... continued.
A quick reminder of where we are: Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
As I showed in an earlier post, there have been a series of so called Concordats between the Financial Services Authority and the Office of Fair Trading - what I described as a blizzard of agreements. For the purpose of providing evidence that they established the basis for real consumer detriment and serious regulatory failings, I am using just one document from the myriad of documents involved, this one: Memorandum of Understanding. It contains not just one but four Concordats - if, you need more details they are all listed in an earlier post.
Now it could be argued, why choose that one, why not set my opinions against each and every similar document that has ever existed? The most obvious reason might seem to be that neither you nor I could stand the mental pain. The less obvious reason is that it is not necessary - each and every one of those agreements, those Memoranda of Understanding, those Concordats all contain the identical elements that formed the basis for consumer detriment and the regulatory failings which prompted that detriment. Let me show you why - in a step by step approach.
First, let me remind you of evidence from an earlier post, it was a comment from Lord Turner, Chairman of the Financial Services Authority given in evidence to the Treasury Select Committee (See earlier post here: Bank Charges - Item 1 - Lodged into evidence.)
What Lord Turner said as part of his evidence was " ... if somebody goes from being £5 in credit to £5 in debit, at the moment, the way in which the law works, the responsibility for making sure that the terms and conditions are reasonably explained et cetera switches from us to the OFT and that clearly is a boundary which is not all that clear.
Does that comment make you wonder why after nearly a decade of agreements, memoranda of understanding, and Concordats, not even Lord Turner can explain who is doing what and when? Does it also make you begin to notice, that according to Lord Turner, there are at least three possibilities involved - Bank Accounts which have at the outset a positive value (+£5.00), those which at the outset have a negative value (-£5.00), and a potentially vast grey area in between which - please note and remember - he just cannot explain.
Nor may I remind you is he alone in not being able to explain whether it is the FSA who are responsible or whether it is the OFT. Again, bear in mind this extract from a speech given by Adam Phillips, Chairman of the Financial Services - Consumer Panel. (See earlier post here - Bank Charges - Test 3. Post 5.)
These comments from Adam Phillips form part of that speech:
" ... The complex regulatory environment builds in inefficiency for firms and it results in confusion and inconsistent treatment for customers ..."
" ... The respective roles of the FSA and OFT need to be clarified. Both organisations are trying to work together to provide a joined up consumer experience, and much alignment can be achieved by rule making under FSMA, but the underlying legislation does not make this easy... "
Neither the comments from Lord Turner nor from Adam Phillips came early in the near decade of agreements between the FSA and the OFT, both are comments made in 2009 - and both are clear evidence in my opinion that it is not just consumers who may be confused, it is the regulators themselves - over who does what and when.
Just at this juncture however, please note and remember one smaller extract from the speech by Adam Phillips above: " ... much alignment can be achieved by rule making under FSMA". It has an importance which I will address in much greater detail later, but for now, for those who have a detailed background knowledge of this issue over Bank charges, ask yourself who it was that issued "the Waiver", which played such an important part in the proceedings over this issue. Was it the FSA or was it the OFT?
Earlier I promised to reduce the pain that might be involved in examining the multitudes of OFT/FSA agreements, Memoranda of Understanding and Concordats, but now is the time to make a start on the Memorandum of Understanding mentioned above, and its four constituent Concordats. We need to do that (step by step) to see where Lord Turner's unclear boundaries and Adam Phillips' inconsistent treatment for customers exist - and why they led to serious regulatory failure and consumer detriment..
This is what we are examining. I am choosing extracts, in this step by step approach. We start with - UTCCRs.
Most of those familiar with the issues over Bank charges will know that the OFT wanted to look at the fairness or otherwise of Bank charges under a specific item of legislation, a derivative of an EU Directive, and called the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs). The eventual Supreme Court decision ruled that the OFT did not have the right to do so, under that legislation, but also clearly noted that the OFT had other avenues they could use over such issues. The OFT decided to throw in the towel and not use any other avenues - leaving the issue of bank charges being fair or unfair - unanswered..
The OFT wanted to use their powers under the UTCCRs - but let's also look at where the FSA stood in terms of the UTCCRs. Did the FSA have any role to play? Did they when they took over control of matters previously addressed under the Banking Code, on the 1st of November 2009 and in advance of any Supreme Court ruling? Did they have a part to play after the OFT decided it had had enough? You will find the legal powers of the FSA here
Included within those legal powers, you will find this:
Unfair Terms in Consumer Contracts Regulations 1999
We may seek an injunction to prevent the use of a contract term drawn up for general use in a financial services contract that appears to us to be unfair as described in the regulations.
I know there are those following this blog who may, because of their deep knowledge of the subject, just at this point jump ahead and tell me that we have a Supreme Court decision on the application of the UTCCR. Don't, please, make that jump in conclusions, where you may assume we are heading may not prove to be where we are heading. Not least because I am not asking Lord Turner or the FSA about their powers or lack of powers under the UTCCRs. I am asking a much simpler question, just this, and no more:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
It is a very simple question.
Plain common sense dictates that until Lord Turner and the FSA answer that simple question, nothing else follows - no matter what legislation may or may not apply.
Plain common sense dictates also that we do not yet need to become bogged down or confused over territorial claims between the FSA and the OFT - we just need one very simple answer to one very simple question from Lord Turner and the FSA.
That has to be our starting point. Not least, because as I indicated above, Lord Turner has stated in evidence, that the FSA does have a role to play in this issue. He may not have been able to explain the precise nature of that role (more's the pity) but he clearly identified to the Treasury Select Committee that the FSA had their part to play, didn't he?
Enough pain for now, I think. Let's sum up this very simple point - both the OFT and the FSA had, and still retain powers under the UTCCR's.
In my next post I will examine which other powers they shared, and how these were addressed in the Concordats.
More importantly I will shortly look at which powers they did NOT share. The answer to that is what prompted my earlier question - Who was it that issued "the Waiver", which played such an important part in the proceedings over this issue. Was it the FSA or was it the OFT?
And as a supplementary to that question - if those of you reading this want to jump ahead slightly - ask yourself what item of legislation empowered the issue of that "Waiver"?
Was it a legal power that the FSA and the OFT shared? Was it for instance a power granted to the FSA under the UTCCRs? Or was it something entirely different - a power only the FSA had?
One that had nothing to do with UTCCRs, and therefore not in any way affected by the eventual Supreme Court decision - then - or as importantly now, today? It's an interesting question.
.
Thursday 21 October 2010
Wednesday 20 October 2010
Bank Charges - Test 3. Post 7.
continued ...
Those following this series of posts will be aware that I am entering into a considerable amount of detail, and perhaps wish I would just get to the point - the point being to prove that millions of consumers suffered serious financial detriment over the issue of the fairness or otherwise of Bank charges - and suffered that detriment due to significant regulatory failure.
I would not have started this series of posts unless I believed that point could be proven, but perhaps more importantly that by proving it, it would also establish that serious regulatory failings also led to significant consumer detriment in other areas, not just those of Bank charges. Before proceeding further let me use this one post to explain - as briefly as I can - why going into such detail is necessary.
We have witnessed the disintegration of major Banks, saved from total collapse due solely to a massive public bailout. Today we will begin to hear of the costs in terms of job losses and cut backs that the recent financial crisis, and the levels of Government indebtedness have inevitably brought in their wake.
Now ask yourself were the Banks not regulated? Ask yourself - was financial stability not under the control of regulators? Ask yourself - did the regulators, and our system of regulation succeed or fail? What does your own evidence, not mine, tell you?
Do we now accept - because the evidence surrounds us and is growing daily - that regulation as it was practised failed? It seems so, and that is why the current Coalition Government has proposed that it will radically alter our system of regulation. We learn, all too sadly, from our mistakes, and we pay the price, a very heavy price and one which, from all we are told from those at the top, is not just the cost for today, but the cost we will bear for many years into the future.
Governments, HM Treasury, MPs, the Governor of the Bank of England, economists, financial commentators, and yes, also Lord Turner from the FSA, all have their views, their reflections on what went wrong. All now offer their differing recipes of how to (perhaps) restructure financial regulation, and how (perhaps) to prevent the re-occurrence of events for which we all now bear the heaviest of prices - the price of failure.
But - what of those at the bottom, those paying the price for regulatory failures - for instance those for whom this series of posts has been established, those that were affected by this issue of Bank charges?
Do they have any part at all to play in forming an effective regulatory regime, one which protects their interests?
Do they have opinions to offer on whether for instance Banks should be broken up, or do those at the top alone make such decisions?
Do those at the bottom have questions to ask, questions which those at the top have still not answered, one (let me stress one of many) being this simple question about the fairness or not of Bank charges:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
Do you personally see that as a hard question to answer? One beyond the capacity of the FSA or the Chairman of the Financial Services Authority? Should that prove to be the case - may I suggest it has much to tell us.
Might it be the case that neither the FSA nor Lord Turner feel obliged to answer, or perhaps even consider such questions, despite their statutory obligations - including their duty to offer protection to consumers in financial matters?
If like me, you have visited the Financial Services Authoritity's web site and read the many speeches given by Lord Turner, you will find examples of some very big questions to which Lord Turner seeks to provide answers, so why should this simple question seemingly defy him?
Might it be that he may insist on evidence to establish that he and the FSA failed? Evidence that would allow him and the FSA to answer finally - what is a very a simple question. One which has affected, and to this day still affects millions of people?
Ask yourself - is not answering that simple question - perhaps the clearest evidence of all - of significant regulatory failure?
I will let you answer those questions for yourselves. But when I decided to start this blog, and starting with this first series of posts - on the question of Bank charges, I knew I needed evidence to justify my opinions. Evidence that would allow those who were affected by the issue to find their own answer, and evidence that Lord Turner, the FSA and those at the top could not refute.
My next post will continue with that evidence. I make no apology for the amount of detail it entails, it is necessary. Because it is the evidence that will demonstrate that significant consumer detriment was caused by serious regulatory failures - and let me stress, not just over this one issue of Bank charges.
.
Those following this series of posts will be aware that I am entering into a considerable amount of detail, and perhaps wish I would just get to the point - the point being to prove that millions of consumers suffered serious financial detriment over the issue of the fairness or otherwise of Bank charges - and suffered that detriment due to significant regulatory failure.
I would not have started this series of posts unless I believed that point could be proven, but perhaps more importantly that by proving it, it would also establish that serious regulatory failings also led to significant consumer detriment in other areas, not just those of Bank charges. Before proceeding further let me use this one post to explain - as briefly as I can - why going into such detail is necessary.
We have witnessed the disintegration of major Banks, saved from total collapse due solely to a massive public bailout. Today we will begin to hear of the costs in terms of job losses and cut backs that the recent financial crisis, and the levels of Government indebtedness have inevitably brought in their wake.
Now ask yourself were the Banks not regulated? Ask yourself - was financial stability not under the control of regulators? Ask yourself - did the regulators, and our system of regulation succeed or fail? What does your own evidence, not mine, tell you?
Do we now accept - because the evidence surrounds us and is growing daily - that regulation as it was practised failed? It seems so, and that is why the current Coalition Government has proposed that it will radically alter our system of regulation. We learn, all too sadly, from our mistakes, and we pay the price, a very heavy price and one which, from all we are told from those at the top, is not just the cost for today, but the cost we will bear for many years into the future.
Governments, HM Treasury, MPs, the Governor of the Bank of England, economists, financial commentators, and yes, also Lord Turner from the FSA, all have their views, their reflections on what went wrong. All now offer their differing recipes of how to (perhaps) restructure financial regulation, and how (perhaps) to prevent the re-occurrence of events for which we all now bear the heaviest of prices - the price of failure.
But - what of those at the bottom, those paying the price for regulatory failures - for instance those for whom this series of posts has been established, those that were affected by this issue of Bank charges?
Do they have any part at all to play in forming an effective regulatory regime, one which protects their interests?
Do they have opinions to offer on whether for instance Banks should be broken up, or do those at the top alone make such decisions?
Do those at the bottom have questions to ask, questions which those at the top have still not answered, one (let me stress one of many) being this simple question about the fairness or not of Bank charges:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
Do you personally see that as a hard question to answer? One beyond the capacity of the FSA or the Chairman of the Financial Services Authority? Should that prove to be the case - may I suggest it has much to tell us.
Might it be the case that neither the FSA nor Lord Turner feel obliged to answer, or perhaps even consider such questions, despite their statutory obligations - including their duty to offer protection to consumers in financial matters?
If like me, you have visited the Financial Services Authoritity's web site and read the many speeches given by Lord Turner, you will find examples of some very big questions to which Lord Turner seeks to provide answers, so why should this simple question seemingly defy him?
Might it be that he may insist on evidence to establish that he and the FSA failed? Evidence that would allow him and the FSA to answer finally - what is a very a simple question. One which has affected, and to this day still affects millions of people?
Ask yourself - is not answering that simple question - perhaps the clearest evidence of all - of significant regulatory failure?
I will let you answer those questions for yourselves. But when I decided to start this blog, and starting with this first series of posts - on the question of Bank charges, I knew I needed evidence to justify my opinions. Evidence that would allow those who were affected by the issue to find their own answer, and evidence that Lord Turner, the FSA and those at the top could not refute.
My next post will continue with that evidence. I make no apology for the amount of detail it entails, it is necessary. Because it is the evidence that will demonstrate that significant consumer detriment was caused by serious regulatory failures - and let me stress, not just over this one issue of Bank charges.
.
Monday 11 October 2010
Bank Charges - Test 3. Post 6.
... continued.
If this is your first visit to this blog - welcome! Be aware that each post in this blog is like a piece in a jigsaw, each post when added and fitted into its neighbour slowly forms the whole picture - one which will when finished give an answer to what should be a simple question - whether Bank charges were fair or unfair. An answer not yet provided by the OFT, the FSA or the Courts.
This post will examine, forensically, the Concordats established between the FSA and the OFT. What are they? (Health and Safety Warning - You need to read the earlier posts to find out in mind numbing detail - the relevant pieces are there for you, but you will find (perhaps in equally mind numbing detail) some being examined below.)
Earlier, I used the BBC TV series Silent Witness to establish the concept of forensic science playing a part in all of this. A better example, for my purposes in this Test, Test 3, is CSI, Crime Scene Investigation, because of the origin of that programme. Its creator, Anthony Zuiker, was looking for a new series for TV, and couldn't find one. As is often the case it was his wife who gave him the answer. His wife told him about a Discovery Channel show she liked about forensic detectives who used DNA and other evidence to solve cold cases.
