Not a perfect storm!

Vodafone will soon be launching their Blackberry Storm in Ireland. However it seems they will be charging Irish consumers a lot more for the phone and the tariffs than in the UK and on the continent. Thanks to http://www.keith.gs/2008/11/vodafone-blackberry-storm-yet-another-paddy-tax/ for spotting this and the detailed analysis.

I am sure they will try and justify it on the basis of that costs are higher here, but of course all these companies forget to mention our very favourable corporate tax rate. Termination rates may be more expensive here, but definitely not six times more expensive. The data doesn't cost a cent more and we already know that the mobile companies here generate the second highest ARPU (average revenue per user) in Europe at €40.87 compared to an EU average of €25.99.

So as Keith says its another paddy tax on the Irish consumer. Obviosuly Vodafone believe that consumers here will pay more, only time will tell. The best way of course for consumers to apply pressure on Vodafone to reduce the price is to hold off on buying the product.

Cutting down on the overheads!!

Perhaps I will try this next time!

Well in these recessionary times we are all on the lookout to cut costs and for bargains. I pass through that boulevard of broken credit limits otherwise known as Grafton Street twice a day on the way to work, it always dangerous to stop there because you end up spending money! Anyhow to my surprise there was an offer of a free haircut there when I passed today. I noticed this before, but since I needed a cut and it generally costs me €13-€15 to get the job done thought it might be worth a try. So I thought practice what your preach Doorley!

Anyhow its a hairdressing training school and in return for the free haircut you are a guinea pig for a trainee hairdresser. Now my request is not too demanding, four on the back and side and trim the front and top. I am suffering a little from Androgenic Alopecia but not quite having to do the comb over just yet! My only request is that they don't take too much off otherwise my hair just stands up! I empathised with the trainee, she is only 3 weeks training and lacked the confidence to do all the job herself. It was fascinating listening to the interaction between tutor and student, he encouraging and challenging her at various times. She got a bit frustrated at times because she couldn't quite get the hang of some of the technics he was showing her. In the end he stepped in to finish off the job. It may have taken twice as long, but I am happy with the result. It may not be everyone's cup of tea but I got my hair cut for nothing and hopefully contributed something to the next generation of hairdressers. So folks there are savings and bargains to be got out there if you look!

Irish Consumers being "Pounded"

Got a call from Newstalk yesterday asking me to comment on their survey of the difference between the cost of clothes in euro on sale here and the price of the same items in sterling on sale in the North and in the rest of the UK. The results of their survey are as follows with the sterling price, the current euro price here and what the price should be based on the value of the euro against the sterling.

H&M

• Black Skirt - £19.99 - e29.90 (Exchange Rate e23.27)

Oasis

• Knee Length Coat - £75 - e113 ( Exchange Rate e87.29)
• Silver Knee Length Dress - £65 - e 94 (Exchange Rate e75.65)
• Black T-shirt with frill - £25 - e38 (Exchange Rate e29.10)

Ted Baker

• Multi coloured stripped shit £70 - e100 (Exchange Rate e81.47)
• Washbag £35 - e50 (Exchange Rate e40.67)
• Coat £85 - e120 (Exchange Rate e98.76)

I subsequently did a piece on their breakfast show this morning. This is not news to many of you I am sure, we are all sick and tired of seeing the sterling price and then the hugely inflated euro price. I pointed out that the euro prices are based on the 2007 value of the euro when the it was worth about 66p to 67p. The euro has strengthened considerably since the start of 2008 and is now worth about 85 pence sterling

When CAI raised this issue back in March we were told that there was a time lag and the currency fluctuations would be reflected in the prices after about 6 months, however almost a year later nothing has changed. There is nothing illegal about what these retailers are doing, but it is still galling. I suppose they are charging what they think we will pay. If consumers want to effect change, the best thing to do is to take your business to another shop or else go across the Border as many thousands are doing.

I know some people have said to me can I not pay in sterling to get around this, unfortunately this is a non-runner, there is no legal obligation on retailers to accept sterling. However both the media and consumer advocates can keep the pressure on by highlighting the difference and if consumers continue to vote with the feet the retailers will have to respond.

Fares Fair and the Audacity of Hope!

On November 1st new EU rules came into force which will require airlines and others advertising ticket prices for flights to include the full cost including fees, charges and taxes upfront. In addition passengers should get the breakdown of the different categories of costs making up the final price:tariff, taxes, airport charges and other fees. We all know the story, a flight is advertised as free or for a €1, but by the time we pay for it the price is €60. Now there are good deals out there and people can get cheap flights. But the problem with this sort of advertising is that it lures people with an initial misleading offer and having gone through the booking process most people just buy rather than start and search again. So instead of booking a flight with another airline for €50, we pay €60 because the initial cost quoted was a €5.

It would be like a supermarket saying we charge 10c for a loaf of bread, but you have to pay 20c for the car park, 10c for the trolley, 10c for using the check-out. Up to now many consumers didn't have the detailed price information they needed up front to make an informed choice and decision. Price transparency is a key component of any consumer contract, so these new rules are welcome. However there will still be wriggle room for the airlines, some have introduced a number of discretionary charges such as check in and baggage charges, so it will still be difficult in some cases to know the full cost until consumers gets to the point of purchase. Consumers will have to factor these extra costs into account.

