Regulatory reforms to deal with information overload in financial services: insights from behavioural economics

Consumer protection regulation is based on the assumption that the communication of sufficient information to consumers enables them to protect themselves against unfair business practices and the consequences of making uniformed decisions, since being imperfectly informed they cannot contract in their own best interests. It is a common belief, however, that providing the consumers with too much information at one time, such that it goes beyond their processing capacities may lead to inefficient and inaccurate performance. Disclosure of information plays a key role in the regulation of financial markets, but to make the disclosing regime efficient, there is a need to take into consideration the cognitive capacities, personal biases, heuristics and their influence on the decision making process.