At Debts Door

The Minister for Social and Family Affairs answered a number of questions in the Dail on Tuesday in relation to number of people seeking assistance from the Money Advice and Budgeting Service (MABS). Its shows that the number of new clients going to MABS in the 11 months to the end of November has from 12,400 for the whole of last year to 15,600 up to the end of November. These figures show a 25% increase and that doesn't include the Decemeber figures. On top of that the numbers calling the advice line which was established in October 2007 is almost 11,500. MABS is an excellent service and I would encourage people who are under financial pressure to seek their assistance. I have heard stories that there are waiting times at some offices, not sure if this is true. If it is then the Government need to provide more resources to the MABS service, because the reality with increased demand, the pressure will grow on the hard working MABS staff who can only see so many people in a day.

Likewise we hear of the pressures on organisations such as St Vincent De Paul where demand for assistance and financial help have grown massively too. And in recent days the Irish Times have been running stories about areas (such as my own next of the woods in South Meath) where the recession is biting. I am old enough to remember the late 1970's and early 1980's when money was scarce and inflation from memory was in the 15-20% bracket. My father died suddenly in 1978 when I was 7 and since he was a farmer our whole livlihood was wiped away. There were no EU farm subsidies back then, you lived from what you produced from the farm. Apart from the emotional loss for my mother and my 3 siblings and I, financially times were very tough too. The memory of those difficult times have stayed with me and that is why I really believe the Government needs to do more to assist people whose are facing tough times. If we give people a hand up now they will be able to rebuild their lives and start contributing again when they are back on their feet.

In their pre-budget report the UK the Government have reduced VAT from 17.5% to 15%, have announced a package of measures to assist those in financial difficulty with mortgage debt such as a £200m mortgage rescue scheme, 3 month stay on repossession and increased resources for money and debt advice. Here apart from a slew of direct and indirect taxation the only positive step has been to increase mortgage interest relief marginally for first time buyers.

We have had the bail out for the banks, its time for the Government to come up with a strategy to support ordinary consumers who have lost their jobs, livlihood and income because of the recession along the lines of what the UK Government have done.

The Never Buy Insurance Policies!

I got a call this week from a sales rep at O2. You see back in July I bought an iPhone, or as one of my friends calls it, the Jesus phone. I am fairly happy with it, the GPS comes in handy when I am lost as I was last weekend...there are a few problems such as texting and I understand from a friend that integrating it with blue tooth in his car is a problem.

Anyhow the sales rep from O2 wanted me to buy insurance to cover my phone in case it was stolen, lost or broken. Basically for €9 a month I could insure my phone if I lost it, or if someone stole it and made loads of calls to Australia. My response was why? Insurance in basically there to cover substantial loss, i.e. if my house burned down, I wouldn't have a home and would still have a big mortgage, so it makes sense to pass the risk to my home insurance company in return for an annual premium. The same applies to motor insurance in that if you cause or are in a serious car collision, the costs could be exorbitant. Indeed motor insurance is unique in that we are required by law to have it if we have a car.


The "Never Pay Policy" sounds good!

But the idea that I should pay €108 a year to insure a phone which I could buy if it was stolen or lost for between €129 to €229 is mad. And even if someone steals my phone and makes calls I would like to think I will know soon enough to be able to cancel it with O2. A few years ago when I bought my mp3 player in Scotland for £50, I couldn't believe it when the assistant almost insisted I take out an insurance policy on it.

These policies are all the rage, because on one hand the providers whether they be telco companies, white goods retailers or airlines make a nice profit on these worthless policies and they also then of course try to fob people off if they have a problem by telling them to make an insurance claim even if they are responsible for dealing with the consumers problem. Thats bad news because the insurance industry is notorious for anti-consumer practices, as someone once put it they will insure you if you fall out a window, but not when you hit the ground.

Consumers should run a mile from these dubious policies, they are expensive and of little value in my humble opinion.

Ad Attack

In recent days RTE highlighted a report which found that broadband customers rarely get the maximum connection speeds advertised by internet service providers. The study on broadband available in Dublin, Cork, Galway and Limerick found that on average consumers benefit from just 60% of advertised speeds. Now in the past telco companies covered themselves by stating in their ads that their offers provided speeds of "up to" so many megabytes. However I thought that had all been sorted out since Comreg and Advertising Standards Association of Ireland (ASAI) had agreed a new set of advertising rules for internet providers last March. Individual consumers can check their speeds, this is one company I have used to check the speed of my broadband at home, but I am sure there are more.

Of course the regulatory regime here for the advertising industry is weak. As in other areas we have "self regulation" or what could be called light touch regulation. I would call it soft touch regulation. Obviously advertising has a role to play in informing consumers about new products or services, it can also promote competition by letting consumers know about cheaper prices or better services. And lets be honest some ads are really good and on TV can be better than the programmes.


A Leonard Rossiter Classic!

However advertising can also be deceptive and misleading as outlined above re broadband. In that case consumers are not getting "what is says on the tin" and are being ripped off by being provided with a service which is poorer than what they are paying for. But the current regulatory regime doesn't promote good practise because if a consumer believes that an advert is misleading all they can do is complain to the ASAI and a number of months later they will either uphold or refuse the complaint. By that stage the advert has served its purpose and may no longer be in circulation. Even where the ASAI has found that an advert was in breach of their codes all they can do is direct that the advert not be run again and/or make recommendations for future ad campaigns. They have no power to impose fines or penalties on those found in breach of their advertising standards even though the misleading advert could have generated considerable revenue for the company. See here for a list of the most recent cases.