That is highly relevant to this examination of the FSA/OFT Concordats. I will be looking for the DNA of the Concordats, what established them, what formed them. Then I need to go back to the "cold case", the "crime scene", which we will find in the agreement signed on the 27th July 2007, by the OFT, by six Banks and one Building Society, and the FSA. That is our "crime scene", and we need the evidence, the DNA from the Concordats to reveal both the "crime" and the perpetrators of the "crime".
In my last post, I said that I would need, and have to rely on your patience as I carry out the investigation. I repeat that request - if you have followed either of those TV series, or if you have watched reports on TV of real crimes being solved through the minute examination of trace evidence, then I hope you will realise that patience is required.
As I explained in my last post, I am using this Memorandum of Understanding signed by Hector Sants, for the FSA, and John Fingleton, for the OFT, for the examination. It contains 4 Concordats, each in turn signed by those acting for the FSA and the OFT.
I have already asked you to note the dates upon which the Concordats were operative and the importance that may have, so let's move on and take a closer look at each Concordat.
1: Co-operation on competition issues: A concordat between the Office of Fair Trading and the Financial Services Authority.
2: The Unfair Terms In Consumer Contracts Regulations 1999 and Enterprise Act 2002: A concordat between the Office of Fair Trading and the Financial Services Authority.
3: The Consumer Protection from Unfair Trading Regulations 2008 and Enterprise Act 2002: A concordat between the Office of Fair Trading and the Financial Services Authority.
4: Banking conduct regime: Consumer Credit Act 1974, Financial Services and Market Act 2000 and Payment Services Regulations 2009: A concordat between the Office of Fair Trading and the Financial Services Authority.
Let's just for a moment visit the "crime scene", and examine something which links those Concordats back to it, this:
A. The OFT has initiated an investigation under s.224 of the Enterprise Act 2002 (the Investigation) into the fairness or otherwise for the purposes of the Unfair Terms in Consumer Contracts Regulations 1999 (the 1999 Regulations) of certain terms contained in each Bank's personal current account arrangements providing for charges to be imposed on customers who seek to make payments for which they do not have available funds (the Relevant Terms and the Relevant Charges).
Now you might immediately see that both Concordats 2 and 3 mention the Enterprise Act 2002, that is a link one to the other. You might also see that Concordat 2 mentions The Unfair Terms In Consumer Contracts Regulations 1999 - another link.
In an earlier post, I spent time on a technique magicians use to perform their tricks - something called misdirection. They make you look in one direction, whilst they hide what they are doing elsewhere. Let me ask you this - what are you looking at right now - which Concordat - which piece of legislation - most importantly, perhaps crucially, which regulator?
Step back for a moment, and consider whether this is true or not. Have those who have been following this issue from the outset been looking at the OFT? Looking at the OFT when that first test case was announced. Looking at the OFT when they won that first case in Court. Looking at the OFT when the Banks decided to appeal, and the case moved up a notch to the Court of Appeal - where again the OFT won. Looking at the OFT when the Banks took the matter to the Supreme Court, and this time the OFT lost. Looking at the OFT again, when the Supreme Court said the OFT could pursue other avenues, and despaired of the OFT when they announced they were throwing in the towel.
Was it when the OFT threw in the towel, that everyone thought this issue had been decided, that it was dead? The Supreme Court, let me remind you, did NOT rule on whether Bank charges were fair or unfair. They did NOT say that the OFT could NOT keep going, that there were NOT other avenues to pursue.
BUT - Has anyone ever looked at what the FSA were doing all that time? Was everyone looking in entirely the wrong direction?
Has anyone ever asked this question:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
Maybe, just maybe, when all the pieces of this jigsaw are in place and others can make up their own minds on the evidence presented, I will not be the only one asking that question. Maybe, just maybe when the millions of people affected by this issue, also ask that question, Lord Turner and the FSA might just feel obliged to answer.
We have a way to go, and more evidence yet to examine. In my next post I will continue this forensic examination of the Concordats, I will also look at the powers vested in the FSA by law, and why - by avoiding misdirection - it leads to the answer.
.
If this is your first visit to this blog - welcome! Be aware that each post in this blog is like a piece in a jigsaw, each post when added and fitted into its neighbour slowly forms the whole picture - one which will when finished give an answer to what should be a simple question - whether Bank charges were fair or unfair. An answer not yet provided by the OFT, the FSA or the Courts.
This post will examine, forensically, the Concordats established between the FSA and the OFT. What are they? (Health and Safety Warning - You need to read the earlier posts to find out in mind numbing detail - the relevant pieces are there for you, but you will find (perhaps in equally mind numbing detail) some being examined below.)
Earlier, I used the BBC TV series Silent Witness to establish the concept of forensic science playing a part in all of this. A better example, for my purposes in this Test, Test 3, is CSI, Crime Scene Investigation, because of the origin of that programme. Its creator, Anthony Zuiker, was looking for a new series for TV, and couldn't find one. As is often the case it was his wife who gave him the answer. His wife told him about a Discovery Channel show she liked about forensic detectives who used DNA and other evidence to solve cold cases.
That is highly relevant to this examination of the FSA/OFT Concordats. I will be looking for the DNA of the Concordats, what established them, what formed them. Then I need to go back to the "cold case", the "crime scene", which we will find in the agreement signed on the 27th July 2007, by the OFT, by six Banks and one Building Society, and the FSA. That is our "crime scene", and we need the evidence, the DNA from the Concordats to reveal both the "crime" and the perpetrators of the "crime".
In my last post, I said that I would need, and have to rely on your patience as I carry out the investigation. I repeat that request - if you have followed either of those TV series, or if you have watched reports on TV of real crimes being solved through the minute examination of trace evidence, then I hope you will realise that patience is required.
As I explained in my last post, I am using this Memorandum of Understanding signed by Hector Sants, for the FSA, and John Fingleton, for the OFT, for the examination. It contains 4 Concordats, each in turn signed by those acting for the FSA and the OFT.
I have already asked you to note the dates upon which the Concordats were operative and the importance that may have, so let's move on and take a closer look at each Concordat.
1: Co-operation on competition issues: A concordat between the Office of Fair Trading and the Financial Services Authority.
2: The Unfair Terms In Consumer Contracts Regulations 1999 and Enterprise Act 2002: A concordat between the Office of Fair Trading and the Financial Services Authority.
3: The Consumer Protection from Unfair Trading Regulations 2008 and Enterprise Act 2002: A concordat between the Office of Fair Trading and the Financial Services Authority.
4: Banking conduct regime: Consumer Credit Act 1974, Financial Services and Market Act 2000 and Payment Services Regulations 2009: A concordat between the Office of Fair Trading and the Financial Services Authority.
Let's just for a moment visit the "crime scene", and examine something which links those Concordats back to it, this:
A. The OFT has initiated an investigation under s.224 of the Enterprise Act 2002 (the Investigation) into the fairness or otherwise for the purposes of the Unfair Terms in Consumer Contracts Regulations 1999 (the 1999 Regulations) of certain terms contained in each Bank's personal current account arrangements providing for charges to be imposed on customers who seek to make payments for which they do not have available funds (the Relevant Terms and the Relevant Charges).
Now you might immediately see that both Concordats 2 and 3 mention the Enterprise Act 2002, that is a link one to the other. You might also see that Concordat 2 mentions The Unfair Terms In Consumer Contracts Regulations 1999 - another link.
In an earlier post, I spent time on a technique magicians use to perform their tricks - something called misdirection. They make you look in one direction, whilst they hide what they are doing elsewhere. Let me ask you this - what are you looking at right now - which Concordat - which piece of legislation - most importantly, perhaps crucially, which regulator?
Step back for a moment, and consider whether this is true or not. Have those who have been following this issue from the outset been looking at the OFT? Looking at the OFT when that first test case was announced. Looking at the OFT when they won that first case in Court. Looking at the OFT when the Banks decided to appeal, and the case moved up a notch to the Court of Appeal - where again the OFT won. Looking at the OFT when the Banks took the matter to the Supreme Court, and this time the OFT lost. Looking at the OFT again, when the Supreme Court said the OFT could pursue other avenues, and despaired of the OFT when they announced they were throwing in the towel.
Was it when the OFT threw in the towel, that everyone thought this issue had been decided, that it was dead? The Supreme Court, let me remind you, did NOT rule on whether Bank charges were fair or unfair. They did NOT say that the OFT could NOT keep going, that there were NOT other avenues to pursue.
BUT - Has anyone ever looked at what the FSA were doing all that time? Was everyone looking in entirely the wrong direction?
Has anyone ever asked this question:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
Maybe, just maybe, when all the pieces of this jigsaw are in place and others can make up their own minds on the evidence presented, I will not be the only one asking that question. Maybe, just maybe when the millions of people affected by this issue, also ask that question, Lord Turner and the FSA might just feel obliged to answer.
We have a way to go, and more evidence yet to examine. In my next post I will continue this forensic examination of the Concordats, I will also look at the powers vested in the FSA by law, and why - by avoiding misdirection - it leads to the answer.
.
Sunday 10 October 2010
Bank Charges - Test 3. Post 5.
... continued.
A quick reminder of where we are: Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
However, I also want to give you a quick (but perhaps vital) reminder of something I mentioned in an earlier post. This is an extract from Test 1: Evidence that the Financial Services Authority regard "Treating Customers Fairly" as fundamental.
"The BCSB website has now been closed. On 1st November responsibility for the regulation of deposit and payment products transferred to the Financial Services Authority."
The 1st of November referred to on that closed site was the 1st of November 2009. That date could prove important.
- Just keep in mind - for now - when the Supreme Court decision was announced. You don’t remember? It was the 25th of November 2009. The FSA took up the reins of responsibility from the BCSB in advance of that decision, and without any knowledge of what that decision was eventually to be. That gap of 20 or so days has an importance I will explain later."
The explanation as to why that may prove important will still follow later, but for now I just want you to remember (in what is a long series of posts and evidence) that the FSA took on the primary regulatory responsibility for Banks and Banking on that date, and in advance of anyone knowing what the Supreme Court ruling would prove to be - a ruling which did NOT determine whether Bank charges were fair or unfair, but solely that the OFT did not have the legal basis for deciding on that question - leaving open a question which to this date still remains unanswered.
In my last post, I treated you to a selection of links (not by any means all that you could have enjoyed) related to the Concordats that are the basis for Test 3. I also made these comments ... "For me, and just perhaps now for you as well, it's not just a question of asking the FSA and the OFT - "Who on earth do you think you are?" - but "What on earth do you think you are doing?" and "How on earth is anyone meant to understand?"
Can I provide you with evidence that it was fair to ask such questions?
The Financial Services and Markets Act gave birth to the FSA, and also the Financial Services - Consumer Panel - described by themselves on that link as "an independent voice for consumers of financial services".
I may later return to the Financial Services Consumer Panel to see what they had to say on this subject of fairness over Bank charges, not least because of who serves on the panel, which includes Mike Dailly from the Govan Law Centre, someone who you can see from that link has spent much time and effort involved in this issue of Bank charges.
But for now, for Test 3, to offer the evidence I mentioned above, I want to use an extract from a speech, given by Adam Phillips, the Chair of the Consumer Panel. It was given on the 13th of October 2009, which is one of the reasons I asked you to remember the dates I mentioned above. There is a second reason which I will come to just shortly, but first some extracts from the speech:
" ... The complex regulatory environment builds in inefficiency for firms and it results in confusion and inconsistent treatment for customers ..."
" ... The respective roles of the FSA and OFT need to be clarified. Both organisations are trying to work together to provide a joined up consumer experience, and much alignment can be achieved by rule making under FSMA, but the underlying legislation does not make this easy... "
I have limited myself to only two extracts, so may I make this recommendation - please read the whole speech, but for now, all I ask is that you see the Chair of the Consumer Panel make comments which for me sit along side my own and justify my earlier remarks.
The second reason I mentioned the date is that from of all the links I gave in my last post, I want to choose just one "Concordat" to examine in the forensic manner I believe it deserves - if Test 3 is to succesfully demonstrate that all such Concordats did not reduce consumer detriment, but caused it. Can my opinion that it is so, be proven? More specifically can it be proven against this issue of fairness over Bank charges?
I have chosen this document for that purpose. It was a Memorandum of Understanding between the FSA and OFT, signed by Hector Sants for the FSA and by John Fingleton for the OFT, and is dated December 2009.
Why choose that one item from the blizzard of previous documents? It is the closest to the dates which I believe may be important, reflects (or should) the new responsibilities taken on by the FSA in the area of Banking, and can be read as incorporating (or not) the views expressed by Adam Phillips.
Sadly, as you will see it has not stopped snowing paper - there are no less than 4 Concordats appearing in just that one document. It doesn't make it that much less confusing, does it? Does it also demonstrate the issues of confusion and the inconsistent treatment of consumers that Adam Phillips mentions? So let's take just one simple point to look at, and tie it down. Once again, it has to do with dates.
Perhaps, like me, you might just take a few minutes to check out some dates on each of those 4 Concordats. Not the date of the document itself, nor the dates on which each of the Concordats may have been signed, but look for the dates upon which they became operative.
All bar one are operative from the 1st of November 2009 - again a date which precedes the ruling from the Supreme Court. Dates, like those, may indeed prove important, as I suggested quite a bit earlier.
That is where we are, the scene is set, the item to be examined is there for you to read. It, and its predecessors, and how each affected the outcome over Bank charges, how they fostered confusion and the inconsistent treatment of consumers, are central to Test 3, and why whether Bank charges are fair or unfair remains an unanswered question.
In my next post I will carry out the examination that I believe is needed, and subject to your patience as I do so, I will then say why in my opinion, it and all such "Concordats" led inexorably to real consumer detriment, serious regulatory failings - and nowhere more so than on this subject of Bank charges.
PS: I should perhaps mention that the FSA, the OFT, the Treasury Select Committee, the Financial Services - Consumer Panel have all been made aware of the existence of this blog, and the nature of the subject it addresses.
PPS: My question?
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?.
No, I still haven't heard. I don't suspect you have either.
.
A quick reminder of where we are: Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
However, I also want to give you a quick (but perhaps vital) reminder of something I mentioned in an earlier post. This is an extract from Test 1: Evidence that the Financial Services Authority regard "Treating Customers Fairly" as fundamental.
"The BCSB website has now been closed. On 1st November responsibility for the regulation of deposit and payment products transferred to the Financial Services Authority."
The 1st of November referred to on that closed site was the 1st of November 2009. That date could prove important.
- Just keep in mind - for now - when the Supreme Court decision was announced. You don’t remember? It was the 25th of November 2009. The FSA took up the reins of responsibility from the BCSB in advance of that decision, and without any knowledge of what that decision was eventually to be. That gap of 20 or so days has an importance I will explain later."
