Happy World Consumer Rights 2010.

It gets slightly overshadowed here by another big day in the middle of March, but in case you don't know today, Monday March 15th 2010 is World Consumer Rights Day. You might wonder why this date, well it all stems from a speech by President John F. Kennedy to the Congress on consumer rights on March 15th 1962.

This year the theme is "Our Money, Our Rights" How the global consumer movement is fighting for fair financial services. The theme is timely here in Ireland. We have seen the devastation caused by a banking and financial system out of control. The real victims are the citizens and taxpayers, who had to bail out a system with their taxes and now are paying on the double with increased interest rate charges, increased fees and commissions and less competition. Even leaving aside the near collapse of the system, we need consumer protection and regulation to protect ordinary consumers from the everyday hazards of engaging with financial institutions. I am sure some will accuse me of being the proponent of a "nanny state".

Well I would argue for stronger consumer protection in the area of financial services on two key points. Firstly financial products are what the academics call "credence products" essentially it is hard for the consumer to evaluate the product and their value will only become know over time. The advantage lies with the financial service provider, in most cases consumers are hoping they are acting in their best interests. Unless there are laws and rules there forcing the seller not to take advantage, they will, as we know only too well. Secondly, when things go wrong it can have a devastating effect on the consumer. Bad advice can lead a consumer to take out a loan they can't repay, investing their life's savings in a bad investment, etc, etc. The impact can be severe and significant.

However there is hope that we can rebuild not only a better and stronger banking system, but also a fairer one. Sometimes when you read the reports coming from banks or the financial press, you would get the impression that the banking system solely operates to meet the needs of executives, shareholders and large investors. However the banking system should be there too to meet the needs of ordinary consumers and small businesses.

I met Matthew Elderfield last Monday, when he came and spoke at the Consumer Panel meeting. I was impressed and hopeful for the future. He laid out a very clear, yet ambitious programme, along the lines of the speech he delivered last Thursday. He made some important points, including the fact that consumer protection would remain at the heart of his work and that the new focus on consumer protection was some how to blame for the failure of prudential supervision. I also liked the fact that he is committed to a review of the Consumer Protection Code and to taking a much tougher line on enforcement. However it is a challenging agenda and there will be strong resistance from the vested and well connected interests.




The man responsible for March 15th, great orator, but just wished he hadn't picked St. Patricks Week!



The reform agenda is massive, on the prudential supervision side alone, a lot of work needs to be done. On the consumer protection side, the review of the Consumer Protection Code is long overdue, the gaps and deficiencies in that need to be addressed and then the code needs to promoted among the public. I have been calling for this since it was originally launched in 2007, but for some reason the Financial Regulator has been reluctant to do this. Other areas of concern are diminishing competition, are we sacrificing competition at the altar of rebuilding the balance sheets of banks. We need to see a crackdown on overcharging and mis-selling. Every few weeks there is another overcharging scandal and the response by the financial institutions and the regulator to date has been slow. We also see the number of complaints to the Financial Ombudsman grow, much of it driven by mis-selling.


We are now dealing with the crisis in all types of debt, however we also need to look at how we can avoid such an orgy of credit being doled out by banks in a feckless and reckless manner in future. One measure would be to make irresponsible lending a crime, essentially financial institutions would be held accountable for giving loans and credit for which were hard to justify on the basis of the income of the recipient. The other area is the lack of independent advice driven by hidden commissions and fees to staff and intermediaries. While I accept the many consumers would be reluctant to pay for financial advice, at the very least they should know if and how much commission a bank employee, broker and intermediary is getting from a particular product or institution. And unlike many other European countries, we don't have provision here for a basic bank account that would allow consumers to have access to banking services without the hefty fees and charges. And I could go on and on....but I am still hopeful we can not only build a stronger and better banking system, but a fairer one as well.

Till debt do us part

When I first left school and got a job in the early 1990s, it was still hard to get credit. I remember going to my local bank and credit union to get a modest loan to buy a car and had no joy. Looking back it was a good lesson, because it meant I had to save and wait and didn't get buried in debt.

