Monday, July 6, 2009

Mr. Doorley goes to Washington

Yes its been a while since I posted. May and early June were mad busy and then I was away on holidays after that, so only now getting into the swing of things again. In mid June I had the pleasure of visiting Washington D.C. (had a short sojourn in NYC). I have grown up on US politics and American civil war history so lots to see and do. The Lincoln memorial and Capitol Hill were particular treats.

In advance of my trip I decided to email the Consumer Federation of America, (CFA) just to see if they would be willing to spare me an hour to discuss consumer issues in the US. Many thanks to Mark Silbergeld, Director of International Issues at the CFA for not only sparing 3 hours to share information on consumer issues, but for inviting me to the 39th Annual Awards of the CFA. It was a very impressive, well attended and enjoyable evening.

Interestingly while I was there one of the major announcements from Obama was the establishment of a new Consumer Financial Protection Agency (CFPA). Of course unlike here where the executive controls the legislature and most Government proposals are implemented in full, Obama will have to negotiate with Congress to get this through. Predictably industry groups in the US blasted the plan. However it was good to see senior politicians over there such as Senator Chris Todd taking a strong consumer position. We could do with more politicians here taking such a strong line to promote and enhance consumer protection.

Senator Dodd tells it as it is....where are the Irish Senator Dodds?

While Obama was setting out his stall in the US, the Irish Government was revealing how it planned to reform the regulation of our financial services sector. Well in truth, it wasn't all that revealing in that it only filled in some of the blanks left over from Cowen's Ard Fheis speech and the April Budget announcement. I welcome the fact that the original suggestion that the consumer information and education role would be merged with the Financial Ombudsman has been ditched and that these functions will be transferred to the NCA. There was a danger that the good work and integrity of the Financial Ombudsman would be undermined by these structural changes. If there was a hint that the Ombudsman was engaged in advocacy, the office could be accused of bias and all decisions could be challenged and overturned. The transfer of these functions to the NCA seems like a good fit and to be cost effective, but the FR had a good track record in the area of information and price surveys, so the NCA needs to maintain that work.

The core issues remain unresolved. Where will consumer protection reside? Who will be responsible for implementation and monitoring of the consumer protection code? Who will conduct the consumer related inspections? Who will take the enforcement proceedings?

There is a danger that we focus solely on institutional reform or on the issue of a rules vs a principle based appraoch. I believe what we really need is cultural change. Essentially we need effective enforcement. We need a regulator who is willing to take on the big players and vested interests and who isn't afraid to institute and pursue legal action.

I have heard a lot of claptrap in recent months on this issue, the most baseless, yet dangerous was the assertion that the Financial Regulator failed because " it was preoccupied with it's consumer mandate". Of course it suits some interests to spin this because the logical conclusion of that argument is to downgrade the consumer protection mandate in the new structure. That would be totally unacceptable and I don't think Government would be that foolish.

My biggest problem with proceeedings has been the lack of a plan or a strategy and the failure by the Department of Finance to engage in consultation on the new regulatory regime. I appreciate that the Minister and the senior department officials are dealing with a myriad of other urgent and serious issues, but we cannot afford to mess this up again. We need more than press releases and speeches, the very least we need is a White Paper setting out the options. Perhaps there is one in the bowels of Merrion Street. However from where I am it appears very disjointed and ad hoc. Let's hope I am mistaken.