The other positive measure being introduced is that airlines will not be able to impose charges on consumers without their express consent. Up to November 1st airlines such as Aer Lingus, Aer Arann and Ryanair have automatically included insurance on flights booked online, requiring the customer "to opt out" if they wanted to exclude an extra such as insurance from their purchase. I have come across cases where the consumer was not aware that they were paying for insurance or thought they were required to buy insurance. Obviously its a matter for each consumer to decide, but do you really need to pay insurance on a flight from Dublin to London? The merit of many of these insurance policies is questionable in my view. From now on the websites of all airlines should be designed so that consumers have "to opt in" to order and pay for insurance and or other extras if they want them.

The key thing now is to ensure that these new rules are enforced. In the first instance that's the responsibility of the Department of Transport and I assume the National Consumer Agency, but also us as consumers to report if we find the new rules are being breached.

I also see that the EU Commission has launched a website for consumers where they can get advice on and report what they consider are unfair commercial practices. Looks like a good initiative.

I cannot leave the blog this week without a mention of events in the US. Well as my friends know I am a bit of a political and election junkie. Watch and enjoy elections and politics from all over the world, and in keeping with habit since 1992 (then all I had was BBC Radio 4) stayed up for the elections. Apart from watching the historic election of Barack Obama, I was keeping an eye on the Senate and House races, would the Democrats get a filibuster proof majority in the Senate and would the 2006 Democrat surprises hold on? My friend Dominic tells me that there is a technical term for this affliction called Psephology not sure if there is any cure! I had been keeping an eye on North Carolina since the summer and was really pleased to see Kay Hagen win over Elizabeth Dole, who ran a nasty and negative campaign, especially in the end.


Inspiring stuff

The thing that inspired me most about Obama was the triumph of hope over fear and optimism over negativity. That got me thinking about consumer advocacy where there is a danger of always being negative, of always knocking, of always being the hurler on the ditch. Yes it is important to highlight deficiencies, but consumer organisations and advocates also need to be positive and put forward solutions and proposals. We are all too familiar with the naysayers, the hurlers on the ditch, the bores who come to meetings, never have a good thing to say, and just criticise and who stay talking when there is nothing left to say. These are the sort of people we all stop listening to after a while, so like people, organisations need to avoid falling into this nexus of negativity or else we won't be taken seriously after a while too.


Classic Naysayers, but at least they were funny unlike some I know!

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.

A French Lesson for Irish Consumers?

I really wish I had paid more attention during french classes at school. I was over in Paris for two days this week attending a seminar and meeting with some old friends and like every time I am there my lack of french comes home to roost. OK I can order a beer or find out where the toilets are, but once it gets more complicated than that, like having to ask directions I have to revert to English.

Could we as consumers learn in the debris of the financial crisis here at home from the French as well. Yes some of their banks have come a cropper on the international markets, but primarily for investing in toxic assets from the US and of course there have been now three cases of rogue traders doing serious damage to the balance sheet. The most famous of course has been Jérôme Kerviel who it is alleged cost the Société Générale bank over €4bn. On Friday when I was there another scandal broke concerning Caisse d'Epargne when four traders cost the company €600m, which given the numbers being thrown around in recent weeks sounds like small change. I had never heard of the bank before, but happened to pass what looked like one of their older branches when I was walking home from dinner on Friday night and took a photo.

The French mortgage market from what I understand is radically different from ours and that in the UK and as a result French consumers are insulated from the worst excesses of the current turmoil, where individuals and families are under terrible financial pressure with rising debts and home repossession. Most home loans are given out on long term fixed interest rates, they don't have the plethora of variable and tracker mortgages that were so popular here. And by long term I don't mean 3-5 years, I mean 20-25 years. That means that French mortgages holders know how much the mortgage will cost them many years in advance. Unlike their Irish counterparts they do not hang on the words of Jean-Claude Trichet as to whether interest rates will go up or down.

When you think about for a while, it is a bit crazy to tie the cost of our debt on our most valuable physical asset, i.e. our home to the vagaries of the financial markets and the deliberations of the European Central Bank. A 1% rise in interest rates has the potential to cause real misery for many homeowners. I suppose its all very well in good times, but the weaknesses in the system are plain to see in the current climate. That's not to say that the French system is perfect, it is much more difficult to get a home loan there, so many people here would not have been able to buy a home if they lived in France.

And of course then there is the cost, would it cost more if people could only purchase a long term fixed rate mortgage compared to the option of a short term variable mortgage? Obviously each case is different, but while in the short term the French mortgage might cost more, in the long term it would appear to cost less and of course give much more security and peace of mind. That brings me to an interesting conclusion in a report on the UK Mortgage market (Miles report) that examined the issue of fixed long term mortgages. It found that consumers really only focused on the immediate short term cost of the mortgage. Can I make the repayments in the initial months? In the UK they rarely looked at the overall cost or the cost if interest rates were to rise when taking out a mortgage, in most cases it is the same here and I can understand why. People assumed that mortgage rates would remain stable and the prices would keep going up. The lenders are supposed to highlight potential pitfalls to borrowers, but I imagine in recent years when money was being thrown at people and most people thought the party would go on forever, this was largely overlooked. However necessity is the mother of invention and therefore it might be an opportune time for Government to examine the pros and cons of encouraging the take-up of long term fixed mortgages here.

PS: The Bank Guarantee Scheme was published on Wednesday, I was on The Breakfast Show on Newstalk on Thursday highlighting how this was a great deal for the banks, but a bad deal for taxpayers and consumers. Clause 44 says "A covered institution shall not pass on the costs of the guarantee to its customers in an unwarranted manner". This is vague, meaningless and unenforceable. Minister Lenihan says that the costs won't be passed on, but once the dust settles in a few months, I wouldn't be so sure.

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.