Then in the space of ten years, everything changed, our society was flooded with credit. It wasn't a case of will I get the loan, the banks wanted to know if I was sure that was enough. I was involved in a campaign in 2007 with NYCI around the issue of credit card debt among young people, "Can You Credit It" Our campaign was a response to the mad situation where young people in college with limited incomes were being bombarded with letters and flyers encouraging them to take on €1,000s in debt. I remember Eddie Hobbs at the time describing credit cards as the gateway drug to a life of debt. It was only one aspect of the credit bubble in Ireland, but no-one in authority seem to care.

About ten days ago the Oireachtas Committee on Social and Family Affairs published a very good report on debt in Ireland, entitled "High levels of Indebtedness in Irish Society" No great surprise that it details the scale of the problem, with debt to disposable income rising from 60% in 1997 to 175% in 2007. Apart from mortgage debt, thousands are saddled with debts on personal loans, credit cards, utility bills etc. While many people overspend and over borrowed during the boom, they have learned their lesson and will over time repay and reduce their debt. However there are a minority whose life will be scarred by debt and arrears.

I have a mortgage and a credit card, but thankfully can make my repayments on time. I would hate to be in arrears and be fearing the call at the door or on the phone. I think that fear and hatred of debt comes from family history. In 1922 my grandfather, also a James Doorley, acted as a guarantor for a relative on a loan. The relative couldn't repay the loan and the bank in question put a charge on the deeds of my grandfathers land until all the money was repaid. The 1920s were not a time of great prosperity, and of course many still refer to the hungry 30s, indeed it was the time of De Valera's economic war with the UK. The deeds of our farm show that it was 1958 before my family was able to finally discharge the debt, when penalties, arrears etc were factored in. My grandfather went from being a fairly prosperous farmer to one who paid most of his profits (if there was any) in later life to pay off a debt.


Excellent series on the crisis by the BBC.

While much has changed in our country, the way and means by which we deal with debt hasn't. It's mad that people still go to jail for debts when killers are walking free. We all know that there are people who can afford to pay and won't, but the vast majority of people in debt can't pay. Through no fault of their own, people lose their jobs, have marital difficulties, suffer from ill-health and find the bills and debt mounting up. The moratorium on mortgage arrears of 12 months is welcome, but does nothing for people who have large personals loans, credit card bill, utility bills etc. Some financial institutions are responsible and do all they can to assist people, others just add to their borrowers woes with threatening letters, hefty legal bills and outrageous arrears fees and penalties. While I accept the borrowers must take responsibility for their actions and decisions, the lenders who threw money at people now deep in debt cannot get off scot free either. Yes we need responsible borrowing, but we also need responsible lending.

We definitely need major reform in this area. The Law Reform Commission produced an excellent report back in September, however I feared that it would be ignored like many of many of their reports. However someone was listening and it was good to see the commitments in the revised Programme for Government on debt and debt enforcement. Then just this week the Government announced the appointment of an expert group to bring forward measures on a rolling basis over the next couple of months. There are some really good people on this, who I worked with in the past and have a strong track record. Paul Joyce and FLAC have been tireless campaigners on debt reform for many years, indeed sometimes they must have felt voices in the wilderness. I worked with Brendan Burgess of askaboutmoney.com on the financial regulator consumer panel when he was chair, he is also an excellent choice, because he has been working and advocating on behalf of consumers in the financial area for many years. It's important to have the financial industry on board and although we are often on the opposite side of the argument, Pat Farrell is a pragmatist and in fairness supports reform in this area too. Good also that Matthew Elderfield the new Head of Financial Supervision at the Central Bank is on board, who really appears to have hit the ground running.

So hopefully we will see speedy and sensible solutions to our current debt problems. We can't wipe out debt, but we can make the system work so as to assist people deal with their debt in a more humane, speedier and satisfactory manner for all concerned.

A Golden Opportunity?

The cash for gold market has really taken off recently. All of sudden we are being bombarded with TV ads, flyers in the door, stalls in supermarkets from companies offering to take all that unwanted gold off our hands for bundles of cash. Gold has always been an attractive commodity in times of financial and political turmoil and this time is no different, global prices have soared in the last year. This means there is a great market for scrap gold now. So in the middle of a recession it seems a bit of a no brainer, gather all that unwanted gold jewellery, stick it in an envelope and wait for the cheque in the post by return. The buyers can resell the gold for a tidy profit, so its a good news story all round.

