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.

Consumers must not be short changed!

All I can say is wow...what an amazing week. Little did I know when I attended a meeting with Minister Brian Lenihan on Monday afternoon at 5pm about the Budget about what was going on behind the scenes and the astonishing announcement made early on Tuesday morning.

Most people agree that this was a bold move that appears to have restored some sense of stability in the Irish Banking system in the short term. However none of us know what the impact will be on the banking sector, the economy and most importantly from my perspective on the consumer. A lot has been written about it and of course we all acknowledge that the global credit crunch played a role. But the Government, regulators and banks have to face up to the reality that much of the problem was home grown as well. The Irish banks shovelled out huge loans to developers and builders in the past 5 years and it was the concerns of other banks about the exposure here that led to the crisis on Monday. Morgan Kelly from UCD had a very good article about this in the Irish Times on Thursday. With Charlie Weston in the Independent leading with a story telling us the banks could be owed €112bn by developers.

Despite the fact that not a cent has been paid by the state because of the guarantee, it is already or very soon going to cost the taxpayer and consumer. As the latest exchequer returns show the Government will have to borrow billions to balance the books, with the guarantee the cost of this credit will shoot up. The other suggestion coming from sections of the financial services sector is that charges and fees will have to increase. This would be totally unacceptable. It was the taxpayers who threw the banks a lifeline in their hour of need, not the shareholders or investors, so is our reward to be higher charges and fees, while those who created this mess, the fat cats at the top get off scot free?


No George Baileys here!!

The Government needs to do 3 things to protect consumers as a result of their decision to guarantee and bail out the banks. Firstly once the dust has settled they must conduct an independent investigation into why this emergency bailout was necessary. Is the current regulatory regime appropriate? Does the Central Bank and Financial Regulator have the necessary powers and did they act appropriately?

Secondly the Government must legislate or regulate to ensure there is no attempt to pass on the cost of this in the form of increased bank charges and fees. It would be all to easy for the banks to pass on the costs of this to the consumer, as we have seen with the airlines when the price of oil went up. Therefore any bank which signs up to the gaurantee scheme would forfeit the right to increase these costs. This can be easily done as all charge and fee increases are already regulated by section 149 of the consumer credit act.

Thirdly the Government must legislate to put the key provisions of the Consumer Protection Code on a statutory footing. The days of "principles based" and light handed regulation are over. We need strong regulatory action to protect consumers, who do not get bail outs or guarantees when they run into financial difficulties.

If the Government fail in this regard, it will be the taxpayers and consumers whi will feel short changed in this whole sorry saga.

Charges of the Heavy Brigade!!

The news was dominated this week by misdeeds in the financial services sector. First we had the disclosure that Bank of Ireland had lost 4 laptops containing the personal, financial and health information of up to 10,000 customers. Bad and all as that was, the abject failure of BOI to inform the Data Protection Commissioner, the Financial Regulator and most importantly those affected immediately reflects very badly on the bank. CAI has called for BOI to pay compensation to all those affected, see our press release.

Then we had another damning report from the Financial Ombudsman in relation to the misselling of financial products to elderly people and the attempts by financial institutions to wriggle out of their commitments to people who had serious illness insurance cover. This is awful stuff, here we have vulnerable people, some in their 80's and 90's and then others whose lives have been turned upside down by serious illness and they are out through the wringer when they are least able to deal with it. Kathleen Barrington has an excellent piece on this in Sunday Business Post today.

There was also turbulence in the mortgage market, with some mortgage providers reducing their commissions to brokers, which could potentially lead some to direct business to where the best commission is rather than where the best deal is for the borrower, see more on that here.

Across the water in the UK the big story was the judgement in the High Court in favour of the Office of Fair Trading, and against all the high street banks.


ITN News report on the case.

The judgement gives the power to the OFT to examine the fairness of charges imposed on customers in relation to unarranged overdrafts, such as people going into overdraft. Thursday's decision was a great one for consumers, however its likely that the banks will appeal all the way to the House of Lords, so it is not over yet. In some cases consumers are charged £35 each time this happens, when independent analysis suggests that it costs the bank about £2. From 2005, thousands of customers have begun to reclaim charges. The charges here are not as high as in the UK, which is primarily in my view because of section 149 of the Consumer Credit Act which I wrote about here previously. And the current charges chaos in the UK is a timely reminder why we need to retain section 149.

However the judgment also points to the need here to review the existing charges imposed to determine their fairness on Irish consumers. In particular there are many people in the sub-prime market who are being charged exorbitant fees and charges which only serve to make it even more difficult for them to sort out their finances. CAI will be writing to the Department of Finance seeking such an independent review of charges.

