Sterling efforts are paying off!!

Ever since sterling started to weaken in early 2008, there have been lots of stories about the huge differences in the price of groceries, clothes, electronic goods etc between here and the UK, but especially Northern Ireland. Initially we were told by retailers that it would take 3-6 months before the currency fluctuations would reach the shop floor. Of course that didn't happen!

The laws of the market dictate that retailers will charge what they think the buyer will pay. Perhaps during the boom people were willing to flash the cash, of course that has changed now for many people. In particular what really cheeses off people is the fact that products had a sterling price displayed which when compared to the equivalent in euros was much cheaper.

The constant commentary and criticism won't go away and more importantly the flood of consumers across the border will cost retailers in the long run, both in terms of business and reputation. Tesco admitted as much this week. And the state coffers are suffering too, the Revenue Commissioners estimate it could be costing up to €700m. It has taken a while but I think retailers are beginning to respond, they have too. Tesco started the ball rolling last month, but we have a long way to go.


Fresh beef for sale in Ballinrobe...a very moooving story!

The focus has also shifted to other products and services, and in recent weeks I was contacted by a few people about the major difference between the sterling and euro prices of the same accommodation, at the resorts on keycamp.ie and keycamp.co.uk in France. When I checked earlier this week there was a significant difference in the prices available on the two sites. Aideen Sheehan did an excellent piece on it in the Independent during the week, hopefully the exposure of the price differential will lead to a review of the Irish prices! I also think that the continued attention on what is referred to as "the Paddy Tax" will force retailers and businesses throughout the economy to focus on delivering more value and drive down prices further.

Valueireland.....get your facts right!

The emergence of a number of consumer advocates and related websites and blogs has been great in recent years. The more information that people can access the better in my view and as a consumer advocate myself I am all in favour of competition. With their websites and blogs people like Brendan Burgess and Damien Mulley are providing a great service to consumers on financial and technology/communications issues respectively. Likewise Conor Pope (Irish Times) and Tina Leonard (Smart Consumer-Irish Indo and RTE) have emerged as really good contributors on issues affecting Irish consumers by putting information in the public domain. And Charlie Weston's War on the banks has done more for mortgage holders than the rest put together. And of course there are excellent websites such as Thrifty pages and Cheapeats which provide practical information to assist people to save money and get a better deal in these less affluent times. Into that mix I would have to add valueireland.com which was set up by Diarmuid McShane, which does provide information and advice as well as indulging in some "commentary".

Now anyone reading Diarmuid's blog would know that he is not a fan of the Consumers' Association which I chair. In fact he goes out of his way to criticise or to find fault with almost everything that the CAI does. He used to be a member of our Council, but lets say we had our differences and to make a long story boring he resigned. He has given his side of the story to the reasons why, in fact ad nauseum on his blog, but there are two sides to every story. I could give my views, however to be frank I think 99% of you would be saying cop yourself on and write about something that is of interest to me and consumers in general, and you would be right!

Its a free country so if he wants to lash CAI everyday, then so be it, nothing worse than being talked about than not being talked about as they say. Indeed some people have asked me what is his strange obsession with CAI, only he can answer that. I just think its a waste of time and energy to be so negative when he could be using the space to be of better use to consumers. There have been times when I have disagreed or found fault with aspects of what other consumer advocates have said, but I have refrained because I believe that it does not serve consumer interests for us to be bickering. That only serves the interests of those who want to see consumer rights undermined and diminished. For that reason, I haven't responded to his attacks.


Is Mortgage Interest Relief a bailout....I say...No, No, No.

However Diarmuid's latest salvo against me and CAI is not only incorrect, but would if unchallenged be very bad news for mortgage holders. He claims that I am advocating for a "bail out" for mortgage holders on a fixed rate. He says;

Referring to banks being bailed out and using that as a precedence for bailing out home owners, as advocated by Mr. Doorley, is an extremely dangerous suggestion and hints that we proceed down the road of two wrongs making a right when it comes to the dire financial affairs that we’re in at the moment.

Of course I never said that. This is the article where I was quoted. The context was the decision by Government in the Budget to abolish mortgage interest relief on mortgages of 7 years or more. This will have a major impact on the over 250,000 people who took out fixed rate mortgages between 1997 and 2002 for example. While some may have switched to a variable rate, many wouldn't have.

Fact number 1.
The Government stated that the reason for the abolition of Mortgage Interest Relief (MIR) for these mortgage holders was that interest rates and repayments had come down in the last 6 months. Yes that's true for people on tracker and some variable interest rates, but not true for people on fixed rate mortgages, they are paying the same as they were in October 2008!

