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Ten reasons why Section 149 should not be repealed: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.

Dustin Douze Points, Competition Nil Point!

Well firstly congrats to Dustin on the great win last Saturday night, I have no doubt he will take Belgrade by storm. On the other hand, competition and consumers took a bit of a battering over the last 10 days and by Euro standards we are not in great shape.

First there was of course Noel Dempsey's decision to shelve competition in Dublin Bus, which is another blow to the hard pressed commuters, who have been waiting years for better services, lower prices and integrated ticketing. The problem with transport services in this country is that they are run and planned to meet the needs of everyone, politicians, managers and unions, all except of course the people this service is supposed to be for...the users, who appear to be an after thought.

Then there was the news (not really news actually as previous CAI surveys for ODCA told us the same thing) that there was limited competition in the groceries sector. The NCA report confirmed that there was little price differential between Tesco and Dunnes Stores, although Aldi and Lidl were much cheaper. While I welcome this survey, I think it has limited value. We have to stop putting the onus on consumers solely to drive change, state agencies like NCA who have a large budget need to be more innovative. I would like NCA to do localised surveys, like a price survey of the main shops in Ashbourne and publish it in the local papers. Now that would grab the local people's attention, but more importantly would grab the attention of the local retailers and traders, no one would want to be the dearest and would help drive and keep prices down.


Dustin douze points!

Also this week the Competition Authority published their 2007 annual report. Now as state agencies go, I think they do a good job. They have produced a number of reports on a range of sectors in the economy where we badly need more competition such as the legal profession, banking, public transport etc. They have managed to shed light on areas of the economy which up to now have been sheltered by uncompetitive practices and vested interests. The problem of course is that they are largely dependent on Government Departments and other state agencies to implement the findings of their reports. According to their own analysis (see page 56-57) the vast majority of these recommendations have not been implemented yet.

We need to inject accountability into the system, so that Government departments and state agencies are required to respond and act within a reasonable period. In the UK they have a system whereby the Government issues a formal response to a report by the Office of Fair Trading. We need something similar here, there may be difficulties with requiring a Government department to respond to a state agency, could create some governance issues. So instead we could require the Competition Authority to report on the response to their recommendation into the relevant Oireachtas committee within 6 months and every 2 years after that, until it is felt the work has been achieved. That would hopefully shame those Government Depts and agencies into action.

I also see that the Office for Fair Trading is for a trial period going to offer rewards for cartel whistelblowers. It will be interesting to see how this goes, but if it works over there it is something CAI will be pursuing here as well.

There is little Ode to Joy for Irish Consumers!!

Quelle Surprise! Another report tells us that we are being ripped off compared to our EU counterparts. Forfas published a report last week which reminds us again just how much over the odds we are paying for everything. Well that is all very good, but what we need now is an action plan to actually address the underlying reasons why the cost of living is so high here. We need a co-ordinated Government response to inflation, we need to overhaul the consumer redress system, we need to either reform or if necessary replace the underperforming regulators and we need to take on the vested interests and inject more competition into the economy. And of course I would say this....we need to make sure CAI and others coming from a consumer perspective are at the table when key decisions are being made to ensure the voice of consumers is heard.

Also last week Paul Kelly in the Irish Examiner did an excellent piece on inflation for everyday costs, in particular food. Its shows that flour has gone up 52%, butter up 27%, milk up 22%, eggs up 16% to name a few. While the overall inflation rate has come down to 4.3% (still very high) in January 2008 these everyday costs have skyrocketed, which hits vulnerable consumers on low and fixed incomes the hardest.

Well what can the EU do to address our inflation problem? The single internal market was supposed to bring extra choice and competition. I think we have got the choice, but the competition has been slow to arrive. Yes, large International and European multinationals have come into the Irish market, but in most cases (perhaps Bank of Scotland-Ireland concerning mortgages is an exception to the rule) rather than shake up the market, seeing how cosy and easy it was to overcharge, they nestled into the Irish way of doing things. So as is confirmed by the Forfas report, Irish consumers have not seen much of the benefits of a single market.


Ode to Joy for Irish Consumers?

The debate on Europe will dominate the political agenda in the coming weeks and months. On a personal basis I am pro-EU and will vote yes for the Lisbon Treaty. It would be easy to blame Brussels for the failure of the single market to benefit consumers. Thats not to say that the EU couldn't do more and I do worry about the army of business and corporate lobbyists who descend on the EU institutions every day to press the case of vested interests. However as with environmental and social legislation, some of our more progressive consumer legislation has been driven by the EU and the actions on flight rights and mobile roaming have been welcome.

What we need to see is a commitment by our own Government and the regulatory bodies here to ensure the full benefits of the single market are passed onto consumers, and that unfortunately has been mostly lacking to date.

Going, Going Gone...Consumers patience gone waiting for laws to protect them in property market!

Property for Sale, great river view, no basement!

There is a certain pattern to political events and action in Ireland. There is a crisis or media storm, Minister responsible wants to be seen as taking action, so he/she sets up a committee/taskforce to look into it. The group is told to report without delay given the urgency of the matter which they do....and then the findings of of the report remain unimplemented until another crisis/event occurs a number of years later.

