True
False
6
What is the main role of the Financial Ombudsman Service?
To offer investment advice
To regulate stock markets
Handle consumer complaints and resolve disputes with financial firms.
To provide financial education
7
Which of the following best describes the role of ‘nudge theory’ in financial behaviour?
Using small interventions to encourage better financial choices
Eliminating financial risks
Ensuring people never lose money
Forcing consumers to make certain financial decisions
8
Which law provides the framework for consumer financial protection in the UK?
Banking Reform Act 2014
Financial Stability Act 2017
FSMA 2000 (Financial Services and Markets Act 2000)
Consumer Protection Act 1995
9
Which organisation provides financial compensation to UK consumers when financial firms fail?
Financial Conduct Authority
Bank of England
Financial Services Compensation Scheme
Financial Ombudsman Service
10
Hyperbolic discounting explains why people tend to prefer immediate rewards over long-term benefits.
True
False
11
What is the main purpose of financial consumer protection?
Ensuring consumers understand financial products and are treated fairly
Maximising bank profits
Reducing government oversight
Increasing financial risks
12
What is the primary role of financial regulators regarding consumer protection?
To ensure fair treatment and protect vulnerable consumers
To prevent financial institutions from making profits
To dictate how people should invest
To eliminate all risks from financial markets
13
Which theory suggests that people tend to prefer avoiding losses over making gains?
Efficient Market Hypothesis
Hyperbolic Discounting
Rational Expectation Theory
Prospect Theory
14
What does 'loss aversion' mean in financial decision-making?
People do not care about losing money
Consumers are more concerned about avoiding losses than making gains
Investors always choose high-risk investments
People prefer gaining small amounts rather than losing large amounts
15
Which of the following best describes behavioural economics?
It ignores individual financial behaviour
It assumes all consumers act rationally
It only applies to businesses, not consumers
It integrates psychological principles into economic decision-making
16
The Financial Conduct Authority (FCA) is responsible for regulating the financial services industry in the UK.
True
False
17
Which of the following is a method used to improve consumer financial literacy?
Increasing financial product complexity
Providing clear, accessible financial education resources
Removing financial regulations
Banning consumer loans
18
Which of the following is a key purpose of the Financial Services Compensation Scheme (FSCS)?
To replace all lost investments
To compensate consumers when financial firms fail
To offer investment loans
To compensate consumers when financial firms fail
19
Which group of consumers is considered most vulnerable in financial markets?
Wealthy investors
CEOs of financial institutions
The Elderly, low-income groups, & people with mental health conditions
Financially literate individuals
20
Which of the following is an example of ‘status quo bias’ in financial decisions?
Selling stocks at a loss
Randomly changing investment portfolios
Sticking with the same financial provider despite better alternatives
Choosing the most expensive financial product