Fact number 2
I stand over my view that by abolishing MIR for fixed rate mortgage holders that the Government are abandoning people lumbered with large repayments. MIR has been a long standing support which Governments gave to assist people who buy houses to live in! The vast majority of the people on fixed mortgages who have been in contact with me, don't expect that they can switch to a variable rate at will and with no cost. They know they are in a contract with upsides and downsides. However they rightly don't understand how a Government can find €7bn to re-capitalise banks, while cutting supports which cost less than 2% of that or €128m to homeowners who didn't cause this mess.

Fact number 3
I have never stated or even "hinted" that people in fixed rate mortgages should be "bailed out" as Mr. McShane refers to it and be able to switch to a variable rate at no cost. I do think there are huge question marks over the penalty fees being requested and being charged by banks for people who switch and I would like to see independent oversight of that.

Fact number 4
I have questioned the actions of some banks and will continue to do so who have been very slow to pass on ECB rate cuts to people on variable rate mortgages. I don't think that the financial services fraternity have quite understood that the rules of the game have changed. The taxpayer and consumer have bailed them out for their reckless and feckless behaviour, so when the ECB cuts interest rates to assist consumers and business and stimulate the economy, the idea that they can gobble up the benefit must be challenged.

The assertion that MIR is akin to a bailout is also dangerous, because the Government is considering its future and has asked the Commission on Taxation to examine it. We all know that the first few years of a mortgage are the hardest and many people on all types of mortgages have factored in the MIR. Over 235,000 people took out fixed rate mortgages between 2003 and the end of the third quarter last year. If the Government did abolish MIR for first time buyers, then many would be in severe difficulty. That must be prevented at all costs. That is why suggestions or assertions that MIR is some kind of bailout would be manna from heaven for those who would like to see it abolished.

So hopefully Mr. McShane will set the record straight.... and perhaps tell us where he stands on mortgage interest relief as well, which is the really important issue here which we all should be working together on to retain.

Going Dutch?

Here we go again. Despite talk of strong regulation and effective enforcement, last week saw the same old softly softly approach to regulation that got us into the current sorry mess. Davy Stockbrokers were found to have breached rules governing the sale of perpetual bonds to credit unions. The Irish Stock Exchange issued a carefully worded statement, which confirmed that Davys had breached stock market rules, but there was no mention of resignations or fines. This deal has been a disaster for the credit unions, it is estimated that they have lost about 100m euro. Davys have only offered 35m in compensation, so ultimately it will be the credit unions members who will suffer with higher loan repayments charges and reduced or no dividends on their shares to meet the massive losses.

These are the same Davys stockbrokers who in league with two other stockbroking firms called for a cut to social welfare. I would say that senior figures in Government must have been fuming because whatever hope there was of a rate cut before the stockbrokers intervened, there was no hope after this, as the credibility of these people is so low. They have projected deflation of 3% this year, so they say social welfare should be cut by 3%. I wouldn't put too much faith into their projections since they have been wrong so many times. I think Fintan O'Toole summed it up perfectly.


Beware the sweet talking Stockbrokers!!!

There has been a lot of talk about the need for radical reform of financial services regulation. A lot of the focus has been on the model. We have heard of the Canadian model of regulation and now the Dutch model is being mentioned. Yes we can learn from other countries, but focusing on models completely misses the main point. The key problem in Ireland was not the model of regulation, but the culture. The financial regulator was not willing to take strong decisive action against reckless and feckless behaviour by banks and bankers. They issued warnings about 100% mortgages, but did nothing to stop them being issued. They also had powers which it would appear they were reluctant to use. The light touch approach was more like the soft touch approach.

I met an official from the Australian regulator a few years ago. He told me how in Australia the regulator there regularly takes CEOs and senior officials to court for breaking the law and rules. When I spoke with him in 2006, they had jailed 17 people in the Financial Services sector. In doing so they sent a very strong message that they wouldn't tolerate any behaviour which puts consumer, the economy and their overall reputation at risk.

The Government does appear to be serious about a radical reform of financial services legislation. I am just concerned that they rushing into changes for the sake of change that may create more problems that they will solve. For example, I am worried about the proposal to separate the consumer protection function out from the new Central Banking Commission. They plan to create a Financial Services Consumer Agency by merging the existing consumer directorate of the Financial Regulator and the Office of the Financial Services Ombudsman. In my view prudential supervision and consumer protection are intertwined and having two agencies will just confuse the consumer and industry.