The explanation as to why that may prove important will still follow later, but for now I just want you to remember (in what is a long series of posts and evidence) that the FSA took on the primary regulatory responsibility for Banks and Banking on that date, and in advance of anyone knowing what the Supreme Court ruling would prove to be - a ruling which did NOT determine whether Bank charges were fair or unfair, but solely that the OFT did not have the legal basis for deciding on that question - leaving open a question which to this date still remains unanswered.
In my last post, I treated you to a selection of links (not by any means all that you could have enjoyed) related to the Concordats that are the basis for Test 3. I also made these comments ... "For me, and just perhaps now for you as well, it's not just a question of asking the FSA and the OFT - "Who on earth do you think you are?" - but "What on earth do you think you are doing?" and "How on earth is anyone meant to understand?"
Can I provide you with evidence that it was fair to ask such questions?
The Financial Services and Markets Act gave birth to the FSA, and also the Financial Services - Consumer Panel - described by themselves on that link as "an independent voice for consumers of financial services".
I may later return to the Financial Services Consumer Panel to see what they had to say on this subject of fairness over Bank charges, not least because of who serves on the panel, which includes Mike Dailly from the Govan Law Centre, someone who you can see from that link has spent much time and effort involved in this issue of Bank charges.
But for now, for Test 3, to offer the evidence I mentioned above, I want to use an extract from a speech, given by Adam Phillips, the Chair of the Consumer Panel. It was given on the 13th of October 2009, which is one of the reasons I asked you to remember the dates I mentioned above. There is a second reason which I will come to just shortly, but first some extracts from the speech:
" ... The complex regulatory environment builds in inefficiency for firms and it results in confusion and inconsistent treatment for customers ..."
" ... The respective roles of the FSA and OFT need to be clarified. Both organisations are trying to work together to provide a joined up consumer experience, and much alignment can be achieved by rule making under FSMA, but the underlying legislation does not make this easy... "
I have limited myself to only two extracts, so may I make this recommendation - please read the whole speech, but for now, all I ask is that you see the Chair of the Consumer Panel make comments which for me sit along side my own and justify my earlier remarks.
The second reason I mentioned the date is that from of all the links I gave in my last post, I want to choose just one "Concordat" to examine in the forensic manner I believe it deserves - if Test 3 is to succesfully demonstrate that all such Concordats did not reduce consumer detriment, but caused it. Can my opinion that it is so, be proven? More specifically can it be proven against this issue of fairness over Bank charges?
I have chosen this document for that purpose. It was a Memorandum of Understanding between the FSA and OFT, signed by Hector Sants for the FSA and by John Fingleton for the OFT, and is dated December 2009.
Why choose that one item from the blizzard of previous documents? It is the closest to the dates which I believe may be important, reflects (or should) the new responsibilities taken on by the FSA in the area of Banking, and can be read as incorporating (or not) the views expressed by Adam Phillips.
Sadly, as you will see it has not stopped snowing paper - there are no less than 4 Concordats appearing in just that one document. It doesn't make it that much less confusing, does it? Does it also demonstrate the issues of confusion and the inconsistent treatment of consumers that Adam Phillips mentions? So let's take just one simple point to look at, and tie it down. Once again, it has to do with dates.
Perhaps, like me, you might just take a few minutes to check out some dates on each of those 4 Concordats. Not the date of the document itself, nor the dates on which each of the Concordats may have been signed, but look for the dates upon which they became operative.
All bar one are operative from the 1st of November 2009 - again a date which precedes the ruling from the Supreme Court. Dates, like those, may indeed prove important, as I suggested quite a bit earlier.
That is where we are, the scene is set, the item to be examined is there for you to read. It, and its predecessors, and how each affected the outcome over Bank charges, how they fostered confusion and the inconsistent treatment of consumers, are central to Test 3, and why whether Bank charges are fair or unfair remains an unanswered question.
In my next post I will carry out the examination that I believe is needed, and subject to your patience as I do so, I will then say why in my opinion, it and all such "Concordats" led inexorably to real consumer detriment, serious regulatory failings - and nowhere more so than on this subject of Bank charges.
PS: I should perhaps mention that the FSA, the OFT, the Treasury Select Committee, the Financial Services - Consumer Panel have all been made aware of the existence of this blog, and the nature of the subject it addresses.
PPS: My question?
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?.
No, I still haven't heard. I don't suspect you have either.
.
Thursday 7 October 2010
Bank Charges - Test 3. Part 4
... continued.
Referring to both the OFT and the FSA, and in particular to the waiver issued by the FSA, I ended my last post with this question:
What is it in the nature of their relationship, that allows them:
- complete control over the rights to justice of ordinary people,
- and the power to halt Courts of Justice stone dead in their tracks! Something not even Governments find easy to do.
Let me remind you this is Test 3 out of 4. Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
I mentioned earlier that I would attempt to offer any evidence in respect of this test in easily digestible portions - attempt is the operative word. I am about to fail - big time! Sorry!
There is not one Concordat, there are several, nor do they remain static in their content or application.
Anyone familiar with Genesis 5: will be aware of the word "begat". I intend to adopt that format to illustrate just how complex this world of Concordats is - and it may help you understand just how easy it would be to have a theory which is fine, but does not work out in practice - which I hope will explain why I spent time on that phrase in an earlier post.
Upfront let me tell you that I do not intend to get my "begats" in any totally time specific order - this is not the OFT/FSA version of "Who do you think you are?" , where as that BBC programme ends you are shown a set of perfectly straight lines, in a perfect series of connections, which establish a clear genealogical lineage.
However, let me see if you form the same opinion as I have? Does what you are about to see beg the question of both the FSA and the OFT - "Who on earth do you think you are? "
What I am about to do is offer you a series of links, we will start with one link, then pick up the links which appear on that first link, then follow each of those links, and then pick up each of the links in every one of those subsequent links, and so on. (Health and safety message - Don't worry after a while, even though I could continue for far longer - I will stop.)
But if you want to know what the Concordats between the OFT and FSA are - this is what you have to do - and yes do feel free to read, absorb, and understand each and every item as you go - why should I be the only one to suffer ;-))?
We start on the 31st of July 2006, and immediately see that ... nope - sorry, that is a revised Concordat, and we really need to go back to 2001.
Nah, let's just start there anyway, and just wander all over a field, no, more like a universe of Concordats and related items.
This Concordat begat ... maybe, this which,.. maybe begat this ... which maybe begat this (yes, well spotted there is the mention of a Concordat related to UTCCR - see how many more you can spot as we go on) ... which maybe begat this ... or maybe it was this to do with Banking Conduct ... or this ... or howsabout this - (It's a memoranda of understanding - and maybe that is what we all need right now - some understanding on all this) ... but how about this (all about better regulations - just what the doctor ordered, perhaps - but hang on, looks like there is a special offer of some kind - three better regulations for the price of one) look here and also here ... ooops, sorry I just missed another one about better regulations here.
In need of some light relief, anyone? Well, just for a laugh go here ... then keep going to here - Yay, we did it, if like me you have read every single one of those items, and googled all the others that exist, you may - at long last - have found this on that last page:
"Bank charges
Banks currently raise a significant proportion of their revenue from charges on unauthorised overdrafts which are not visible to and controllable by consumers and therefore not subject to effective competition.
We are undertaking an investigation of fairness under the Unfair Terms in Consumer Contracts Regulations 1999 with a view to bringing enforcement action. Alongside this we are seeking to agree changes to charges with banks and exploring alternative ways to address our concerns."
But then, do you notice you are invited to use another link for further information about Bank charges, and off we go again to even more links - sorry, off you go again, if you are brave enough, I've already been there, round and round in circles.
Now, c'mon, be honest ... it was easy wasn't it? It clarified the whole issue of the relationship between the FSA and the OFT didn't it. There isn't and can never be any confusion about who does what, and when and why, can there?
No, it isn't easy, and yes, its totally confusing. Genesis 5; leads on to Genesis 11: - which is where you will find the Tower of Babel - where nobody understood a word anyone else was saying, languages became wholly unitelligible, and in their own way the OFT and the FSA have over the years created their very own Tower of Babel.
I am not sure, given the number of Concordats, plans and other links, they even understand what they are doing. - are you?
For me, and just perhaps now for you as well, it's not just a question of asking the FSA and the OFT - "Who on earth do you think you are?" - but "What on earth do you think you are doing?" and "How on earth is anyone meant to understand?"
And it is fair, yes that word - fair, it is fair to ask those questions, because one of the prime reasons for the very existence of the FSA and the OFT recognises something called the asymmetries of knowledge, power and influence between say the Banks or Insurance Companies and the ordinary individual. Perhaps like me, you may now be persuaded that the FSA and the OFT in being given the legal powers to address such problems have not solved them, but have just massively added to them.
Remember, all I am (perhaps by now I can say - we are) trying to discover is a simple answer to a simple question:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
I can find this answer : " ... The banks have exploited their position of power to impose unfair charges...."
But it doesn't come from Lord Turner or the FSA.
I can also find this answer: " ... stronger consumer protections, including measures to end unfair bank and financial transaction charges ..."
Links to those quotations, and the many others which describe bank charges as "unfair" in unequivocal terms will follow in a later post.
But of this you have my assurance - they don't come from Lord Turner or the FSA.
I know my answer, I suspect you do as well, but are you beginning to wonder if Lord Turner or the FSA do in fact have an answer?
Surely, somewhere in that blizzard of documentation (and trust me, that was just a glimpse), in all of those carefully constructed plans, that myriad of Concordats, there lies an answer?
I wonder if Lord Turner or the FSA could spare just a few minutes to point out where?
Or, maybe, just maybe, you are beginning to wonder if Lord Turner or the FSA even care. Do they care about the millions of ordinary people who have been affected by this issue? Was it showing they cared, when they issued their waiver, which "switched off" the FOS, and closed the Courts?
Maybe, you are beginning to wonder if Lord Turner and the FSA just wish people with questions would go away and leave them alone. Maybe they just want to "switch off", not get involved. It has happened before, remember?
.
Referring to both the OFT and the FSA, and in particular to the waiver issued by the FSA, I ended my last post with this question:
What is it in the nature of their relationship, that allows them:
- complete control over the rights to justice of ordinary people,
- and the power to halt Courts of Justice stone dead in their tracks! Something not even Governments find easy to do.
Let me remind you this is Test 3 out of 4. Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
I mentioned earlier that I would attempt to offer any evidence in respect of this test in easily digestible portions - attempt is the operative word. I am about to fail - big time! Sorry!
There is not one Concordat, there are several, nor do they remain static in their content or application.
Anyone familiar with Genesis 5: will be aware of the word "begat". I intend to adopt that format to illustrate just how complex this world of Concordats is - and it may help you understand just how easy it would be to have a theory which is fine, but does not work out in practice - which I hope will explain why I spent time on that phrase in an earlier post.
Upfront let me tell you that I do not intend to get my "begats" in any totally time specific order - this is not the OFT/FSA version of "Who do you think you are?" , where as that BBC programme ends you are shown a set of perfectly straight lines, in a perfect series of connections, which establish a clear genealogical lineage.
However, let me see if you form the same opinion as I have? Does what you are about to see beg the question of both the FSA and the OFT - "Who on earth do you think you are? "
What I am about to do is offer you a series of links, we will start with one link, then pick up the links which appear on that first link, then follow each of those links, and then pick up each of the links in every one of those subsequent links, and so on. (Health and safety message - Don't worry after a while, even though I could continue for far longer - I will stop.)
But if you want to know what the Concordats between the OFT and FSA are - this is what you have to do - and yes do feel free to read, absorb, and understand each and every item as you go - why should I be the only one to suffer ;-))?
We start on the 31st of July 2006, and immediately see that ... nope - sorry, that is a revised Concordat, and we really need to go back to 2001.
Nah, let's just start there anyway, and just wander all over a field, no, more like a universe of Concordats and related items.
This Concordat begat ... maybe, this which,.. maybe begat this ... which maybe begat this (yes, well spotted there is the mention of a Concordat related to UTCCR - see how many more you can spot as we go on) ... which maybe begat this ... or maybe it was this to do with Banking Conduct ... or this ... or howsabout this - (It's a memoranda of understanding - and maybe that is what we all need right now - some understanding on all this) ... but how about this (all about better regulations - just what the doctor ordered, perhaps - but hang on, looks like there is a special offer of some kind - three better regulations for the price of one) look here and also here ... ooops, sorry I just missed another one about better regulations here.
In need of some light relief, anyone? Well, just for a laugh go here ... then keep going to here - Yay, we did it, if like me you have read every single one of those items, and googled all the others that exist, you may - at long last - have found this on that last page:
"Bank charges
Banks currently raise a significant proportion of their revenue from charges on unauthorised overdrafts which are not visible to and controllable by consumers and therefore not subject to effective competition.
We are undertaking an investigation of fairness under the Unfair Terms in Consumer Contracts Regulations 1999 with a view to bringing enforcement action. Alongside this we are seeking to agree changes to charges with banks and exploring alternative ways to address our concerns."
But then, do you notice you are invited to use another link for further information about Bank charges, and off we go again to even more links - sorry, off you go again, if you are brave enough, I've already been there, round and round in circles.
Now, c'mon, be honest ... it was easy wasn't it? It clarified the whole issue of the relationship between the FSA and the OFT didn't it. There isn't and can never be any confusion about who does what, and when and why, can there?
No, it isn't easy, and yes, its totally confusing. Genesis 5; leads on to Genesis 11: - which is where you will find the Tower of Babel - where nobody understood a word anyone else was saying, languages became wholly unitelligible, and in their own way the OFT and the FSA have over the years created their very own Tower of Babel.
I am not sure, given the number of Concordats, plans and other links, they even understand what they are doing. - are you?
For me, and just perhaps now for you as well, it's not just a question of asking the FSA and the OFT - "Who on earth do you think you are?" - but "What on earth do you think you are doing?" and "How on earth is anyone meant to understand?"
And it is fair, yes that word - fair, it is fair to ask those questions, because one of the prime reasons for the very existence of the FSA and the OFT recognises something called the asymmetries of knowledge, power and influence between say the Banks or Insurance Companies and the ordinary individual. Perhaps like me, you may now be persuaded that the FSA and the OFT in being given the legal powers to address such problems have not solved them, but have just massively added to them.
Remember, all I am (perhaps by now I can say - we are) trying to discover is a simple answer to a simple question:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
I can find this answer : " ... The banks have exploited their position of power to impose unfair charges...."
But it doesn't come from Lord Turner or the FSA.
I can also find this answer: " ... stronger consumer protections, including measures to end unfair bank and financial transaction charges ..."
Links to those quotations, and the many others which describe bank charges as "unfair" in unequivocal terms will follow in a later post.
But of this you have my assurance - they don't come from Lord Turner or the FSA.