And so it is with regulating auctioneers, estate agents, letting agents etc. In 2004 Michael McDowell set up a group to review the sector in light of concerns expressed. It worked very speedily and produced a report in 2005. In the interim the Government set up an implementation group....(I hope you are still with me on this) and last year the National Property Services Regulatory Authority was established on an ad-hoc basis. However as of today it doesn't have any statutory powers, so while it is engaging in preparatory work, it cannot regulate the activities of estate agents and auctioneers and cannot investigate complaints from property buyers and sellers if they arise and where necessary impose sanctions and award compensation.

This delay is unacceptable, in July 2005 the Government promised it would bring in these laws and two and a half years later, the latest information from the Government website suggests that the necessary legislation will not be published until late 2008 and given the time it takes for bills to go through the Oireachtas, it could be 2010 before consumers engaging in property transactions have the rights they badly need. The National Property Services Regulatory Authority which is based in Navan has appointed a CEO, and other staff, I assume, has a budget of almost €1m, but from a consumer prospective is a toothless watchdog.

Given the high home, land and property ownership levels in Ireland, large numbers of consumers are engaging in transactions each year. In particular the purchase of a home is a significant life event and with the large sums of money involved, it is vital that the profession meets the highest standards. While I have no doubt that the majority of estate agents and auctioneers do an excellent job, concerns and problems remain. The main issues for consumers include the misleading guide prices being advertised, inaccurate information about the property being provided, phantom bidders being used to artificially increase prices and blatant conflicts of interests. While the representative bodies such as the IPAV and IAVI can investigate complaints and take some disciplinary actions, they can only act on complaints made against their members. And while the majority are members of these associatons, you don't need to be. And even if they were to kick someone out of their association, they can still practice in the market. And as with all self regulatory bodies the public perception is that these bodies will side “with one of their own” and therefore consumers lack confidence in them and are less likely to complain.

I would also be concerned at the limited requirements for getting an auctioneers licence at present, made worse by the fact that once a licence is obtained there is a total lack of an ongoing supervisory and disciplinary system. It is positive that the NPSRA will have powers to set minimum levels of education and qualificiations for estate agents and auctioneers and will apply fitness and probity criteria.

Its funny that the Government can rush legislation through the Oireachtas when exchequer funding is at stake, but drags it heels on important pieces of legislation like this which are vital to protect consumers. CAI will continue to call on the Department of Justice, Equality and Law Reform to publish the legislation by the summer and to have it passed into law by the end of the year at the latest.

Post Haste....Not!!!

The latest survey by Comreg of the opinions of business and residential postal users about postal services here published in recent days makes for depressing reading. When this information is put together with the repeated failure of An Post to meet the targets for next day delivery, surely its time for someone to take responsibility for a service that is not delivery for consumers, pardon the pun! It is ridiculous that a target of 94% for next day delivery of post set by Comreg for An Post a number of years ago continues to be missed by a mile. For the last 5 years, the rate has been in the 63%-79% bracket. I use the post a few times a week and it is really frustrating that sometimes it takes a few days for a letter to get from Dublin to Ashbourne.


I know Royal Mail have had their problems too, but I really like this ad!

I don't blame the postal workers, especially the postmen and women who go out in all weathers to deliver our letters, but the management at the top and in particular the regulator and the Government who have presided over this fiasco. Obviously An Post deliver most of the post in the country, even if on the business side new players have come into the market in recent years. But even with liberalisation, if we allow the current providers to get away with a poor service without any penalties or consequences, well then there is no incentive for improvement. In fact the opposite has happened, Comreg awarded a price increase, with the standard stamp going up from 48c to 55c last March without any commitments on improved service.

You have to plough through it, but on page 39 of the business report it records levels of satisfaction, there are some minor shifts up and down, but overall there are still high levels of dissatisfaction and on page 42 it shows 40% of business customers were unhappy with aspects of postal service. That's an amazing figure.

There were lower levels of dissatisfaction among residential customers, about 10%, but heavy users (those getting or sending more than 14 items a week) dissatisfaction was up to 20%. Of those who made a complaint 34%, only 20% were happy with how it was dealt with, which again is quite a shocking figure.

It's clear from this that with liberalisation approaching we either need incentives for all post providers to improve performance and perhaps price freezes or other sanctions where targets are not met, which result in consumers getting a bad deal.

Many more home owners at debts door in Ireland

The Irish housing market after a decade of boom, has been stuttering for over a year now. I just know where I live in Ashbourne, many houses have been on sale for months. The first crack in the market came when Michael McDowell promised in October 2006 that if the Progressive Democrats were re-elected to Government they would reform the stamp duty regime. That was for many people, including myself a good reason to put house buying on hold. As a first time buyer, the prospect of buying without stamp duty and saving €1,000s was very attractive. So almost overnight a market that had been on fire, cooled considerably.