Apart from the structure, we need to recruit people of international standing with no connections with the industry here, who will take no prisoners and can withstand the financial lobby and act in the public and consumers interest. And while the focus has rightly been on the banks, I think it is also high time we had a shakeup of how the stockbroking companies are regulated.

Weston on target again!

Last autumn Charlie Weston in the Irish Indo doggedly pursued and exposed the banks for their failure to pass on the ECB rate cuts to hard pressed consumers. Eventually Charlie managed to shame most of the banks into treating their customers in a fair manner, which was the least we could expect given the bank guarantee scheme, otherwise known as the "no banker left behind" scheme.

Well Charlie is at it again, by highlighting the shameful failure of the banks to pass on the savings from the 5 cuts in the ECB rate to consumers on credit cards, personal loans and overdrafts. Financial institutions are also increasing charges and fees and on top of that they are reducing the rate paid to savers.


Irish banks as responsive as Carol to needs of consumers!

Basically the banks are making ordinary consumers pay for the sins of the golden circle and their feckless and reckless lending practices. This needs to be exposed and the Government needs to call in the bankers and tell them this is not acceptable. The impending regulatory reform of the financial services sector should serve as an opportunity to recast the banking system here so that we have banks that serve the needs of consumers, business and long term sustainable growth and not a small elite and short term profiteering.

Fair play to Charlie for exposing this rip-off. We need to keep a focus on this to shame the banks into treating consumers fairly.

The weight of opinion is growing for a ban on junk food advertising

Happy St. Patrick's Day as I write here in Scotland, where it is just another day at the office, where I am over for a 2 day meeting. So while most of the population was gearing up for St.Patrick's day, not too many were aware that last Sunday March 15th was World Consumer Rights Day. No great surprise I suppose, but it does give consumer advocates an opportunity to raise issues of importance nationally and globally.


Campaign video from our Italian counterparts

Consumers International co-ordinated the theme and events for the day. For the second year in a row they decided to focus on the campaign to restrict junk food advertising to children and young people, which is leading to such a huge health and social problem all over the world. This is part of their ongoing excellent "Junk Food Generation" campaign.

We have a major problem in Ireland, it is estimated that over 330,000 children are obese. The Government set up a Taskforce on Obesity which reported in 2005. It set out a course of action, however like many strategies published in recent years it largely lies gathering dust.

We once again took the opportunity again this year to link up with the Children's Rights Alliance Their CEO Jillian Van Turnhout is not only an excellent advocate for children, but also a good friend of many years. Last March we called for action to be taken to protect children from aggressive and pervasive junk food advertising, in the form of a ban of adverts before 9pm.

We were delighted that the Minister for Communications, Energy and Natural Resources, Eamon Ryan included section 42 of the Broadcasting Bill 2008 to restrict the advertising of foods which are high in salt, sugar and fat to children. The Bill is making its way through the Oireachtas and should be passed by the summer, however in our view it is vital that once it is passed that the new proposed Broadcasting Authority moves quickly to regulate junk food advertising.

As expected there has been an outcry from sections of the junk food and advertising industries to date. No doubt they will propose industry developed and managed "voluntary" codes which won't be worth the paper they are written on and even if breached there will be no meaningful penalties. However the reality is that the Goverment has to put the current and future health and well being of thousands of children before commercial interests. I think a long battle lies ahead, but one worth fighting!

Sharing the pain equally? Fat chance!

Blogging had to take a back seat these last few weeks. I represent NYCI at the social partnership talks and the negotiations on a plan to address the perilous state of our public finances were quite intense up until last Tuesday. The rather snappily titled (not) document "Draft Framework for a Pact for Stabilisation, Social Solidarity and Economic Renewal" was concentrating all our minds. The public perception may be that the talks collapsed completely, however while the Government and the Trade Unions failed to agree on the issue of the pensions levy, this document has been agreed and will be important in the coming months and years.

Some of the discussions at the talks were interesting, people expressing anger at how the bankers, builders, stockbrokers etc who got us into this mess were getting away Scot free. There is an expectation at the few dozen people who contributed greatly to the rapid descent in our economy must pay the price. People talked about a criminal assets bureau for the financial sector. One story was recounted about how Sean Fitzpatrick was asked to leave a pub, because the owner didn't want his sort around the place. I am not surprised, people are losing their jobs, their homes, dreams and sanity and these guys get millions in payoffs and can retire to the golf course. Indeed it was galling to read Rossa White over in the very smug Davy's stockbrokers lecturing us on how to deal with the crisis, when he and his kind have talked up the housing market and contributed so much to our current problems. And as for their analysis, they can keep it, they have been so wrong so often, they have the credibility of used car salesmen. As recently as March 2006, the so called "analysts" were telling us the boom would last for another 15 years.