Well it is not that simple, as it seems many people could be selling their gold at a fraction of its worth. When you think about it, in normal circumstances would you allow the buyer to dictate the price they are willing to give you? As with all new crazes problems arise, in the US, there has been a lot of controversy about one particular company highlighted by consumerist.com and alleged wrongdoing. Here Senator John Paul Phelan of Fine Gael has also rightly raised legitimate questions concerning the regulation of this activity and the potential for it to increase burglaries and theft. Senator Phelan is proposing a private members bill to deal with this. Although if there is evidence that some companies are using sharp practice, then that could be tackled under the existing provisions of the Consumer Protection Act 2007 dealing with unfair and misleading commercial practices.


Like the Cash for Gold craze...Glee is the latest TV craze, no TV channel is safe!

However there is no law against illogical consumer behaviour and if people insist on sending their gold in the post without any idea of its value and accepting whatever price is offered, then no surprise if companies buy it as cheaply as possible. According to one company in the US 94% of customers accepted the offer given. However a very recent survey by Which in the UK found that most of the TV cash for gold operators offered poor value compared to pawnbrokers and jewellers. Now obviously no one would expect to get the retail value of the gold, but most of the cash for gold operators were only offered about 6% of the retail value of the items, compared to about 25% from the jewellers/pawnbrokers.

The lesson here is to do a bit of work. Find out the caratage (quality) and weight of your scrap gold. This expert gives great advice on what to do. Some of the companies involved provide online price calculators, so you have an idea of the price being offered. I came across this site which gives information on the value of gold based on weight and quality, they don't claim it is perfect, but it might give you some ballpark idea of values. If all that seems a bit too challenging, at the very least take your scrap gold to a pawnbroker or jeweller to get a valuation. As the seller of a now even more valuable and sought after commodity doing some leg work gives you information, choice and bargaining power and will probably ensure you get more for your gold!

Premium Discontent!

The recent bad weather with the floods in November and the snow and ice of Christmas and New Year brought misery and hardship to many individuals, households and communities. I cannot imagine what is must be like to have your home flooded either as the result of torrential rain or by bursting pipes.

As people start to get their lives together, many turn to making insurance claims for the damage caused. President McAleese has rightly called on insurance companies to process these claims speedily. That is why people pay considerable sums to them each year to ensure that when a disaster strikes they have some financial compensation. The IIF have already stated that the floods in November will cost €244m. Most of these claims relate to commercial property damage with €77m being claimed by domestic customers. However it is important to remember that this is what is estimated and these are claims, some claims may not qualify.

No doubt the recent bad weather will be used as a further excuse by insurers to hike premiums in 2010. But hold on a minute, that is what insurance is there for. Insurance companies are meant to factor in potential inclement weather into their prices. The possibility of flooding and snow and frost are hardly unexpected. Indeed it could be argued that up to this winter, we have had a spate of very mild winters. Using the recent bad weather as a cover to further hike prices shouldn't be entertained.

This is especially so when we know from the CSO that home or dwelling insurance and motor insurance went up by 16.8% and 10.1% respectively in the 12 months to December. This is against the background of 5% deflation. So what is going on here? The insurance industry will say "prices came down between 2002 and 2007 by 45%, so they had to start going up at some stage". What they don't tell us of course is that prices skyrocketed between 1997 and 2002 going up by over 61%. Most of the fall in premiums can be attributed to the introduction of the Personal Injuries Assessment Board, which led to a significant reduction in the cost of claims for insurers. The extent to which those savings were passed onto consumers is something which I would have concerns about.


Funny Ad...but the bad weather and price hikes are not as humourous!

Likewise you will hear guff about the increasing cost of claims, fraudulent claims and the extra 1% Government levy. Yes the levy has gone up by 1%, that's just 1%...what about the other 15%? The claim about increasing repair and building costs is balderdash, it must cost half what it did 3 years ago to get any repair job done. So I don't buy that one. On the fraudulent and exaggerated claims, well they have to provide proof for that, but again a useful cover for price hikes.