Tonight is my last night playing Roger in "I do not like thee, Dr. Fell" with Dunshaughlin Players. Its been hard work over the last few months learning the lines and moves, but performing has been great fun so far, especially with such a great cast, director and backstage team. Looking forward to the finale tonight and a few beers afterwards perhaps!!

Section 149, we need you!!!

I do a bit of amateur drama in my spare time, currently practicing with Dunshaughlin players for "I Do Not Like Thee, Dr. Fell" by Bernard Farrell. You don't have to be mad to do drama, but it helps, just like being a consumer advocate in fact.

Anyhow, we did a play last autumn and part of the dialogue involved one character who kept repeating the line "Car 149...where are you?" So much so, it has been imprinted on my mind. Anyhow as a result late last week when I received some documentation from the Department of Finance last week indicating that they were to consider a review of section 149 of the 1995 Consumer Credit Act my first reaction was...."Section 149, we need you"

Well it might sound a bit anoraky...but Section 149 is quite important, this is the section of the legislation which requires banks and financial institutions to seek approval and justify why their fees and charges should be increased. As a result its abolition is top of the bankers wish list. That's no surprise to me, but what I am surprised is that the Government appear to be considering this seriously too. One would have thought with all our problems with increased debt and problems in the housing market, they would have more important things to consider.

The reason this is on the agenda is because the EU institutions have just agreed a new consumer credit directive and the Government here are committed to transposing this new legislation by 2010 and will review the issue later this year. Well I welcome the review of consumer credit legislation, repeal of section 149 is far from welcome.

Those in favour of appealing this say that the new protections such as the Financial Regulator's consumer protection code make this unnecessary. Some also claim it hinders competition. I disagree on both counts.


Competition is not being hindered by section 149, it's the cosy arrangement that banks had here before the arrival of Halifax that hindered competition.

Ten reasons why Section 149 should not be repealed:

1. No evidence to suggest that section 149 has impeded competition, what has impeded competition has been the cosy environment where established banks maintained high costs and charges, which allowed them to be among the most profitable in the developed world. When banks say this is about competition, what they really mean is that there bottom line is suffering, credit is harder to obtain and raising fees and charges is a solution to both these problems.

2. I welcome the entrance of new providers such as Halifax in recent years who have shaken up the market and given consumers a better deal on current accounts, but there is still room for improvement as many of the offers for example of interest on current accounts are time limited.(Halifax being an exception to this)

3. Charges and Fees set out in section 149 are maximum charges, many of the financial institutions are applying much lower charges than those agreed, so again banks don’t have to seek approval to lower charges and fees, only to increase them! Section 149 cannot be characterised as a price control measure, banks and financial institutions are completely free to set interest rates etc, regulators in other sectors of the economy have control and oversight of charges and fees, so financial services is no different from other sectors.

4. Suggestions that Financial Regulator's Consumer Protection Code overrides the need for section 149 is misguided, code has only just been introduced, way to early to judge if it will provide the protection that consumers need.

5. Given the current credit crunch, removal of section 149 would lead in my view to a major increase in charges and fees by banks under pressure to maintain profit margins, removal of section 149 would in fact be a charter for increased charges and fees.

6. Its only a few years since we had major problems with unauthorised over charging by banks, in total the FR has indicated that €168 million was or is owed to Irish consumers by the banks, not all those issues have been sorted out yet, only 80% has been repaid to date, so removing section 149 would send all the wrong signals.

7. It is vital that section 149 is not reviewed in isolation, commitment in Consumer Strategy Group report in 2005 to undertake review of consumer protection performance and role of Financial Regulator in 2008, for me that has to happen first before Section 149 can even be looked at. We cannot remove important provisions of consumer protection legislation in isolation from other matters.

8. I agree with the view of the Consumer Director of the Financial Regulator, Mary O’Dea when she said in 2005 that “We believe that before Section 149 could be removed a number of conditions would need to be met, one of which is that full consideration should be given to the development of a standardised low-cost basic bank account. There appears to be an opportunity here where everyone can gain – low cost, no frills bank accounts would help all consumers, and particularly those on low incomes, and would lead to an environment where legislators could decide that control of these charges might not be warranted. Of course, we’re not at that stage yet, but it is something worth thinking a bit more about.” Mary O’Dea 16th May 2005 at OPEN Conference. Since there is no sign of action by banks to address issue of financial exclusion, would be unwise to abolish section 149.

9. Given the push by the State to encourage people to open bank accounts for social welfare payments, it is important to have oversight and control of charges and fees to protect low income consumers.

10. Sub-prime lenders have just come under remit of FR, major issues there in relation to the exorbitant charges and fees which apply when consumers get into difficulty, I would welcome an urgent review and analysis of these charges and fees and in my view greater oversight rather than less is required.