I know my answer, I suspect you do as well, but are you beginning to wonder if Lord Turner or the FSA do in fact have an answer?
Surely, somewhere in that blizzard of documentation (and trust me, that was just a glimpse), in all of those carefully constructed plans, that myriad of Concordats, there lies an answer?
I wonder if Lord Turner or the FSA could spare just a few minutes to point out where?
Or, maybe, just maybe, you are beginning to wonder if Lord Turner or the FSA even care. Do they care about the millions of ordinary people who have been affected by this issue? Was it showing they cared, when they issued their waiver, which "switched off" the FOS, and closed the Courts?
Maybe, you are beginning to wonder if Lord Turner and the FSA just wish people with questions would go away and leave them alone. Maybe they just want to "switch off", not get involved. It has happened before, remember?
.
Wednesday 6 October 2010
Bank Charges - Test 3. Part 3
... continued.
I ended my last post with this question, " Can you trace anywhere a comment from Lord Turner or the FSA which tells you, tells anyone, what their view or opinion is over whether Bank charges are fair or unfair?"
I also showed in my last post that the FSA were one of the named parties in the test case that the OFT brought, but for whatever reason the FSA chose not to play an active part in the court proceedings from the outset.
Are those two items connected? That is what I am looking at in Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
Consider this - before the test case was instigated, and before - in tandem - the FSA introduced their "Waiver" (something I will deal with in very great detail in a later post), those who felt that their individual Bank charges were unfair were asking for their money back, and many were receiving it back, usually stated by the Banks as a "goodwill gesture". And yes, some did not succeed in getting any money back.
I can find no wholly reliable statistics on the amounts involved, but before the start of the test case, I think it is reasonable to suggest that Banks had already refunded around £500 million in charges to more than 350,000 customers.
Again it is an estimate, and may not be reliable, but again I think it can be reasonably stated that overall the Banks were facing the possibility that they may have been liable to refund up to £1 billion in charges.
Let's say that £1 billion is at the top end of a scale, and again some individuals would have gained some money back, even if described as a "goodwill gesture", and others would not. Given the situation now, is it possible to suggest that it may have proved better for the OFT never to have taken the matter to the Courts?
Especially so, when all the individuals affected had an alternative route available through the Financial Ombudsman Service (FOS) whose regime is to seek the resolution of a dispute or complaint, avoiding entirely the need for taking the matter to Court.
You may claim that I make that comment with the benefit of hindsight, and yes, that is true, but remember what I am testing (as above), and let me ask you what were amongst the reasons given by the OFT in bringing the test case.
This was the document. involved. This is an extract from that document:
"C. ... The scale of the customer litigation causes increased expense for all litigants as well as the Courts and presents significant administrative problems for the Courts in handling such cases ..."
I leave this to you to assess for yourself, but if I suggested, for me - (and take into account my earlier reference to the FOS and that it is a free service):
- there seems to be an emphasis on administration rather than on whether millions of ordinary people should be allowed to pursue justice for themselves
- yes, if each individual pursued their claim through the Courts, rather than the FOS, there were indeed costs. Those costs were at an individual level for the ordinary person, but they were at an aggregate level for the Banks.
Ask yourself - should there be a wholly unlected authority who can deprive any individual of their legal rights?
Ask yourself - on the question of eventual costs - who stood to lose most?
Ask yourself - at that point in time, whose interests do you believe might have been best served by the OFT decision, particularly when backed up and strengthened by the FSA decision to issue their "Waiver"? (I repeat much more on that later).
- The Courts had their administrative burdens relieved.
- The Banks had any cases through the FOS frozen, and any actions through the Courts stayed.
- The FSA, apart from the waiver, were nowhere to be seen.
- Each and every ordinary person claiming unfairness over the Bank charges they had paid were, in an instant, deprived of their rights to pursue their claims by whatever means they chose.
Who gained, who lost, as a result of that OFT decision?
But was it solely an OFT decision? The FSA played one very significant part in those events, the issue of the Waiver. Two regulatory bodies acting in diverse ways, but in concert one with the other, to produce the situation I have just outlined.
What is it in the nature of their relationship, that allows them:
- complete control over the rights to justice of ordinary people,
- and the power to halt Courts of Justice stone dead in their tracks! Something not even Governments find easy to do.
Powers that can achieve those forms of results, powers of that magnitude, which control and dictate the rights of individuals, and can summarily prevent access to Courts in the pursuit of justice - are they not normally reserved to dictatorships?
I will look at that Concordat again in my next post - I hope by now you may realise it plays a very significant role in this whole matter. It may indeed have been the single most important factor in causing real consumer detriment. Test 3 may reveal that - the evidence follows.
PS: Anyone heard an answer yet?
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
Nope, didn't think so!
I ended my last post with this question, " Can you trace anywhere a comment from Lord Turner or the FSA which tells you, tells anyone, what their view or opinion is over whether Bank charges are fair or unfair?"
I also showed in my last post that the FSA were one of the named parties in the test case that the OFT brought, but for whatever reason the FSA chose not to play an active part in the court proceedings from the outset.
Are those two items connected? That is what I am looking at in Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
Consider this - before the test case was instigated, and before - in tandem - the FSA introduced their "Waiver" (something I will deal with in very great detail in a later post), those who felt that their individual Bank charges were unfair were asking for their money back, and many were receiving it back, usually stated by the Banks as a "goodwill gesture". And yes, some did not succeed in getting any money back.
I can find no wholly reliable statistics on the amounts involved, but before the start of the test case, I think it is reasonable to suggest that Banks had already refunded around £500 million in charges to more than 350,000 customers.
Again it is an estimate, and may not be reliable, but again I think it can be reasonably stated that overall the Banks were facing the possibility that they may have been liable to refund up to £1 billion in charges.
Let's say that £1 billion is at the top end of a scale, and again some individuals would have gained some money back, even if described as a "goodwill gesture", and others would not. Given the situation now, is it possible to suggest that it may have proved better for the OFT never to have taken the matter to the Courts?
Especially so, when all the individuals affected had an alternative route available through the Financial Ombudsman Service (FOS) whose regime is to seek the resolution of a dispute or complaint, avoiding entirely the need for taking the matter to Court.
You may claim that I make that comment with the benefit of hindsight, and yes, that is true, but remember what I am testing (as above), and let me ask you what were amongst the reasons given by the OFT in bringing the test case.
This was the document. involved. This is an extract from that document:
"C. ... The scale of the customer litigation causes increased expense for all litigants as well as the Courts and presents significant administrative problems for the Courts in handling such cases ..."
I leave this to you to assess for yourself, but if I suggested, for me - (and take into account my earlier reference to the FOS and that it is a free service):
- there seems to be an emphasis on administration rather than on whether millions of ordinary people should be allowed to pursue justice for themselves
- yes, if each individual pursued their claim through the Courts, rather than the FOS, there were indeed costs. Those costs were at an individual level for the ordinary person, but they were at an aggregate level for the Banks.
Ask yourself - should there be a wholly unlected authority who can deprive any individual of their legal rights?
Ask yourself - on the question of eventual costs - who stood to lose most?
Ask yourself - at that point in time, whose interests do you believe might have been best served by the OFT decision, particularly when backed up and strengthened by the FSA decision to issue their "Waiver"? (I repeat much more on that later).
- The Courts had their administrative burdens relieved.
- The Banks had any cases through the FOS frozen, and any actions through the Courts stayed.
- The FSA, apart from the waiver, were nowhere to be seen.
- Each and every ordinary person claiming unfairness over the Bank charges they had paid were, in an instant, deprived of their rights to pursue their claims by whatever means they chose.
Who gained, who lost, as a result of that OFT decision?
But was it solely an OFT decision? The FSA played one very significant part in those events, the issue of the Waiver. Two regulatory bodies acting in diverse ways, but in concert one with the other, to produce the situation I have just outlined.
What is it in the nature of their relationship, that allows them:
- complete control over the rights to justice of ordinary people,
- and the power to halt Courts of Justice stone dead in their tracks! Something not even Governments find easy to do.
Powers that can achieve those forms of results, powers of that magnitude, which control and dictate the rights of individuals, and can summarily prevent access to Courts in the pursuit of justice - are they not normally reserved to dictatorships?
I will look at that Concordat again in my next post - I hope by now you may realise it plays a very significant role in this whole matter. It may indeed have been the single most important factor in causing real consumer detriment. Test 3 may reveal that - the evidence follows.
PS: Anyone heard an answer yet?
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
Nope, didn't think so!
Tuesday 5 October 2010
Bank Charges - Test 3. Part 2.
Previously on "Trial and Error" ...
If this is the first time you have arrived at this blog, do please be aware that this blog is like a jigsaw puzzle. Each post is a piece in the jigsaw, and if you start here, without also reading earlier posts, by the time we get to the end of the jigsaw, you will say "But, there are pieces missing!"
Perhaps a brief recap may not go amiss. You have found yourself in a series of posts addressing the subject of bank charges - and whether they are fair or unfair.
I have my own opinions, and am presenting evidence in support of these opinions. One of which is that the questions that arose over the fairness of Bank charges, questions that still to this day remain, fell, and do still fall, to Lord Turner and the FSA to answer.
I used the jigsaw analogy above deliberately. I do not think I am alone in starting a jigsaw by looking for the 4 corner pieces, and all those that have a straight edge. Finding those pieces helps me construct an outline, a framework for solving a jigsaw puzzle.
That is in part what I am doing with the 4 Tests in this series of posts, I am building an outline, a framework for solving a puzzle - the puzzle over whether bank charges are fair or not. In doing so, I am hoping that others who are also trying to solve the puzzle will see pieces they have not looked at in any detail before - but we need the framework first.
So far, I have looked at Test 1 - Evidence that the Financial Services Authority regard "Treating Customers Fairly" as fundamental, - and - Test 2 - Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament - they form part of the puzzle.
At this juncture they are as complete as I wish them to be, but there are more pieces to this puzzle than just the 4 corner pieces.
Let's look at another part of the jigsaw puzzle and see if we can find its place in the bigger picture.
Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
Do you ever watch the BBC series Silent Witness? It is about forensic science, the characters use their abilities in a series of examinations, in as much minute detail as is required, to establish what happened and why. The next two Tests require that level of forensic examination, and to allow you to follow each examination, I have intentionally broken them down into what I hope will be easily followed parts, rather than over-lengthy posts.
Ever heard the phrase "It's fine in theory, but it won't work in practice"? That phrase has always puzzled me. If it is indeed fine in theory, surely then it should work in practice? And if it doesn't work in practice, surely then that shows the theory was anything but fine?
So which is it, over this issue of Bank charges? At different times and in different ways it involved both the OFT and the FSA - but neither found an answer to the puzzle?
Was it perhaps the theories of the OFT or the theories of the FSA , that, Court case after Court case eventually led to a result with no answer to the essential question - are Bank charges fair or not?.
Or was it perhaps how they put their respective theories into practice?
Even more worryingly, perhaps, could it in fact be both, both theory and practice - neither working as they should?
What could lie behind all the effort involved, the costs involved, the time involved, that could lead eventually to a relatively simple question about fairness never finding an answer? Looking at both the theory and the practice of the Concordat between the FSA and the OFT may begin to help us understand.
Let me start this series of forensic examinations with this example. It is the basis of the test case, the agreement that was signed by the OFT and the Banks involved in the Court cases that followed.
I can use many parts of that agreement for comment, but what, at this juncture, as one small but very important part of this puzzle, I would ask you to note first is that there are 9 parties to the agreement over this test case, the OFT, the Banks concerned - AND the FSA.
But then note this extract:
" 6. FSA
6.1 If, at any time after the completion of the trial at first instance of the Preliminary Issues, the FSA wishes to join in the proceedings, then .... "
Why might it be that the FSA, perhaps our prime regulator in the area of financial services, having been listed as one of the parties in the test case, then do not join in the proceedings themselves from the outset? The answer to that lies in the Concordat. So too do the implications.
If you have been reading since the outset of these posts, you might be asking yourself, if the FSA "switched off" from involvement in the test case in the Courts from the outset, does that piece fit at all with another piece in the puzzle that I mentioned earlier, when Dr Heurtas told us " ...Technically, the FSA has switched off Principle 6 ("Treating Customers Fairly") ..."
However, let me leave you with this far simpler question to consider:
Can you trace anywhere a comment from Lord Turner or the FSA which tells you, tells anyone, what their view or opinion is over whether Bank charges are fair or unfair?
That is why I repeat again, and will continue to do so:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
I will examine another small part related to the Concordat in my next post.
If this is the first time you have arrived at this blog, do please be aware that this blog is like a jigsaw puzzle. Each post is a piece in the jigsaw, and if you start here, without also reading earlier posts, by the time we get to the end of the jigsaw, you will say "But, there are pieces missing!"
Perhaps a brief recap may not go amiss. You have found yourself in a series of posts addressing the subject of bank charges - and whether they are fair or unfair.
I have my own opinions, and am presenting evidence in support of these opinions. One of which is that the questions that arose over the fairness of Bank charges, questions that still to this day remain, fell, and do still fall, to Lord Turner and the FSA to answer.
I used the jigsaw analogy above deliberately. I do not think I am alone in starting a jigsaw by looking for the 4 corner pieces, and all those that have a straight edge. Finding those pieces helps me construct an outline, a framework for solving a jigsaw puzzle.
That is in part what I am doing with the 4 Tests in this series of posts, I am building an outline, a framework for solving a puzzle - the puzzle over whether bank charges are fair or not. In doing so, I am hoping that others who are also trying to solve the puzzle will see pieces they have not looked at in any detail before - but we need the framework first.
So far, I have looked at Test 1 - Evidence that the Financial Services Authority regard "Treating Customers Fairly" as fundamental, - and - Test 2 - Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament - they form part of the puzzle.
At this juncture they are as complete as I wish them to be, but there are more pieces to this puzzle than just the 4 corner pieces.
Let's look at another part of the jigsaw puzzle and see if we can find its place in the bigger picture.
Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
Do you ever watch the BBC series Silent Witness? It is about forensic science, the characters use their abilities in a series of examinations, in as much minute detail as is required, to establish what happened and why. The next two Tests require that level of forensic examination, and to allow you to follow each examination, I have intentionally broken them down into what I hope will be easily followed parts, rather than over-lengthy posts.
Ever heard the phrase "It's fine in theory, but it won't work in practice"? That phrase has always puzzled me. If it is indeed fine in theory, surely then it should work in practice? And if it doesn't work in practice, surely then that shows the theory was anything but fine?
So which is it, over this issue of Bank charges? At different times and in different ways it involved both the OFT and the FSA - but neither found an answer to the puzzle?