I have no doubt that profits in the insurance industry are down in 2009 and will be down in 2010 from the dizzy heights of the Celtic Tiger, but that is the case for every business and sector. Insurers will have to take some of the pain instead of passing it on to consumers and businesses. Historically profits here far exceeded those in the UK, in 2002 it was found that motor insurers in Ireland had 11 times the profits of their counterparts in the UK. Also the Financial Regulator Annual Reports (Page 134) show that based on competition indicators the market here is not competitive.

What needs to be done. Well we need scrutiny by the Financial Regulator, Government and Oireachtas. The Regulator could start by producing more reader and citizen friendly reports on the Industry. The annual statistics on the Insurance Industry (called the Blue Book) are turgid and difficult reading, the contain some interesting data, but it is hard going. It also doesn't address issues like how much of the saving of PIAB were passed onto consumers, or are premium increases justified based on the data available. So we need more and better data.

The Government has a vague commitment in the most recent revised Programme for Government about ensuring consumers get the benefits of competition in the insurance market. Based on a response by the Minister for Finance a review will be conducted, but when and by whom is not clear. The Oireachtas can also play a role in that the Enterprise and Small Business Committee could hold hearings and invite the insurers to outline and explain how they can justify the current increases. It would be all too easy with the focus on the banks, for the insurers to hike prices and their profits while the glare of the media and public was elsewhere.

Watch out for snake oil salesmen online!

I came down with a bit of a lung infection during the week and in the course of doing some online research on my ailment, it struck me how many companies are advertising drugs of one sort or another on the web. I never even thought about buying drugs online, seems a bit mad and unsafe to do so. I suppose it should have struck me because my junk email account is full of spam emails selling Viagra.

You can buy non-prescription drugs online, but many of these are available in shops/pharmacies and are generally occasional purchases, so I imagine the online trade in these is minimal. It is of course illegal to buy prescription drugs online for many good reasons. However it would appear that many people do it. Apart from the dangers of self diagnosis, you don't really know what you are getting. You could be paying good money for flour or starch or something a lot more dangerous. If you are not sure about the status of a particular drug, such as whether it is prescription or non-prespription, best to check the Irish Medicine Boards website where they have a database of authorised drugs on sale in Ireland.


Beware the online snake oil salesmen!

I see the Revenue Commissioners intercepted 3,000 items which contained 393,067 prescription pills in 2008 which were purchased over the web. Across the EU the number of sales is staggering, according to the EU Commission over 34 million fake tablets were intercepted in 2 months.

It would appear the market for so called "embarrassment drugs" such as Viagra is high. Many people are still too embarrassed to talk to their doctor about some conditions. This issue needs to be tackled on 2 levels. On the prevention side there is merit I think in a public awareness campaign advising people of the dangers involved. In these times of economic stringency, hard to expect Government to pay for this. It would appear to be the sort of thing that pharmacutical companies cound fund, it would be in their interests to reduce this trade. On the supply side greater efforts need to be taken by public health and enforcement agencies to track down and close down these online snake oil salesmen.

Bleak Houses?

The good news for many in the private rented sector is that prices are now back at 1999 levels. There is a lot of supply and those in the market can pick and chose. It is likely though that the tax on non-principled private residences aka second homes will be increased in the Budget tomorrow. A lot of landlords have numerous properties, so they may try and pass this cost onto the tenants. Also the Commission on Taxation recommended the abolition of the rent relief for tenants, it may not be awful lot, but for many on tight budgets was a help.


Hopefully conditions are better now!

However for many people and families on low incomes and on social welfare, the cost of renting has bizarrely gone up, despite the fact that they can least afford it. People in this category get state support in the form of rent supplement, 91,600 or 24% more than last year based on recent figures from the Department of Social and Family Affairs. Changes in the last Budget, mean that not only have tenants to pay more as part of their contribution to the rent, many also have had to top up the "official" state payment as this was also reduced in the Budget and landlords expect tenants to make up the difference. I fully understand why the Government cut their contribution, rental costs were coming down across the economy, so why not in this sector as well. However in many cases the landlord didn't accept the cut and turned to the tenant to make up the difference. You might wonder why in the current market people just don't up sticks and leave rather than pay above the market rate. I am sure in some cases people have, but not all landlords will accept tenants on rent supplement for a variety of reasons, so there is no guarantee that they will get alternative accommodation.