As I discussed in this blog last March there is also considerable global pressure for greater regulation of junk food advertising towards children, which many believe is contributing to child obesity. CAI linked up with the Childrens' Rights Alliance to call for greater restrictions on junk food advertising here and it is positive that Minister Eamon Ryan has included a provision for this in the Broadcasting Bill which is going through the Oireachtas now. Likewise there is growing pressure to restrict alcohol advertising which appears to be targeting young people, but so far the Government have caved into the drinks lobby and only introduced "voluntary codes" which are unenforceable, weak and ineffective.

What we need to protect consumers is an advertising code underpinned by law, policed by a powerful regulator where ads can be stopped or taken down immediately and where financial penalties can be applied to act as a disincentive.

Buffetted in times of recession

I like many Irish people purchased shares in Telecom Eireann having fallen for all the hype and marketing about how wonderful an opportunity it was. It was my first foray into the world of stocks and shares and apart from those who sold their shares in the first few days we suffered big losses.

In recent times people have suggested that shares are now great value and the "sage of Omaha" Warren Buffett tells us (see video below) "Be greedy when others are fearful and be fearful when others are greedy" But can we trust the stockbrokers not to sell us duds as many have tried over the last decade.


The Sage of Omaha!

As Dave points out on his blog here at 6:30 on a Wednesday some "expert" over at Davys is ramping up Bank of Ireland shares and then at 8:20 the next morning they are revising down their price target and as he says some explanation and disclosure as to the drastic change would be helpful. Of course if an ordinary consumer bought €20,000 of shares based on this advice at the time, they would be sitting on shares worth now about €1500. But no fear Davys would still have their hefty fees.

Of course Shane Ross is the man the stockbrokers hate, because he was a stockbroker and he knows that the so called "experts" in stockbroking firms are just making it up as they go along. As he points out they have been wrong so many times and they are still listened to. His article is a fairly damning indictment of the situation and that was January 2008 and since then share prices have fallen much much further. He also makes a good point about a conflict of interest where a stockbroker personally or his/her company could well be the broker for the firm they are encouraging others to invest in. Is this always declared to the client? Its a serious issue when people's life savings can be lost or massively reduced by these recommendations.

This is an area which does require greater regulation, but will the stockbrokers who are powerful vested interests really want our politicians upsetting their applecart? Indeed there have been some minor changes and the Financial Regulator has now some oversight of the work and procedures of the Irish Stock Exchange, but I don't think it is enough a lot more needs to be done. Of course our stockbroking firms have always been very supportive of the democratic process and in return some politicians appear to have been very forgiving when of "errors" that have occured, so I wouldn't "bank on it" and the prospect of any serious and meaningful regulation of this area any time soon.

But that doesn't mean that we shouldn't try and this is an area I will be returning to in the coming months. And of course apart from the big regulation issues there are the individual cases where people find they are being charged hefty fees for a bad service, and unlike the price of a pint of milk, huge sums of money are involved.

Protective or Defective Directive?

I was out judging a schools public speaking competition last night for the National Forum on Europe, thankfully the subject was not Lisbon! All the speakers were really impressive, I remember the first time I spoke in public, the room spun around and I got my cards mixed up so I repeated about half the speech. Public speaking competitions are a good starter, but debating is much better for helping you frame an argument, think on your feet and of course the odd bit of heckling. Had some fun times in debating competitions in Tipperary, including one famous occasion where one of our team (now an esteemed member of the legal profession) managed to convince our opponents he was an adjudicator and asked them for their main arguments prior to the contest, you can imagine their surprise when he took his place on our team!

While we are still dealing with the fall out from the Lisbon Treaty defeat here in Ireland, the EU machinery in Brussels works away on a daily basis churning out reports, recommendations, opinions and directives. Many of these impact on our daily lives, but in most cases what is decided today may not affect us for many years. The EU "Community Method" is complex and slow, but it does work, having experienced it myself during my time with the EYF.


My friend Dominic encouraged me to join him in Croker on Wednesday night, it was more like Krakow or Warsaw than Dublin-the Polish fans far outnumbered the Irish and were great fun and in great voice....a nice side of EU integration even if Ireland lost 3-2

I was over in Brussels last week and got a briefing on the proposal by Commissioner Kuneva for a new consumer directive. As you can see here the Commission is saying that this directive is a great step forward. BEUC (European Consumers' Organisation) on the other hand is not so happy, raising concerns about a number of issues.

From my experience the big shift here is the move from minimum harmonisation to maximum harmonisation. This means that if passed that EU law in the areas covered by the directive will be the same in all member states. The benefits of course are that the law is consistent across the EU and where legal provisions are weak, consumers will be better protected. However where the law is stronger, maximum harmonisation could undermine hard won gains by consumers over many years. Do we really want to forgo rights just to enhance cross border trade?

Its unlikely that the directive will be passed before the European elections next June and the installation of a new Commission in the autumn of 2009, so the current proposal could fall. In any event it is a proposal to monitor because it could have a big impact on us all in the year ahead.

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!