Was it perhaps the theories of the OFT or the theories of the FSA , that, Court case after Court case eventually led to a result with no answer to the essential question - are Bank charges fair or not?.
Or was it perhaps how they put their respective theories into practice?
Even more worryingly, perhaps, could it in fact be both, both theory and practice - neither working as they should?
What could lie behind all the effort involved, the costs involved, the time involved, that could lead eventually to a relatively simple question about fairness never finding an answer? Looking at both the theory and the practice of the Concordat between the FSA and the OFT may begin to help us understand.
Let me start this series of forensic examinations with this example. It is the basis of the test case, the agreement that was signed by the OFT and the Banks involved in the Court cases that followed.
I can use many parts of that agreement for comment, but what, at this juncture, as one small but very important part of this puzzle, I would ask you to note first is that there are 9 parties to the agreement over this test case, the OFT, the Banks concerned - AND the FSA.
But then note this extract:
" 6. FSA
6.1 If, at any time after the completion of the trial at first instance of the Preliminary Issues, the FSA wishes to join in the proceedings, then .... "
Why might it be that the FSA, perhaps our prime regulator in the area of financial services, having been listed as one of the parties in the test case, then do not join in the proceedings themselves from the outset? The answer to that lies in the Concordat. So too do the implications.
If you have been reading since the outset of these posts, you might be asking yourself, if the FSA "switched off" from involvement in the test case in the Courts from the outset, does that piece fit at all with another piece in the puzzle that I mentioned earlier, when Dr Heurtas told us " ...Technically, the FSA has switched off Principle 6 ("Treating Customers Fairly") ..."
However, let me leave you with this far simpler question to consider:
Can you trace anywhere a comment from Lord Turner or the FSA which tells you, tells anyone, what their view or opinion is over whether Bank charges are fair or unfair?
That is why I repeat again, and will continue to do so:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
I will examine another small part related to the Concordat in my next post.
Sunday 3 October 2010
Bank Charges - Test 3. Part 1.
If you have just reached this blog and wonder what it is about - this series of posts is primarily about Bank charges (and a bit more - how by using that subject it may lead us to a better understanding of how the failures of regulators, central bankers and governments got us into the financial mess many of us now face.)
I am using a very simple, but crucial, question on Bank charges, namely:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
In my earlier posts I set myself 4 tests - the following sequence of posts will address Test 3:
Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
Before I deal with why I think that Test is important, and why in my opinion it has indeed led to consumer detriment, and offer evidence in support of my opinion, I want to start from a wider perspective.
(Authors note: In a later series of posts, but not in this series, I will examine how the FSA/OFT Concordat may have led to a "price fixing" issue which also affected many millions of people in the UK)
When we use the word "fair", and as we discuss "fairness" both in general terms or as it may apply to this issue of Bank charges, are we applying a purely subjective assessment, perhaps one we learned as a child over whether we should share our toys with our siblings or friends, or when we were told the time to stop playing outside and come back inside?
Those early days in our lives - when we were heard to complain "But, Mummy, that is just not fair!"
Remember those days, you just like me, saw fairness in that way, did we not? Subjectively - as it affected us.
As we grow older, do our ideas of fairness and unfairness widen beyond our self interest? Do you buy "Fairtrade" coffee, for instance? Whilst still primarily subjective, it is wholly your personal choice whether to do so or not, does it begin to illustrate elements of objectivity, and most certainly move from pure self interest to concern for others and their place in the world.
Do our more adult ideas of fairness begin to form something important, a way by which we can show we care for others less fortunate than ourselves? Our place in forming the society, and world, in which we live, and to see our sense of what is fair play its part.
But does a gap in who and what we are, and the positions we hold in society create a gap? Those who seek an answer to the fairness or otherwise over Bank charges, an answer so far unspoken even by the Supreme Court, do so because it has affected them - many millions of them, but not as children. But is there a disconnect, a gap of understanding, between those affected, and the regulators who are appointed by law to offer consumers protection, bodies like the OFT and the FSA?
Amongst those in the adult population, some do indeed take on senior positions in the likes of the FSA, the OFT, or become the politicians who form a Government after an election, or take on roles at the level of the EU, or the United Nations.
Do the concepts of what is fair, of what constitutes fairness, move increasingly from the subjective to the objective, to matters of legality, of laws and of treaties - no matter that these are constructed from the subjective views of those who pass the laws, or sign the Treaties?
When that happens, how distant might become our childhood thoughts of what is fair, how far away might become our more adult thoughts on being fair to others, those who we do not know and may never meet?
Do those in high places, no matter how well intentioned, but through force of the pressures they face, always succeed in producing answers or laws which are without flaw or mistake? Are they always able to witness, at first hand, the unfairness they may inflict on others, or are they too high up the ladder to even see those affected? Did Sir Fred Goodwin?
Don't worry, I am not about to start a philosophy seminar, or embark on some personal polemic, I will in my next post start to provide the evidence which addresses Test 3. But in doing so, it will be issues of the nature I have just commented on which will prove of importance.
What is fair? What is unfair? The evidence that follows is related - I assure you - very specifically to the issue of Bank charges. It will trace its way back to something Lord Turner said (see an earlier post) about there being an unclear boundary, one that existed between the FSA and the OFT. It is what I referred to as "Mind the Gap!"
Can you, like me, detect the boundary, the gap, between what we saw as fair and unfair when we were very young and which we first detected in that call to come in from our mothers, and how perhaps we view the same issues of fairness differently as we grow older? A change from the purely subjective to something more objective.
That is the process we need to examine this issue of fairness over Bank charges. There is a boundary, a gap, between what one law may define as fairness, and another law or set of rules which may define what is fair and unfair in an entirely different fashion. We need to examine those boundaries, those gaps, to discover what they might tell us.
Bear in mind that the Supreme Court ruling did NOT bridge that gap, its decision was not about what was fair or unfair, but solely whether the OFT had any right to examine the question of fairness. The Supreme Court examined and tested the law chosen by the OFT for their purposes, and found against them. Is there another route to an answer, one so far denied to those affected?
Lord Turner has told us that such a boundary, a gap, exists between the FSA and the OFT. It is that boundary, that gap, that I will address in my next post.
Do the FSA and the OFT share the exact same view on fairness, do they work under precisely the same laws, or the same identical set of rules, the rules and laws that define for them individually, each to their own what is fair and unfair? What can we learn by looking very closely at the boundary that Lord Turner tells us exists?
Did the Concordat agreed to by the FSA and the OFT resolve problems, or by conflating very real issues, such as fairness, such as who does what and when, such as which law or set of rules to apply, result in real detriment to many ordinary people?
The answer to that question also lies behind my question:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
I am using a very simple, but crucial, question on Bank charges, namely:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
In my earlier posts I set myself 4 tests - the following sequence of posts will address Test 3:
Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
Before I deal with why I think that Test is important, and why in my opinion it has indeed led to consumer detriment, and offer evidence in support of my opinion, I want to start from a wider perspective.
(Authors note: In a later series of posts, but not in this series, I will examine how the FSA/OFT Concordat may have led to a "price fixing" issue which also affected many millions of people in the UK)
When we use the word "fair", and as we discuss "fairness" both in general terms or as it may apply to this issue of Bank charges, are we applying a purely subjective assessment, perhaps one we learned as a child over whether we should share our toys with our siblings or friends, or when we were told the time to stop playing outside and come back inside?
Those early days in our lives - when we were heard to complain "But, Mummy, that is just not fair!"
Remember those days, you just like me, saw fairness in that way, did we not? Subjectively - as it affected us.
As we grow older, do our ideas of fairness and unfairness widen beyond our self interest? Do you buy "Fairtrade" coffee, for instance? Whilst still primarily subjective, it is wholly your personal choice whether to do so or not, does it begin to illustrate elements of objectivity, and most certainly move from pure self interest to concern for others and their place in the world.
Do our more adult ideas of fairness begin to form something important, a way by which we can show we care for others less fortunate than ourselves? Our place in forming the society, and world, in which we live, and to see our sense of what is fair play its part.
But does a gap in who and what we are, and the positions we hold in society create a gap? Those who seek an answer to the fairness or otherwise over Bank charges, an answer so far unspoken even by the Supreme Court, do so because it has affected them - many millions of them, but not as children. But is there a disconnect, a gap of understanding, between those affected, and the regulators who are appointed by law to offer consumers protection, bodies like the OFT and the FSA?
Amongst those in the adult population, some do indeed take on senior positions in the likes of the FSA, the OFT, or become the politicians who form a Government after an election, or take on roles at the level of the EU, or the United Nations.
Do the concepts of what is fair, of what constitutes fairness, move increasingly from the subjective to the objective, to matters of legality, of laws and of treaties - no matter that these are constructed from the subjective views of those who pass the laws, or sign the Treaties?
When that happens, how distant might become our childhood thoughts of what is fair, how far away might become our more adult thoughts on being fair to others, those who we do not know and may never meet?
Do those in high places, no matter how well intentioned, but through force of the pressures they face, always succeed in producing answers or laws which are without flaw or mistake? Are they always able to witness, at first hand, the unfairness they may inflict on others, or are they too high up the ladder to even see those affected? Did Sir Fred Goodwin?
Don't worry, I am not about to start a philosophy seminar, or embark on some personal polemic, I will in my next post start to provide the evidence which addresses Test 3. But in doing so, it will be issues of the nature I have just commented on which will prove of importance.
What is fair? What is unfair? The evidence that follows is related - I assure you - very specifically to the issue of Bank charges. It will trace its way back to something Lord Turner said (see an earlier post) about there being an unclear boundary, one that existed between the FSA and the OFT. It is what I referred to as "Mind the Gap!"
Can you, like me, detect the boundary, the gap, between what we saw as fair and unfair when we were very young and which we first detected in that call to come in from our mothers, and how perhaps we view the same issues of fairness differently as we grow older? A change from the purely subjective to something more objective.
That is the process we need to examine this issue of fairness over Bank charges. There is a boundary, a gap, between what one law may define as fairness, and another law or set of rules which may define what is fair and unfair in an entirely different fashion. We need to examine those boundaries, those gaps, to discover what they might tell us.
Bear in mind that the Supreme Court ruling did NOT bridge that gap, its decision was not about what was fair or unfair, but solely whether the OFT had any right to examine the question of fairness. The Supreme Court examined and tested the law chosen by the OFT for their purposes, and found against them. Is there another route to an answer, one so far denied to those affected?
Lord Turner has told us that such a boundary, a gap, exists between the FSA and the OFT. It is that boundary, that gap, that I will address in my next post.
Do the FSA and the OFT share the exact same view on fairness, do they work under precisely the same laws, or the same identical set of rules, the rules and laws that define for them individually, each to their own what is fair and unfair? What can we learn by looking very closely at the boundary that Lord Turner tells us exists?
Did the Concordat agreed to by the FSA and the OFT resolve problems, or by conflating very real issues, such as fairness, such as who does what and when, such as which law or set of rules to apply, result in real detriment to many ordinary people?
The answer to that question also lies behind my question:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
Friday 1 October 2010
Bank Charges - Test 2. Part 3.
If you have just reached this blog and wonder what it is about - this series of posts is primarily about Bank charges (and a bit more - how by using that subject it may lead us to a better understanding of how the failures of regulators, central bankers and governments got us into the financial mess many of us now face.)
I am using a very simple, but crucial, question on Bank charges, namely:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
In my earlier posts I set myself four tests - this is a continuation of Test 2, the earlier posts do however remain very relevant.
Test 2 - Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament.
Let's restate the three statutory obligations that apply:
• Securing the appropriate degree of protection for consumers;
One of the ways in which the FSA sought to achieve that objective was by adopting a high level principle called, Principle 6 - "Treating Customers Fairly".
And yet, as I recorded in an earlier post, in a speech The Future of Retail Banking in the UK. given by Dr. Thomas F. Heurtas, who in 2007 was the Director Wholesale Firms Division at the FSA, we find this comment:
" ... Technically, the FSA has "switched off" Principle 6 ("Treating Customers Fairly") with respect to deposits ..."
Does that decision to "switch off" the means by which the FSA sought to meet their statutory objectives strike you as fulfilling them or failing them?
Now let's list the two other statutory obligations:
market confidence - maintaining confidence in the financial system;
financial stability - contributing to the protection and enhancement of the UK financial system
In my earlier post, I asked if just by looking around you at the state of the UK finances, and as we face higher taxes, cut backs, and job losses, you could work out for yourself without comment from me, whether you thought those objectives had been fulfilled or failed.
I promised in my last post to limit my comments and head to Test 4, so I won't discuss the dire financial news from Ireland yesterday, nor how the financial crisis is affecting those living in Greece, nor why in the financial stability the FSA were obliged to secure it was necessary for the UK Government to use legislation designed for terrorism to secure the deposits of those whose money had been placed with Banks in Iceland.
Instead I want to use just one example, that of Northern Rock. The speech given by Dr Heurtas was given just a few short months before the queues started to appear outside the doors of Northern Rock.
Please read the speech from Dr Heurtas, about the "Future of Retail Banking in the UK" but here are some extracts to encourage you to do so:
" ... What we seek is to assure that banks are soundly managed and well capitalised, so as to limit the risk that the bank will fail and consequently harm consumers and/or disrupt financial stability ..."
" ... The challenge for the banks and for their regulators is to assure that banks remain soundly managed and well capitalised...."
" ... We have no objection to allowing banks to reduce their capital ..."
Yes, in part I am being selective, but, beyond asking you to read the whole speech, what I want to highlight is that speech contains all the elements that 3 short months later led to the collapse of Northern Rock, and not much later, the collapse of RBS and HBOS. So did the FSA fulfil or fail to meet their obligations - on the face of it the failure, total failure, is self evident.
So did the FSA know what they were doing, did they understand the lessons of history, and not just those we often hear cited, those from the 1930's?
Let's go back to 2003 to answer that question - and use a speech by Howard Davies, who in 2003 was the Chairman of the Financial Services Authority. From tulips to dotcoms: What can we learn from financial disasters? is a cogent and reasonable analysis of how and why financial disasters happen - they have indeed happened throughout history.
Again, I ask that you read the whole speech, but let me use this one extract to point to the answer to Test 2 - did the FSA fulfil or fail in their statutory objectives.
" ... It would be heroic to think that we could develop our understanding to the point of being able to forecast the next outbreak of mad tulip disease, but we should nonetheless do what we can to help spot danger signs. That is particularly important now that the FSA has a statutory duty to promote public understanding of the financial system, linked to its parallel objective of maintaining confidence in the UK’s markets... "
Now ask yourself - if the Chairman of the FSA was able to understand how financial disasters had arisen thoughout history, and thought the FSA could help by spotting the danger signs, how could it be that 4 long years later with the FSA on the job, Dr Heurtas could discuss the "future" of retail banking in the UK, when it was about to collapse about our ears? Did we have a lookout in the shape of the FSA, or were they asleep down below deck?