The most recent housing statistics from the Department of the Environment show the amazing decline from 35,000 loan approvals for houses in the second quarter of 2006 to just over 20,000 in the third quarter of 2007. In response to pressure the Government did eventually abolish stamp duty for first time buyers in June 2007 to stimulate the market, but by then the full extent of the American sub-prime crisis became known. And even further reform in Budget 2008 has failed to have the desired effect.

As you can see from this US TV report by CBS, the housing market there is going through a tumultuous time. Of course we have to be concerned about the impact of the sub-prime crisis on the global economy, but I think we also need to be concerned about the thousands of home owners and families who have lost or will lose their homes.



And while it is not as bad here, the number of foreclosures and repossessions is rising as reported in the Irish Independent today, trebling in number since 2004. As reported here, some consumers who were given loans by sub-prime mortgage providers are given very little chance to work their way out of difficulty and are loaded with charges and fees that make repossession the most likely outcome. While sub-prime lenders will now be regulated by the Financial Regulator from Friday next, that would appear to be too late for those who took out mortgages before then. Will the lessons of this disaster be learned, hard to say, but I hope so.

The market is still very slow given that many house hunters in my view believe that house prices are over valued and are waiting for them to fall further. The prices in some areas did come down, I took a chance and bought a house last autumn, the final price I paid was down about 30k. However given how bad the market is, I am surprised that prices have not come down a lot more.

When they do, there is a ready market there as reported last week when a builder slashed the prices for new houses in North Dublin and most of them we bought within hours. The Construction Industry Federation are very quick to lecture the Government on what needs to be done to stimulate the market, however if their members who have made zillions in the last decade were willing to cut prices to reflect the reality in the market, first time buyers may start to buy again. And for me the most important part would be that house prices would become affordable again for many people currently shut out. I have sympathies for private sellers in the second hand house market who are holding on for the best price given that many of them would be in a negative equity situation if they reduced the asking price too much. But the builders and property developer could afford to reduce prices and take some of the pain, but I won't be holding my breath.

Unless prices fall and perhaps interest rates come down significantly I think the housing market will continue to stagnate for all long time, which is bad for those trying to get on the property ladder, bad for those dependent on the housing sector for their employment and income and of course bad for the Government coffers and economy.

Is Yellow Book the answer to our yellow pack customer service culture here?

I had the pleasure of spending the New Year holidays with my good friend Didi and his girlfriend Ana in Moscow and in the course of our discussions they were asking me about my new role. I was telling them that apart from high prices here, poor customer service or what we could call "yellow pack" customer service was a big problem. We know from a Eurobarometer survey in 2006 that 35% of Irish consumers were unhappy with the manner in which their complaint was dealt with, and of those almost half didn't take any further again. I imagine in most cases, people were just fobbed off and worn down until they just gave up.

Ana was telling me about the system in Portugal, its called the "Yellow Book". If you have a customer complaint and are not getting anywhere about a public service, retailer, restaurant, bank, basically any goods or service provider you can request the "yellow book". Here is some information on line about the "Livro Amarelo". (I know it is in Portuguese, but if you use an online translation service, it gives you the gist of what it is about). But basically all public authorities/providers are required to have this book by law on the premises, you fill out a form which is in triplicate, one copy for you, one for the provider and one which goes to the public authority responsible for addressing the complaint.

Ana told me that the request for the yellow book doesn't normally go down too well, its almost like an insult and I can imagine why. She has experience of being told that the yellow book has been abolished or that they can't find it. Anyhow in a lot of cases the threat of the consumer looking for the yellow book generally moves the provider to take the complaint more seriously.

It struck me as a potential solution to some of our customer service problems. The reality is that we give consumers rights, but not the means to enforce or at least we make it very difficult for them to seek redress. We go to a bank, shop to restaurant or call a customer care line and we are unhappy about some issue, but cannot seem to get them to take our complaint seriously or sort it out. We are angry and determined to do something about it. But then by the time we find out what to do, where to go and how to do it, we have lost the will to live or do not just have time to sit down and draft that email or letter which may just end up in another black hole. However with the yellow book, you make the complaint there and then on the premises or online, no need to write a letter, spend hours on a so-called customer care line when all the details are fresh in your memory.

Its certainly a system I plan to follow up and look into further. Of course not saying this is a panacea, but the basis of a solution. Lisbon is a very agreeable city and this is an excellent excuse to travel there. It would also address an issue in that the consumer protection landscape is complex, there are a plethora of different systems, agencies, bodies with responsibility for adjudicating on consumer complaints. The yellow book could be the solution in that consumers don't need to know where to go, they just need to fill in the details in the yellow book and the complaint goes to the relevant authority automatically, so if it is about food safety it goes to the Food Safety Authority of Ireland, about financial services, the Financial Ombudsman and so on. That's the theory anyhow, might be worth trying to see if it works in practice here.

Of course you could also take a more extreme route. This guy after months of trying to get a complaint with BT solved uploaded it to You Tube and got the required results. See http://www.youtube.com/watch?v=2O3_NNlUqNE&feature=related