The Organization for Economic Co-operation and Development has introduced a new set of guidelines designed to ensure that financial services firms are adequately explaining their products to clients.

The group says that financial services firms must make sure their customers understand what they have agreed to when they sign up for mortgages, take out loans and buy other products.

Its new guidelines recommend that governments make it a legal obligation for firms to provide clear, standardized language in mortgage agreements to make them more easily comparable. Similarly, it recommends that lenders should be required to spell out the key terms of loans, explain the implications of missing a payment, and that they should be made legally responsible for checking customers’ credit needs and whether they will be able to meet their payments.

The OECD also calls on governments to better protect consumers and help them understand credit and other complex financial products. This means informing people of their rights and responsibilities, working to clamp down on fraud and unethical practice, and promoting fair pricing of credit products through the development of independent credit bureaus, it says.

“Even in the absence of the crisis, developments in financial markets, demographics, economic and policy changes all point to the importance of financial education and enhanced financial consumer protection. Surveys of financial literacy continue to show that consumers in virtually every country lack adequate financial backgrounds or understanding and that they underestimate their needs for education in the financial area,” noted André Laboul, head of the OECD’s financial affairs division.

Laboul added that the OECD’s recommendations, “address a central issue that has been largely and surprisingly overlooked in discussions on the resolution to the crisis, namely the protection and empowerment of consumers in an increasingly complex and volatile financial environment.”