Ask yourself - Might that possibility also apply in equal fashion to the questions over Bank charges? If the FSA could not see the big picture - what is the probability that they would never ever notice a much smaller item on the radar, no matter that it affected millions of people, and involved £millions?
Remember this BBC News item I used earlier? It is a few months after Dr Heurtas' speech, and by then Howard Davies has moved on and been replaced as Chairman of the FSA by Callum McCarthy.
It relates to Northern Rock. What did Callum McCarthy, on behalf of the FSA, say about the situation at Northern Rock? This:
" ... Northern Rock's business and capital base themselves have been judged to be sound by the Financial Services Authority, which reiterated on Saturday that deposits and withdrawals could still be made.
It described the long queues at branches and difficulties with the bank's website as "entirely logistical and are in no way related to the bank's solvency or its underlying ability to deliver funds to savers who wish to withdraw".
"To be absolutely clear, if we believed that Northern Rock was not solvent, we would not have allowed it to remain open for business," FSA chairman Callum McCarthy said...."
Two days later, this BBC report :
" ... The government has said that it will guarantee all deposits held by the embattled Northern Rock bank. The government has said that it will guarantee all deposits held by the embattled Northern Rock bank.
The chancellor reiterated comments made by the Treasury and financial services watchdog the FSA that Northern Rock is a solvent business.... "
Would that be some of the deposits that the FSA "switched off" their principle from? Ooops!
A few short months later, this BBC News report:
" ... Northern Rock to be nationalised ..."
Now think also of RBS, and HBOS and all the other items I mentioned earlier - how would you decide Test 2 is looking? In support of the FSA or otherwise?
Test 2 - Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament.
I suspect you may already have decided on your answer. Have you?
Jon Pain, a Managing Director, Retail Markets at the FSA has. About a year ago, he conceded " ... serious mistakes by financial institutions, governments, central banks and regulators, including the FSA ..."
No, I haven't this time given you a link, just not yet, because what Jon Pain said, and what the FSA, and many in it have said and conceded will form the basis for Test 4 - and the link will appear there, plus the evidence that answers this question:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
I am using a very simple, but crucial, question on Bank charges, namely:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
In my earlier posts I set myself four tests - this is a continuation of Test 2, the earlier posts do however remain very relevant.
Test 2 - Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament.
Let's restate the three statutory obligations that apply:
• Securing the appropriate degree of protection for consumers;
One of the ways in which the FSA sought to achieve that objective was by adopting a high level principle called, Principle 6 - "Treating Customers Fairly".
And yet, as I recorded in an earlier post, in a speech The Future of Retail Banking in the UK. given by Dr. Thomas F. Heurtas, who in 2007 was the Director Wholesale Firms Division at the FSA, we find this comment:
" ... Technically, the FSA has "switched off" Principle 6 ("Treating Customers Fairly") with respect to deposits ..."
Does that decision to "switch off" the means by which the FSA sought to meet their statutory objectives strike you as fulfilling them or failing them?
Now let's list the two other statutory obligations:
market confidence - maintaining confidence in the financial system;
financial stability - contributing to the protection and enhancement of the UK financial system
In my earlier post, I asked if just by looking around you at the state of the UK finances, and as we face higher taxes, cut backs, and job losses, you could work out for yourself without comment from me, whether you thought those objectives had been fulfilled or failed.
I promised in my last post to limit my comments and head to Test 4, so I won't discuss the dire financial news from Ireland yesterday, nor how the financial crisis is affecting those living in Greece, nor why in the financial stability the FSA were obliged to secure it was necessary for the UK Government to use legislation designed for terrorism to secure the deposits of those whose money had been placed with Banks in Iceland.
Instead I want to use just one example, that of Northern Rock. The speech given by Dr Heurtas was given just a few short months before the queues started to appear outside the doors of Northern Rock.
Please read the speech from Dr Heurtas, about the "Future of Retail Banking in the UK" but here are some extracts to encourage you to do so:
" ... What we seek is to assure that banks are soundly managed and well capitalised, so as to limit the risk that the bank will fail and consequently harm consumers and/or disrupt financial stability ..."
" ... The challenge for the banks and for their regulators is to assure that banks remain soundly managed and well capitalised...."
" ... We have no objection to allowing banks to reduce their capital ..."
Yes, in part I am being selective, but, beyond asking you to read the whole speech, what I want to highlight is that speech contains all the elements that 3 short months later led to the collapse of Northern Rock, and not much later, the collapse of RBS and HBOS. So did the FSA fulfil or fail to meet their obligations - on the face of it the failure, total failure, is self evident.
So did the FSA know what they were doing, did they understand the lessons of history, and not just those we often hear cited, those from the 1930's?
Let's go back to 2003 to answer that question - and use a speech by Howard Davies, who in 2003 was the Chairman of the Financial Services Authority. From tulips to dotcoms: What can we learn from financial disasters? is a cogent and reasonable analysis of how and why financial disasters happen - they have indeed happened throughout history.
Again, I ask that you read the whole speech, but let me use this one extract to point to the answer to Test 2 - did the FSA fulfil or fail in their statutory objectives.
" ... It would be heroic to think that we could develop our understanding to the point of being able to forecast the next outbreak of mad tulip disease, but we should nonetheless do what we can to help spot danger signs. That is particularly important now that the FSA has a statutory duty to promote public understanding of the financial system, linked to its parallel objective of maintaining confidence in the UK’s markets... "
Now ask yourself - if the Chairman of the FSA was able to understand how financial disasters had arisen thoughout history, and thought the FSA could help by spotting the danger signs, how could it be that 4 long years later with the FSA on the job, Dr Heurtas could discuss the "future" of retail banking in the UK, when it was about to collapse about our ears? Did we have a lookout in the shape of the FSA, or were they asleep down below deck?
Ask yourself - Might that possibility also apply in equal fashion to the questions over Bank charges? If the FSA could not see the big picture - what is the probability that they would never ever notice a much smaller item on the radar, no matter that it affected millions of people, and involved £millions?
Remember this BBC News item I used earlier? It is a few months after Dr Heurtas' speech, and by then Howard Davies has moved on and been replaced as Chairman of the FSA by Callum McCarthy.
It relates to Northern Rock. What did Callum McCarthy, on behalf of the FSA, say about the situation at Northern Rock? This:
" ... Northern Rock's business and capital base themselves have been judged to be sound by the Financial Services Authority, which reiterated on Saturday that deposits and withdrawals could still be made.
It described the long queues at branches and difficulties with the bank's website as "entirely logistical and are in no way related to the bank's solvency or its underlying ability to deliver funds to savers who wish to withdraw".
"To be absolutely clear, if we believed that Northern Rock was not solvent, we would not have allowed it to remain open for business," FSA chairman Callum McCarthy said...."
Two days later, this BBC report :
" ... The government has said that it will guarantee all deposits held by the embattled Northern Rock bank. The government has said that it will guarantee all deposits held by the embattled Northern Rock bank.
The chancellor reiterated comments made by the Treasury and financial services watchdog the FSA that Northern Rock is a solvent business.... "
Would that be some of the deposits that the FSA "switched off" their principle from? Ooops!
A few short months later, this BBC News report:
" ... Northern Rock to be nationalised ..."
Now think also of RBS, and HBOS and all the other items I mentioned earlier - how would you decide Test 2 is looking? In support of the FSA or otherwise?
Test 2 - Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament.
I suspect you may already have decided on your answer. Have you?
Jon Pain, a Managing Director, Retail Markets at the FSA has. About a year ago, he conceded " ... serious mistakes by financial institutions, governments, central banks and regulators, including the FSA ..."
No, I haven't this time given you a link, just not yet, because what Jon Pain said, and what the FSA, and many in it have said and conceded will form the basis for Test 4 - and the link will appear there, plus the evidence that answers this question:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
Thursday 30 September 2010
Bank Charges - Test 2. Part 2.
I was asked a question yesterday. It was asked by someone reading this blog, someone who I admire for her efforts at helping other people, and establishing a forum where ordinary people can share experiences and knowledge to help each other.
She asked me whether I would be submitting evidence to a current consultation being carried out by HM Treasury. This one. A new approach to financial regulation - Judgement, focus and stability. (Warning - it is 76 pages long, very detailed, and asks loads and loads of questions)
My answer? Very political - it was yes and no. You see for me I would like answers to simpler questions.
I think it was Robert Peston from the BBC who said that some of our larger Banks have a turnover far in excess of the whole economy of the UK. So why is it that - when I am only half awake, not yet had my first strong black coffee, - when my wife suddenly announces that we need milk for everyone's breakfast, - and that we have run out of toilet rolls - I arrive at the ATM to be told there are no bank notes available? Where is the consultation on that?
We are in many ways beseiged by consultations - all trying to find answers to very big questions:
How about this one? A call for evidence from BIS - Department for Business, Innovation and Skills - Consumer Rights Directive : Allowing Contingent or Ancillary Charges to be Assessed for Unfairness.
It's all about Bank charges, and it relates to the Supreme Court decision against the OFT - but does it deal with why there are no £10.00 notes in the ATM? Bet your life it doesn't! Nor does it answer my question to Lord Turner and the FSA - do you believe that the charges levied by Banks on their customers were and are fair or unfair?
Nor will you find an answer to my family's urgent need for milk and toilet rolls, nor my question to Lord Turner in this current consultation. It comes from the Independent Commission on Banking - Issues Paper - Call for Evidence. I misread that title at first, thought it said "Tissues Paper" - and thought yay, there is a Consultation that might give me an answer I need after all.
But no, that last consultation looks at some very big issues. You will hear those issues discussed often, Banks that are "too big to fail", should Banks be broken up - splitting the Investment banking from the Retail side of Banks, Narrow Banking, Utility Banks, etc etc.
Now, if unlike me and I believe most ordinary people, you need the day to day, minute by minute, services of a Global Investment Bank, and are not faced with the rather more simple problem of why there are no £10.00 notes in an ATM, or an answer about the fairness of Bank charges, then by all means please read every detail of those consultations.
But for me, and millions of ordinary people in the UK, right here, right now, I would just like Lord Turner and the FSA to answer my very simple question - do you believe that the charges levied by Banks on their customers were and are fair or unfair?
I now face a problem - I want you to keep reading this blog, but before I get to Test 3 and Test 4, I need to finish Test 2.
Perhaps your interest is waning somewhat - understandable. Why don't I just get to the point? Fair question. I could assure you that what I have to say is relevant, interesting, a "must read" - and yes, I do assure you it is all of those, but I am not sure that is sufficient to keep you here.
You like me, probably just want the answer to my question of Lord Turner and the FSA. Well, may I tell you once we get through Test 2, and Test 3 - you will get that very answer, because strangely it already exists.
The FSA have already given their answer - but we need to finish Test 2 and Test 3, and use the evidence that they will contain to show not just that it has indeed happened - but as importantly how it has already happened.
You see, I am not sure that Lord Turner or the FSA are even aware as I write that they regard the charges levied by Banks on their customers were and are unfair - yep, unfair, I will highlight and repeat that word just in case you missed it.
It will be evidence from within the very heart of the FSA that I will present in Test 4 that shows how they reached that conclusion.
Now, I already hear you asking - how could that be? How could it be that while the OFT took on three high profile Court appearances, and spent loads of your money and mine, lost, and then gave up, with no answer for anyone - how could it be that the FSA, our prime financial Regulator already knew and had the answer - at no cost to anyone? They just had to tell us, and instruct the Banks under the statutory powers they had - and insist that the Banks "treated customers fairly" - their highest level principle - how indeed could that be?
Ever watched Derren Brown, or indeed any magician? My absolute favourites are Penn and Teller - edgy! Well, all magicians use something called "misdirection". They manage to draw your attention away from what you should be looking at, and towards what they want you to see. That is what has happened over the issues of Bank charges. Everyone, and I do mean everyone that I have read or talked to, has been looking at the OFT and what they were doing, and nobody that I can trace, anywhere, has been looking at the FSA. Misdirection? I think so.
I will deal with closing Test 2 as quickly and as briefly as I can, and move through Test 3 again in as fast a time as I can manage - and as I do so I want you to remember that one word "misdirection", because it forms a major clue, not only over the issue of Bank charges, but also into the murkier world of the whole financial crisis - people looking in the wrong places, and not looking where they should have been looking.
Soon we will reach the final Test - Test 4.
Test 4 - Evidence, which must be irrefutable and unequivocal, that the Financial Services Authority expect charges to be a fair reflection of the additional administration costs faced, not a way to increase profits or offset costs from other parts of a business.
She asked me whether I would be submitting evidence to a current consultation being carried out by HM Treasury. This one. A new approach to financial regulation - Judgement, focus and stability. (Warning - it is 76 pages long, very detailed, and asks loads and loads of questions)
My answer? Very political - it was yes and no. You see for me I would like answers to simpler questions.
I think it was Robert Peston from the BBC who said that some of our larger Banks have a turnover far in excess of the whole economy of the UK. So why is it that - when I am only half awake, not yet had my first strong black coffee, - when my wife suddenly announces that we need milk for everyone's breakfast, - and that we have run out of toilet rolls - I arrive at the ATM to be told there are no bank notes available? Where is the consultation on that?
We are in many ways beseiged by consultations - all trying to find answers to very big questions:
How about this one? A call for evidence from BIS - Department for Business, Innovation and Skills - Consumer Rights Directive : Allowing Contingent or Ancillary Charges to be Assessed for Unfairness.
It's all about Bank charges, and it relates to the Supreme Court decision against the OFT - but does it deal with why there are no £10.00 notes in the ATM? Bet your life it doesn't! Nor does it answer my question to Lord Turner and the FSA - do you believe that the charges levied by Banks on their customers were and are fair or unfair?
Nor will you find an answer to my family's urgent need for milk and toilet rolls, nor my question to Lord Turner in this current consultation. It comes from the Independent Commission on Banking - Issues Paper - Call for Evidence. I misread that title at first, thought it said "Tissues Paper" - and thought yay, there is a Consultation that might give me an answer I need after all.
But no, that last consultation looks at some very big issues. You will hear those issues discussed often, Banks that are "too big to fail", should Banks be broken up - splitting the Investment banking from the Retail side of Banks, Narrow Banking, Utility Banks, etc etc.
Now, if unlike me and I believe most ordinary people, you need the day to day, minute by minute, services of a Global Investment Bank, and are not faced with the rather more simple problem of why there are no £10.00 notes in an ATM, or an answer about the fairness of Bank charges, then by all means please read every detail of those consultations.
