Financial Regulator – Two views

Below is an editorial published in the Irish Independent in response to the ‘overcharging’ of customers at Ulster Bank.

Thursday August 23 2007

There is something Pythonesque about the vision of Ulster Bank chiefs sitting in emergency session to discuss their over-charging of customers. Do they — and the other 34 banks and finance firms who have been forced to pay back money that they have “borrowed” from their customers — wonder aloud how this terrible thing could have happened?

Do they express amazement that the checks and balances, so efficient when tracking down customers who do not pay on time, or who exceed their overdraft agreements, somehow failed to function properly when required to work the other way around? To a senior bank official, it must feel as though his Porsche or Merc has inexplicably re-fused to reverse into the executive parking space.

The bank has admitted that it wrongly billed customers for insurance policies on loans that were paid back early and has been suitably excoriated by the Consumers’ Association for allowing the overcharging to happen and failing to immediately disclose its magnitude.

One curious aspect is the fact that some 25,000 people apparently failed to notice that they were continuing to pay what was essentially protection money on a loan they had already paid off in full.

Widespread overcharging, estimated at about €167m has been exposed by internal examinations by the offending institutions, who have been ordered to do so by the Financial Regulator.

Where would we be without him?

The following was my reply to the editor. (Not published)

Sir,

On the assumption that you were not being facetious when you praised the work of the Financial Regulator in last Thursday’s editorial (23rd Aug.), you should be aware of the following.

The Financial Regulator was established in May 2003 after a series of very serious scandals within the financial sector, many of which involved direct theft from customer’s accounts. Consumers were assured that a new era of accountability, transparency and enforcement was at hand. This has not happened.

The regulator was given the power to impose a fine of up five million euros on errant institutions. But even this pathetic fine, which represents about two days profit for some banks, has never been imposed. Indeed, Ireland is unique in the world in that not a single financial institution has ever been fined or charged for wrongdoing since the establishment of the State in 1922. This fact alone should give pause for serious reflection, but there is worse.

One of the stated principles of the Financial Regulator is to

“Help consumers to make informed decisions on their financial affairs in a safe and fair market.”

This does not happen.

By law, the Financial Regulator is forbidden from disclosing any information whatsoever on the nefarious activities of financial institutions. (S.33AK of the Central Bank Act, 1942 as amended by the Central Bank and Financial Services Authority of Ireland Act, 2003).

This law is strictly enforced by the regulator even to the point of refusing to discuss scandals that are already in the public domain. Obviously, this blanket secrecy puts consumers at a serious disadvantage while providing dodgy financial institutions with watertight protection.

You ask the question; “Where would we be without him? (Financial Regulator)” A great deal better off is my answer.
Yours etc.

Anthony Sheridan