Also some people and families on rent supplement live in sub-standard accommodation. Earlier this year the Government to their credit did introduce higher standards for private rented sector accommodation and last week they brought in further improvements. However many of the new provisions do not apply to existing rental properties until 2013. Some landlords will meet the criteria and treat people properly, however some will try and avoid their legal obligations. That is where the local authorities come in, they are supposed to inspect rental properties in their areas. Some have a great record, over 50% of registered properties, however 17 out of the 34 local authorities inspect less than 5% (see table 37) of properties to check that they meet the current minimum standards. So the chances of dodgy landlords being caught are slim.

Organisations like Threshold do an excellent job in supporting tenants on a very limited budget, however the local authorities need to do more and carry out more inspections (at least 20%) to ensure that tenants get decent living conditions for the millions which is being spent by the state for these properties.

Traffic Lights...the right road for food labelling.

There is a big battle going on in Brussels these days that gets scant attention in the national press, but which will have major implications for consumers and their health for years to come.

In January 2008, the EU Commission introduced a proposal for a new directive to reform how food is labelled across the EU. The proposed rules will require manufacturers to put nutritional information for 6 nutrients (energy, fat, saturated fat, carbohydrates, sugar and salt) on the front of packaging.

New regulations are badly needed. Just this week the Food Safety Authority published a report on consumers experiences and preferences when it comes to food labelling. Almost 50% always or usually look at the labels, mostly to check nutritional, calorie content and ingredients. I have to be honest and say that I am among the 50% that doesn't do this very often, either because the print is very small or because the information is very technical and of little use. However I will make a New Years resolution....3 weeks early to start from now on! Although I am a sucker for the foods, such as biscuits labelled as "low fat". I know I am kidding myself into thinking chocolate biscuits are not fattening!

The research showed that 87% felt that nutritional information was very important or important and 81% of consumers want information on the health impact of alcohol on labels. Of most relevance to the debate raging in the EU institutions at the moment, they asked people about whether they preferred the Guideline Daily Amount (GDA) system or Traffic Light system for nutritional information. Here the response is a little confusing as they presented 4 options, but overall 39% preferred the traffic light system. However the suggestions that any new regulations could be a mixture of both was voted down by Irish consumers. The report does appear to show that consumers are taking more notice of the nutritional information on the packaging than before.

The traffic light system was developed by the Food Satefy Agency in the UK and would require manufacturers to put a red (high), yellow (medium) and green (low) symbol on the packaging depending on the levels of salt, fat and sugar in the product. The GDA system was developed by the Food Industry and consists of symbols with percentages of fat, sugar etc in the product based on the average daily amount for an adult.


I like traffic lights...unless they are red of course!

BEUC and other consumer and health advocates want the traffic light system for fat, saturated fat, sugar and salt because it is much clearer than the percentages GDA model. Of course the food manufacturers and processors are against this because no company wants to have red light symbols on their packaging. However the best way around this of course is for them to reduce the amount of salt, sugar and fat in their products. So not only will the traffic light system help inform consumers as to the levels of these substances, it will also force manufacturers to change the contents of their products which will be good for everyones health.

This is an important debate and issue. Several reports and studies have shown that consumers are not aware of the levels of fat, sugar and salt in many of the products they eat. The Dispatches Show on Channel 4 did an excellent programme on breakfast cereals recently. When they poured the equivalent of what the children were consuming in sugar into a bowl (300grams) a week, its easier to understand why we have an epidemic of obesity.

Therefore it is important that the EU Commission and all involved in the development of these new food labelling regulations make sure that the health needs of consumers are put before the interests and profits of the food industry. In particular our elected representatives in Brussels, our MEPs have an important role to play, lets hope they take the traffic light approach on this particular road.