But for me, and millions of ordinary people in the UK, right here, right now, I would just like Lord Turner and the FSA to answer my very simple question - do you believe that the charges levied by Banks on their customers were and are fair or unfair?
I now face a problem - I want you to keep reading this blog, but before I get to Test 3 and Test 4, I need to finish Test 2.
Perhaps your interest is waning somewhat - understandable. Why don't I just get to the point? Fair question. I could assure you that what I have to say is relevant, interesting, a "must read" - and yes, I do assure you it is all of those, but I am not sure that is sufficient to keep you here.
You like me, probably just want the answer to my question of Lord Turner and the FSA. Well, may I tell you once we get through Test 2, and Test 3 - you will get that very answer, because strangely it already exists.
The FSA have already given their answer - but we need to finish Test 2 and Test 3, and use the evidence that they will contain to show not just that it has indeed happened - but as importantly how it has already happened.
You see, I am not sure that Lord Turner or the FSA are even aware as I write that they regard the charges levied by Banks on their customers were and are unfair - yep, unfair, I will highlight and repeat that word just in case you missed it.
It will be evidence from within the very heart of the FSA that I will present in Test 4 that shows how they reached that conclusion.
Now, I already hear you asking - how could that be? How could it be that while the OFT took on three high profile Court appearances, and spent loads of your money and mine, lost, and then gave up, with no answer for anyone - how could it be that the FSA, our prime financial Regulator already knew and had the answer - at no cost to anyone? They just had to tell us, and instruct the Banks under the statutory powers they had - and insist that the Banks "treated customers fairly" - their highest level principle - how indeed could that be?
Ever watched Derren Brown, or indeed any magician? My absolute favourites are Penn and Teller - edgy! Well, all magicians use something called "misdirection". They manage to draw your attention away from what you should be looking at, and towards what they want you to see. That is what has happened over the issues of Bank charges. Everyone, and I do mean everyone that I have read or talked to, has been looking at the OFT and what they were doing, and nobody that I can trace, anywhere, has been looking at the FSA. Misdirection? I think so.
I will deal with closing Test 2 as quickly and as briefly as I can, and move through Test 3 again in as fast a time as I can manage - and as I do so I want you to remember that one word "misdirection", because it forms a major clue, not only over the issue of Bank charges, but also into the murkier world of the whole financial crisis - people looking in the wrong places, and not looking where they should have been looking.
Soon we will reach the final Test - Test 4.
Test 4 - Evidence, which must be irrefutable and unequivocal, that the Financial Services Authority expect charges to be a fair reflection of the additional administration costs faced, not a way to increase profits or offset costs from other parts of a business.
Wednesday 29 September 2010
Bank Charges - Test 2. Part 1.
I finished my last post "Test 1." with this:
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
I am not quite finished with Test 1, you will see why shortly, but I want to move on to Test 2, which is:
Test 2 - Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament.
I also want to start to show how addressing this issue of Bank charges - by looking at the role of the FSA, not the OFT, - leads us into much murkier waters, namely those that led to the taxpayer bail out of some major Banks, and the higher taxes, cut backs, and job losses that we all now face in the UK. That also requires us to look at the role, and effectiveness of the FSA.
To do so, I want to stay in 2007, and introduce you to Dr. Thomas F. Heurtas, who in 2007 was the Director Wholesale Firms Division at the FSA. Today he is Banking Sector Director of the FSA, a role specifically created to enable the FSA to deliver the Tripartite authorities' initiatives to improve the regulatory architecture of the banking industry. You can read more about Dr Heurtas and his past experience here.
First let me again remind you that the FSA has statutory obligations imposed on it by Parliament, I listed the one that applies to consumers in an earlier post, but given the area I also want to look at over the banking crisis, let's see what statutory obligation the FSA were asked to meet:
There is actually not one, but two, which I believe are relevant, these:
market confidence - maintaining confidence in the financial system;
financial stability - contributing to the protection and enhancement of the UK financial system
Now, without me saying another word, how would YOU vote on the success of the FSA on achieving those two objectives, as you look around you today? Are you 100% confident in the financial system? Do YOU believe that we have financial stability?
As you answer those questions, perhaps you will begin to understand more fully why I am choosing to look at the role, and effectiveness of the FSA, not just on the single issue of bank charges (which let me assure you will remain the main focus of attention in this series of posts), but also looking at the FSA, and its effectiveness, from a much wider perspective.
Let's get to Dr Heurtas, and find what a Speech he gave on The Future of Retail Banking in the UK. might tell us. The Speech (as highlighted) was given at The Institute of Economic Affairs' 10th Anniversary Conference.
That Conference took place on the 6th of June 2007. Why do I want to emphasise that date? Well, as you read the extracts I will use and comment upon, and when as I very much urge you to do, you read the whole speech, I want to place Dr Heurtas' Speech in context.
Can you remember when the first queues of "depositors" started to appear outside Northern Rock? Maybe this BBC News item will remind you. It was September 2007, just three short months since Dr Heurtas gave his speech on "The Future of Retail Banking in the UK". They say a week is a long time in politics, looks very much like a few months is a long time in Banking!
I will return to that BBC News item later, to see what the FSA had to say about the solvency of Northern Rock - set against the statutory objectives that Parliament had asked the FSA to meet.
But first the speech. Maybe instead of asking the FSA " Do you believe that the charges levied by Banks on their customers were and are fair or unfair? ", we can add to the comments and extracts in Test 1, by seeing what Dr Heurtas had to say about "fairness" in his speech - and yes, about Banks treating their customers fairly.
Extracts (and my comments) start:
" ... From the perspective of the regulator, the future of retail banking in the UK should have three characteristics. First, it should be fair to consumers...."
" ... Assuring consumer protection is one of the statutory objectives of the FSA, and this is embodied in Principle 6 for authorised firms, "A firm must pay due regard to the interests of its customers and treat them fairly," as well as in the FSA's strategic objective to help retail consumers obtain a fair deal .."
" ... Under our Treating Customers Fairly initiative we have sought to illustrate this principle in more detail. Briefly put, we have stated that firms should put treating customers fairly at the heart of what they do, that they should bear in mind the requirement to treat customers fairly at every stage of the product life cycle, from the conception of the product design, distribution, marketing, advice and, when dealing with the customer post sale, service, including the handling of complaints, if any.
So far , so good, it is a clear and very powerful message. Would you agree it should leave the Banks in no doubt about what the FSA wanted?
But then we also get an even fuller picture of what the FSA ask of the Banks over fairness:
" ... In our view, Treating Customers Fairly should result in six outcomes for consumers: ..."
To avoid me making this post even longer than it is, please may I invite you to go to the link above for the Speech and see for yourself what those six outcomes were. In fact, for the purpose of this series of posts, please may I invite you to read the whole speech.
For me, I want to draw your very specific attention to one passage, and only that one specific passage, because for me it allows me to pass Test 2.
Test 2: Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament.
Remember I asked you when the first queues appeared outside the Northern Rock, and I chose to describe them, not as savers - I chose to describe them as "depositors"?
The reason lies in this one passage, two short sentences from the Speech by Dr Heurtas:
" ... We think that the obligation to treat customers fairly extends across all products that the bank sells, including deposits.
Technically, the FSA has "switched off" Principle 6 ("Treating Customers Fairly") with respect to deposits ..."
I think it best if I leave those words to sink in before I move on. There is a very big lesson to be learned, one that in drawing from the past, may allow us to alter the future. Who knows, we might even get an answer from Lord Turner and the FSA to my simple question of them. Or do you think the fact that they have never answered that simple question suggests they have "switched off" to whether Banks treat their customers fairly - not just over Bank charges, but on a whole lot more?
My next post will expand on the consequences of the time when the FSA openly chose to "switch off" their statutory obligations. You will see that it was not just switching off to "depositors" - it was to you, to Parliament, and to the country.
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
I am not quite finished with Test 1, you will see why shortly, but I want to move on to Test 2, which is:
Test 2 - Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament.
I also want to start to show how addressing this issue of Bank charges - by looking at the role of the FSA, not the OFT, - leads us into much murkier waters, namely those that led to the taxpayer bail out of some major Banks, and the higher taxes, cut backs, and job losses that we all now face in the UK. That also requires us to look at the role, and effectiveness of the FSA.
To do so, I want to stay in 2007, and introduce you to Dr. Thomas F. Heurtas, who in 2007 was the Director Wholesale Firms Division at the FSA. Today he is Banking Sector Director of the FSA, a role specifically created to enable the FSA to deliver the Tripartite authorities' initiatives to improve the regulatory architecture of the banking industry. You can read more about Dr Heurtas and his past experience here.
First let me again remind you that the FSA has statutory obligations imposed on it by Parliament, I listed the one that applies to consumers in an earlier post, but given the area I also want to look at over the banking crisis, let's see what statutory obligation the FSA were asked to meet:
There is actually not one, but two, which I believe are relevant, these:
market confidence - maintaining confidence in the financial system;
financial stability - contributing to the protection and enhancement of the UK financial system
Now, without me saying another word, how would YOU vote on the success of the FSA on achieving those two objectives, as you look around you today? Are you 100% confident in the financial system? Do YOU believe that we have financial stability?
As you answer those questions, perhaps you will begin to understand more fully why I am choosing to look at the role, and effectiveness of the FSA, not just on the single issue of bank charges (which let me assure you will remain the main focus of attention in this series of posts), but also looking at the FSA, and its effectiveness, from a much wider perspective.
Let's get to Dr Heurtas, and find what a Speech he gave on The Future of Retail Banking in the UK. might tell us. The Speech (as highlighted) was given at The Institute of Economic Affairs' 10th Anniversary Conference.
That Conference took place on the 6th of June 2007. Why do I want to emphasise that date? Well, as you read the extracts I will use and comment upon, and when as I very much urge you to do, you read the whole speech, I want to place Dr Heurtas' Speech in context.
Can you remember when the first queues of "depositors" started to appear outside Northern Rock? Maybe this BBC News item will remind you. It was September 2007, just three short months since Dr Heurtas gave his speech on "The Future of Retail Banking in the UK". They say a week is a long time in politics, looks very much like a few months is a long time in Banking!
I will return to that BBC News item later, to see what the FSA had to say about the solvency of Northern Rock - set against the statutory objectives that Parliament had asked the FSA to meet.
But first the speech. Maybe instead of asking the FSA " Do you believe that the charges levied by Banks on their customers were and are fair or unfair? ", we can add to the comments and extracts in Test 1, by seeing what Dr Heurtas had to say about "fairness" in his speech - and yes, about Banks treating their customers fairly.
Extracts (and my comments) start:
" ... From the perspective of the regulator, the future of retail banking in the UK should have three characteristics. First, it should be fair to consumers...."
" ... Assuring consumer protection is one of the statutory objectives of the FSA, and this is embodied in Principle 6 for authorised firms, "A firm must pay due regard to the interests of its customers and treat them fairly," as well as in the FSA's strategic objective to help retail consumers obtain a fair deal .."
" ... Under our Treating Customers Fairly initiative we have sought to illustrate this principle in more detail. Briefly put, we have stated that firms should put treating customers fairly at the heart of what they do, that they should bear in mind the requirement to treat customers fairly at every stage of the product life cycle, from the conception of the product design, distribution, marketing, advice and, when dealing with the customer post sale, service, including the handling of complaints, if any.
So far , so good, it is a clear and very powerful message. Would you agree it should leave the Banks in no doubt about what the FSA wanted?
But then we also get an even fuller picture of what the FSA ask of the Banks over fairness:
" ... In our view, Treating Customers Fairly should result in six outcomes for consumers: ..."
To avoid me making this post even longer than it is, please may I invite you to go to the link above for the Speech and see for yourself what those six outcomes were. In fact, for the purpose of this series of posts, please may I invite you to read the whole speech.
For me, I want to draw your very specific attention to one passage, and only that one specific passage, because for me it allows me to pass Test 2.
Test 2: Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament.
Remember I asked you when the first queues appeared outside the Northern Rock, and I chose to describe them, not as savers - I chose to describe them as "depositors"?
The reason lies in this one passage, two short sentences from the Speech by Dr Heurtas:
" ... We think that the obligation to treat customers fairly extends across all products that the bank sells, including deposits.
Technically, the FSA has "switched off" Principle 6 ("Treating Customers Fairly") with respect to deposits ..."
I think it best if I leave those words to sink in before I move on. There is a very big lesson to be learned, one that in drawing from the past, may allow us to alter the future. Who knows, we might even get an answer from Lord Turner and the FSA to my simple question of them. Or do you think the fact that they have never answered that simple question suggests they have "switched off" to whether Banks treat their customers fairly - not just over Bank charges, but on a whole lot more?
My next post will expand on the consequences of the time when the FSA openly chose to "switch off" their statutory obligations. You will see that it was not just switching off to "depositors" - it was to you, to Parliament, and to the country.
Tuesday 28 September 2010
Bank Charges - Test 1.
In my last post I set out 4 Tests which I believe must be met to justify my belief that resolving the question of Bank charges being fair or unfair falls to Lord Turner and the FSA, not the OFT.
It is worth recording again that the eventual Supreme Court decision concluded that the OFT did not have a legal right to investigate whether such charges were fair or unfair.
The Justices did point out that there were alternative avenues which the OFT could continue to pursue, the OFT decided not to do so.
So with the OFT completely out of the picture, it does leave us with the inevitable question - what was, and what remains, the position of the FSA as regards fairness? Is it something they ignore or something they regard as fundamental, for themselves and for those they regulate - including the Banks?
Test 1: Evidence that the Financial Services Authority regard "Treating Customers Fairly" as fundamental.
Google these four words “FSA Treating Customers Fairly”. And yes, the myriad of hits you will receive will confirm that one of the highest level principles adopted by the FSA was the concept of “Treating Customers Fairly”. It is a principle they expect to find in every organisation they regulate - including Banks.
But for our purposes we need to be a bit more selective, and attempt to understand how they chose to apply that principle - or as you may discover - how the FSA chose to secure the application of that principle to everyone they regulated - except one very select group - yes, the Banks.
Might that be true? Might the FSA have adopted a key principle, one that in many ways underpinned their whole approach to regulation, one that insisted that customers should be treated fairly and then somehow let the Banks off the hook? We need to go back to 2007 to answer that question.
May I introduce Clive Briault to you? He had been, until his departure, the managing director of the FSA retail business unit, and prior to that had spent 18 years at the Bank of England. I wish to use extracts from a letter he wrote on the 9th of February 2007.
The letter was addressed to Mike Young, Independent Banking Code Review, c/o British Bankers Association, and was the FSA Submission to the 2007 Review of the Banking Code.