Exclusive recording of the Cabinet meeting!

I see the Times in London came up with a list of the 10 people most responsible for the credit crunch. Would be interesting to do a similar exercise here on the ten people responsible for the near collapse of the banking system. Sean Fitzpatrick and Pat Neary may be obvious choices, but they are not solely to blame, there are many people still holding powerful positions in this state who have a lot to answer for as well.

There was an interesting story in the Sunday Tribune last week that didn't get much coverage. It dealt with contracts for difference (CFD) and how they played such a crucial role in the collapse of Anglo Irish and the reputational damage to our financial service sector here. It is alleged that through CFDs Sean Quinn and his family built up a huge stake, almost 25% in Anglo Irish Bank, unknown to many investors. Slowly though international investors got wind of what was happening and confidence in the bank and shares began to collapse. As the article states here, both the Financial Regulator and Irish Stock Exchange come out badly from this fiasco. But will there be any real change so that the lessons learned cannot be repeated?

There is a really interesting section in the article on how a 1% tax could have prevented the problems at Anglo Irish, but how the powerful Dublin stockbrokers scuppered that;

"It could have been different. In March 2006, the Revenue Commissioners, responding to a query about a tax treatment from a Dublin broker issued guidance that tax-free CFDs should be taxed at the 1% that applied to traditional share purchases. All hell broke lose. "It was like a tsunami had hit," recalls a tax expert with close knowledge of what happened at the time. "The brokers kicked up a storm," he said.The storm confirmed the importance of the CFD trades to the profits of the main Dublin stockbrokers, despite the fact that the Irish stock exchange was being dangerously speculated on. Within days, the then finance minister, Brian Cowen, bowed to pressure and pledged to amend the Finance Bill to maintain the tax-free status of CFD trading. The 1% stamp duty levy would continue to be levied only on traditional purchases of shares"

I am sure the files on the correspondence between the main stockbrokers and the Department of Finance would make for interesting reading. But will we see radical change at the Financial Regulator and will the Irish Stock Exchange investigate what went on here to avoid a repeat, which has done so much damage to our financial services sector and has contributed greatly to our economic and public finance woes? I am also concerned at the lack of apparent urgency or sense we need a radical overhaul of the financial services regulatory system. In the Dáil this week the Minister said this in a response to a question on reform;

Financial Services Regulation.
"Deputy Joan Burton asked the Minister for Finance the measures and actions he will take to examine the reasons behind the regulatory failure in the financial services sector here to determine the changes that are required; if he will give a commitment to engage a broad range of stakeholders, such as academics, consumer representatives and social partners; and if he will make a statement on the matter.

Minister for Finance (Deputy Brian Lenihan): Any change to the regulatory framework in Ireland must have regard to EU and international developments. In relation to the EU, there are a number of proposals being developed for adoption this year, including improvements to the Capital Requirements Directive to further strengthen the existing banking prudential framework. Furthermore, the role and mandates of national regulators has been the subject of in-depth consideration by the Ecofin Council. Common reporting standards for financial institutions will enable greater EU wide consistency in supervision. An initial report on this matter is due to be submitted to the Spring European Council and any reform of our Financial Regulator’s structures will be consistent with EU developments. Arising from recent events, there are a number of reviews underway within the Financial Regulator with a view to identifying any shortcomings in the Financial Regulator’s strategic regulatory approach, its structures and its capacity to respond. I await with interest the outcomes of these reviews and will be working with the Regulatory Authority to bring about improvements in our system of financial regulation. Stakeholders will have an involvement in this process through the independent statutory Consultative Panels which will be making an important input to the review process. I will bring proposals to Government if, arising from these reviews, I consider that a change in legislation is required. As the Deputy will also appreciate, under the Credit Institutions (Financial Support) Scheme, the oversight of the banks concerned has already been greatly intensified.

