Wednesday, October 29, 2008

Watchdog teeth and fake grass!!!

I have been critical of the Financial Regulator for being too timid in the past. However I am happy to acknowledge when they prove me wrong by their recent decision concerning Quinn Insurance. I don't know the full details of the case but from press reports it would appear that the Financial Regulator investigated and came to the conclusion that regulations were breached and issued quite a hefty fine. Leaving aside the particular case my view is that such action sends out a strong message to a very powerful sector of our society, i.e. the Financial Services Sector that they are not above the law.

The challenge of being involved in any consumer organisation is that the consumer generally thinks you are too soft on the vested interests, while the vested interests take a radically different view and use all opportunities, both directly and indirectly to undermine you and your organisation. And of course the indirect approach is more difficult to counter. In the United States there is a growing phenomenon where big corporations fund individuals or groups who establish organisations through various means (usually one person outfits) who portray themselves as advocates for a cause when in fact their primary goal is to undermine a campaign or cause by spreading misinformation and muddying the waters. Some examples are fake environmental groups funded by the oil industry that contradict the views of environmental organisations. All you need is one person and organisation with a plausible name and a website and hey presto you are in business. What these fake organisations do is called astroturfing, to distinguish them from real "grassroots" organisations. And it may not always be easy to flush them out, but I suppose key questions to determine their bone fides would be, who is running and behind the organisation, does it have a real "membership", do they have any conflicts of interest and are these declared and how is the operation being funded and by whom?

Astroturfing at play!

It came to mind when I was asked about CAI by a consumer who thought we were too soft on the banks and the financial services sector. I outlined what CAI had consistently called for and I also informed him that I didn't have any bank shares nor do I work in the financial services sector. But I understand his frustration as the banks, stockbrokers and insurance companies hold huge sway in our society and have huge influence on our political system. The most recent example was the bank guarantee scheme, which had the fingerprints of the banks all over it and as a result it was great for the banks but bad for the taxpayer and the consumer. That nexus of the political and economic world was exposed in the tribunals, where companies make donations to politicians and political parties "to support the democratic process". They may be acting within the law, but the perception (it may well be false) among the public is that they are paying for access and influence and also improving their chances of getting state contracts. On the other hand CAI and many other campaigning organisations have to work very hard on limited resources to get a meeting and a hearing. As we have seen time and time again those who make donations have easy access and sometimes informal means by which to influence decisions.

I admitted to my acquaintance that it is definitely not a level playing pitch, but things are better now. There is more independent regulation now of a number of sectors. I think Joe Meade in the Financial Ombudsman's office sets a good example, he is willing to take on the big boys on behalf of the ordinary consumer. Without him does anyone really think the average consumer would have a hope of taking on the AIBs, Davy Stockbrokers and Quinn Insurances and any other large financial company. I have no problem with actors in the broader consumer movement railing against the actions of individual regulators (as I have done), but what surprises me is that some appear to be opposed to the idea of strong, effective and independent regulation. That is playing into the hands of the vested interests who want to retain or return to self and weak regulation. I recently wrote on the need to revise the regulatory regime being proposed for the legal profession, because what is on offer is not much of an improvement on the unsatisfactory process we have at the present time. We have a long way to go and a hard fight ahead to get real and effective regulation for the consumer on all fronts, but it is a battle worth fighting for.