This response is a bit alarming, as if nothing much has happened and some tweaking may be required! For my sins I have been re-appointed to the Financial Regulator's Consumer Consultative Panel. I am proud of the work the last panel did on the Consumer Protection Code, which was an advance for consumers. My view is that the Financial Regulator failed not because it did not have the powers to act, but because it was too timid and unwilling to act against the big players, something which I stated publicly in December 2007. The financial services sector in Dublin was a small cosy club, where the top bankers, stockbrokers, audit firms, government officials and central bank regulators were and those still standing are still very chummy. No one will rock the boat!

I would hope that the Consumer Panel will have some input and influence on reforms, but what we really need is a broader public debate and discussion about the role of banks and the financial services sector. We need the sector to return to basic banking and to serve the needs of the economy and our society and not be the slave of the equity analysts! On top of trying to protect consumers rights in the areas of mortgage repossession and attempts by banks to pass on their mistakes in higher charges and fees, I will be following up on some of the issues raised here and looking in particular at the how we can make the system work for consumers and citizens.

Layaway, the cure for our plastic pain?

Yesterday, January 19th was officially the most depressing day of the year, when it seems the bad weather, long forgotten new year resolutions and the post Christmas bills all catch up with us. To be honest the bill I hate most is my credit card bill. January seems so far away when you are shopping before Christmas. Yes I try to reduce the cost of it, but sometimes I need it to tide me over or I have to withdraw cash where these sneaky charges kick in....it always galls me even if I have to pay a few euro in charges and fees. Two years ago I was involved in a NYCI campaign to address some of the worst anti-consumer features of credit cards. Last year I got a commitment from the Financial Regulator that some of these issues would be dealt with in the review of the Financial Regulator's Consumer Protection Code in 2009. Given all that has happened in the financial sector in recent days, months and weeks, a revolution in regulation is required, not a review.

Well back to my bill, I got a shock when it arrived as I was charged a €7.50 over limit fee. How could this be, I don't remember having to pay this before. Anyhow I called my bank Permanent TSB and asked where did this come from. I was informed that this new fee was announced in a press release in October (couldn't find that) and of course if I had read the new terms and conditions line by line, would have seen details on page 6, how silly of me!

Bank charges and fees have been a major issue in the UK. Some of the banks there charge unfair and exorbitant fees and the issue has been through the courts where the banks have been taken to task and many consumers are getting redress. The Office for Fair Trading there has investigated these charges known as default charges and called for reductions. The only reason we have been spared such an onslaught is that many of the fees and charges (not credit card fees it would appear) are governed by Section 149 of the Consumer Credit Act which I wrote about previously Anyhow my bank told me that the fee was to cover their costs because it cost them moeny when I went over the limit, which of course is balderdash.

Firstly I told them a limit is a limit, if I exceed my credit card limit, then the payment should be refused. I am certainly not one to be embarrassed if my credit card is refused. Secondly it doesn't cost the bank anything, in fact they are charging me interest on the larger amount, so in fact they are having their cake and eating it. Getting a nice fee of €7.50 plus interest on the bigger balance. A few years ago banks were actively encouraging people to increase their limits, sending them letters and calling them. This was banned by the regulator, now they have found a new way around this. Charge an over limit fee and madden us all into increasing our limit to avoid it.

Against the background of my rage at this fee and credit cards in general, I came across this interesting article in the Economist on layaway. Its referred to as a lay-by in the UK, Australia and New Zealand. Basically a return to old and perhaps more sensible times when if you wanted to buy a suite of furniture, you paid for it in instalments and only when you had fully paid for it you collected it. As this blogger recounts I do remember something like this from childhood, but until recent times seemed quite quaint. So instead of walking in, flashing the plastic and a buy now pay later mentality, you are forced to budget so that you can afford your weekly or monthly payments. Sounds like hire purchase, but its not. HP is usually used for large purchases like a car, you get possession of the goods straight away and payments are spread over 2-5 years. For people on lower or stretched incomes (which includes a lot of people now) layaway could be perfect for purchases such as clothes, furniture, white goods etc.


Layaway explained!

Basically you decide what you want to buy, pay a deposit and then pay a weekly or monthly instalment, perhaps over 3-6 months. In other jurisdictions there is a service fee and you would have to factor that into the overall cost. In these times when retailers suddenly collapse, consumers may be wary of paying instalments over a number of months without possession of the goods. And what if you can't pay or if you change your mind. These are all things that need to be clarified before you decide to go down this route. Of course you first have to find a retailer who offers this facility. I could only find one. But I imagine in this straightened times that some retailers would do anything to make sales, while many consumers want to better control and manage their costs, so it just might take off. My only advice is that if it is offered, check all the fine print! But certainly an idea for the times.