Let's take a quick detour to find out about the Banking Code, and the Banking Code Standards Board. You will find them here, or rather you won’t find them, because as you can see:
"The BCSB website has now been closed. On 1st November responsibility for the regulation of deposit and payment products transferred to the Financial Services Authority."
The 1st of November referred to on that closed site was the 1st of November 2009. That date could prove important.
- Just keep in mind - for now - when the Supreme Court decision was announced. You don’t remember? It was the 25th of November 2009. The FSA took up the reins of responsibility from the BCSB in advance of that decision, and without any knowledge of what that decision was eventually to be. That gap of 20 or so days has an importance I will explain later.
But first let’s address the time gap from 2007 until the direct involvement of the FSA in 2009. It’s time to read Mt Briault’s letter, and see what he said on behalf of the FSA, and what levels of “fairness” he, and the FSA expected from the Banks.
I have extracted some of his comments from the letter- it is there for you in that highlighted link to read it in its entirety.
Extracts (and my comments) start:
" ... Interaction between the FSA and the Banking Code
Our interest in the BC arises from all four of our statutory objectives, namely:
• Promoting public understanding of the financial system;
• Securing the appropriate degree of protection for consumers;
• Maintaining market confidence; and
• Reducing the extent to which financial institutions can be used for the purpose of financial crime...."
So (at that time) there are four statutory objectives - imposed on the FSA, set by Parliament.
Remember in an earlier post, I used the phrase “Mind the Gap”? See if you can spot it here.
" ... We are keen to ensure that the architecture governing the regulation of BC subscribers is coherent and risk-based, both to ensure that there are no 'gaps' in consumer protection …"
Bit obvious, perhaps, but have you ever considered that this whole issue of Bank charges is about “gaps”.
Gaps either left by regulators and/or Governments, and gaps through which ordinary people are left to fall, and suffer the consequences.
Bear in mind we have witnessed the OFT exit - stage left, leaving many millions of consumers a very big gap, a gap involving £Millions, and where neither what was fair or unfair has yet been found.
" ... We also have responsibility for applying certain standards derived from EU law, such as the Unfair Terms in Consumer Contracts Regulations 1999 ..."
UTCCR 1999? Hang on, wasn’t that the legislation the OFT were trying to use? And now we find the FSA also involved.
That brings us back to gaps again, doesn’t it? Remember in an earlier post I quoted Lord Turner as saying to the TSC, that between the FSA and the OFT there was “ a boundary which is not all that clear." Another gap for looking at later?
Let’s stick with Test 1, and look for this word “fairness” in Mr Briault’s letter.
" ... Principle 6 is of particular relevance to the BC Review. This states that ' a firm must pay due regard to the interests of its customers and treat them fairly'. This is the basis of our 'Treating Customers Fairly' (TCF) initiative. In our July 2006 publication 'Treating Customers Fairly – towards fair outcomes for consumers' we set out the six high-level outcomes that we are looking for firms to deliver when dealing with their customers. These outcomes will mean that consumers:
• deal with firms where the fair treatment of customers is a key part of the corporate culture;
• are marketed and sold retail products that have been designed to meet their needs and are targeted accordingly;
• receive clear information and are kept suitably informed before, during and after the point of sale;
• receive suitable advice which takes account of their circumstances;
• receive the product performance they have been led to expect by firms they deal with - and the service is both of an acceptable standard and as they have been led to expect;
• do not face unreasonable post-sale barriers imposed by firms when they want to change product, switch provider, submit a claim or make a complaint.
On its own I think that allows me to say Test 1 is passed, the FSA had their high level principle and it had been communicated to the Banks - and it was all about "Treating Customers Fairly".
But! Yes, isn't there always a but?
Mr Briault points it out in his letter:
" ... You will note some similarity to the key commitments within the BC, but there are two key differences, one of coverage and one of application:
• On coverage, the absence of an over-arching fairness objective within the BC is a significant omission.
• On application, our impression is that, in any case, little weight is placed on the commitments when monitoring and enforcing the BC, with the result that subscribers may not always follow the 'spirit' of the BC...."
So we find that the FSA were clearly aware of, and highlighting “ a significant omission” in the Banking Code and it was on this specific question of “fairness”.
Perhaps worse still, it looks like the FSA had also gained the impression that “ …little weight is placed on the commitments when monitoring and enforcing the BC, with the result that subscribers may not always follow the 'spirit' of the BC...."
Am I being fair if I say - in one letter we seem to have the FSA being very clear about what they expect from Banks on the question of fairness, and yet noting that the actual Code says nothing about fairness, and that even if it did, they seem to suspect it may well be ignored in practice? That would surely put the FSA on their guard, as the principal custodian of a statutory obligation to secure protection for consumers?
Have we found yet another gap? One so vast there is nothing but complete silence?
Please read that letter in full - Do YOU think Mr Briault on behalf of the FSA gave a clear picture to the Banks of what the FSA wanted on this question of fairness?
Now please think of all the media coverage over Bank charges, the letters to the FOS, the Court activity, the discussions in Parliament, the recent manifestos for the Election etc etc. Have you noticed what body has never said what they think about the fairness or unfairness of Bank charges?
Why do YOU think 3 years on from that letter, with the OFT nowhere to be seen, the FSA have had nothing to say about whether the Banks have treated their customers fairly, and still have not a word to say?
Surely with a high level principle that "Customers should be treated fairly" the FSA should have something to say? Have YOU ever heard anything from them about Bank charges being fair or unfair? Did they say anything 3 years ago, 2 years ago, 1 year ago, are they saying anything now, today?
Not about the waiver, not about the OFT, not about the Supreme Court decision, the FSA just require to give a very simple answer to a very simple question - based on their fundamental principle that customers should be treated fairly.
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
While they consider that question - I think I need to introduce you to Dr. Thomas F. Huertas, and I will in my next post.
It is worth recording again that the eventual Supreme Court decision concluded that the OFT did not have a legal right to investigate whether such charges were fair or unfair.
The Justices did point out that there were alternative avenues which the OFT could continue to pursue, the OFT decided not to do so.
So with the OFT completely out of the picture, it does leave us with the inevitable question - what was, and what remains, the position of the FSA as regards fairness? Is it something they ignore or something they regard as fundamental, for themselves and for those they regulate - including the Banks?
Test 1: Evidence that the Financial Services Authority regard "Treating Customers Fairly" as fundamental.
Google these four words “FSA Treating Customers Fairly”. And yes, the myriad of hits you will receive will confirm that one of the highest level principles adopted by the FSA was the concept of “Treating Customers Fairly”. It is a principle they expect to find in every organisation they regulate - including Banks.
But for our purposes we need to be a bit more selective, and attempt to understand how they chose to apply that principle - or as you may discover - how the FSA chose to secure the application of that principle to everyone they regulated - except one very select group - yes, the Banks.
Might that be true? Might the FSA have adopted a key principle, one that in many ways underpinned their whole approach to regulation, one that insisted that customers should be treated fairly and then somehow let the Banks off the hook? We need to go back to 2007 to answer that question.
May I introduce Clive Briault to you? He had been, until his departure, the managing director of the FSA retail business unit, and prior to that had spent 18 years at the Bank of England. I wish to use extracts from a letter he wrote on the 9th of February 2007.
The letter was addressed to Mike Young, Independent Banking Code Review, c/o British Bankers Association, and was the FSA Submission to the 2007 Review of the Banking Code.
Let's take a quick detour to find out about the Banking Code, and the Banking Code Standards Board. You will find them here, or rather you won’t find them, because as you can see:
"The BCSB website has now been closed. On 1st November responsibility for the regulation of deposit and payment products transferred to the Financial Services Authority."
The 1st of November referred to on that closed site was the 1st of November 2009. That date could prove important.
- Just keep in mind - for now - when the Supreme Court decision was announced. You don’t remember? It was the 25th of November 2009. The FSA took up the reins of responsibility from the BCSB in advance of that decision, and without any knowledge of what that decision was eventually to be. That gap of 20 or so days has an importance I will explain later.
But first let’s address the time gap from 2007 until the direct involvement of the FSA in 2009. It’s time to read Mt Briault’s letter, and see what he said on behalf of the FSA, and what levels of “fairness” he, and the FSA expected from the Banks.
I have extracted some of his comments from the letter- it is there for you in that highlighted link to read it in its entirety.
Extracts (and my comments) start:
" ... Interaction between the FSA and the Banking Code
Our interest in the BC arises from all four of our statutory objectives, namely:
• Promoting public understanding of the financial system;
• Securing the appropriate degree of protection for consumers;
• Maintaining market confidence; and
• Reducing the extent to which financial institutions can be used for the purpose of financial crime...."
So (at that time) there are four statutory objectives - imposed on the FSA, set by Parliament.
Remember in an earlier post, I used the phrase “Mind the Gap”? See if you can spot it here.
" ... We are keen to ensure that the architecture governing the regulation of BC subscribers is coherent and risk-based, both to ensure that there are no 'gaps' in consumer protection …"
Bit obvious, perhaps, but have you ever considered that this whole issue of Bank charges is about “gaps”.
Gaps either left by regulators and/or Governments, and gaps through which ordinary people are left to fall, and suffer the consequences.
Bear in mind we have witnessed the OFT exit - stage left, leaving many millions of consumers a very big gap, a gap involving £Millions, and where neither what was fair or unfair has yet been found.
" ... We also have responsibility for applying certain standards derived from EU law, such as the Unfair Terms in Consumer Contracts Regulations 1999 ..."
UTCCR 1999? Hang on, wasn’t that the legislation the OFT were trying to use? And now we find the FSA also involved.
That brings us back to gaps again, doesn’t it? Remember in an earlier post I quoted Lord Turner as saying to the TSC, that between the FSA and the OFT there was “ a boundary which is not all that clear." Another gap for looking at later?
Let’s stick with Test 1, and look for this word “fairness” in Mr Briault’s letter.
" ... Principle 6 is of particular relevance to the BC Review. This states that ' a firm must pay due regard to the interests of its customers and treat them fairly'. This is the basis of our 'Treating Customers Fairly' (TCF) initiative. In our July 2006 publication 'Treating Customers Fairly – towards fair outcomes for consumers' we set out the six high-level outcomes that we are looking for firms to deliver when dealing with their customers. These outcomes will mean that consumers:
• deal with firms where the fair treatment of customers is a key part of the corporate culture;
• are marketed and sold retail products that have been designed to meet their needs and are targeted accordingly;
• receive clear information and are kept suitably informed before, during and after the point of sale;
• receive suitable advice which takes account of their circumstances;
• receive the product performance they have been led to expect by firms they deal with - and the service is both of an acceptable standard and as they have been led to expect;
• do not face unreasonable post-sale barriers imposed by firms when they want to change product, switch provider, submit a claim or make a complaint.
On its own I think that allows me to say Test 1 is passed, the FSA had their high level principle and it had been communicated to the Banks - and it was all about "Treating Customers Fairly".
But! Yes, isn't there always a but?
Mr Briault points it out in his letter:
" ... You will note some similarity to the key commitments within the BC, but there are two key differences, one of coverage and one of application:
• On coverage, the absence of an over-arching fairness objective within the BC is a significant omission.
• On application, our impression is that, in any case, little weight is placed on the commitments when monitoring and enforcing the BC, with the result that subscribers may not always follow the 'spirit' of the BC...."
So we find that the FSA were clearly aware of, and highlighting “ a significant omission” in the Banking Code and it was on this specific question of “fairness”.
Perhaps worse still, it looks like the FSA had also gained the impression that “ …little weight is placed on the commitments when monitoring and enforcing the BC, with the result that subscribers may not always follow the 'spirit' of the BC...."
Am I being fair if I say - in one letter we seem to have the FSA being very clear about what they expect from Banks on the question of fairness, and yet noting that the actual Code says nothing about fairness, and that even if it did, they seem to suspect it may well be ignored in practice? That would surely put the FSA on their guard, as the principal custodian of a statutory obligation to secure protection for consumers?
Have we found yet another gap? One so vast there is nothing but complete silence?
Please read that letter in full - Do YOU think Mr Briault on behalf of the FSA gave a clear picture to the Banks of what the FSA wanted on this question of fairness?
Now please think of all the media coverage over Bank charges, the letters to the FOS, the Court activity, the discussions in Parliament, the recent manifestos for the Election etc etc. Have you noticed what body has never said what they think about the fairness or unfairness of Bank charges?
Why do YOU think 3 years on from that letter, with the OFT nowhere to be seen, the FSA have had nothing to say about whether the Banks have treated their customers fairly, and still have not a word to say?
Surely with a high level principle that "Customers should be treated fairly" the FSA should have something to say? Have YOU ever heard anything from them about Bank charges being fair or unfair? Did they say anything 3 years ago, 2 years ago, 1 year ago, are they saying anything now, today?
Not about the waiver, not about the OFT, not about the Supreme Court decision, the FSA just require to give a very simple answer to a very simple question - based on their fundamental principle that customers should be treated fairly.
Let's ask Lord Turner and the FSA this very simple question:
Do you believe that the charges levied by Banks on their customers were and are fair or unfair?
While they consider that question - I think I need to introduce you to Dr. Thomas F. Huertas, and I will in my next post.
Monday 27 September 2010
Bank Charges - Back to the Future?
So far, I have avoided deliberately any comments on the role of the OFT. Why?
Because I believe that we need to concentrate, not on the role of the OFT, but on the role of the FSA to resolve this question of fairness in the matter of Bank charges. I have long ago concluded that resolving the issue fell directly under the control of Lord Turner and the FSA.
Now it is one thing to hold an opinion on something, it is an entirely different matter to establish "beyond all reasonable doubt" that the opinion is validated by evidence, that is what I will now attempt to do.
First therefore what would constitute evidence that would justify my opinion "beyond all reasonable doubt"?
I think it needs to meet a minimum of three criteria, but for good measure I have chosen four :
Let's call them the four crucial Tests:
Test 1 - Evidence that the Financial Services Authority regard "Treating Customers Fairly" as fundamental.
Test 2 - Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament.
Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
Last, but very very far from least ...
Test 4 - Evidence, which must be irrefutable and unequivocal, that the Financial Services Authority expect charges to be a fair reflection of the additional administration costs faced, not a way to increase profits or offset costs from other parts of a business.
The evidence that will follow meets those criteria and passes each of those tests - and more. They will also lead to other issues where consumer detriment has arisen due to very similar and very serious regulatory and political failures. The questions over Bank charges are important in themselves, but will also point the way to other similar issues.
But do we we need to go back a bit in time? Not only to help us understand the present, but also as an essential basis for understanding and preparing for the future. A future where the role and scope of banking is already under the microscope, and where any failure on the part of Governments and regulators to get it right, once again leaves ordinary individuals to pay a heavy price, in taxes, in cut backs and in jobs. It is the present we all now face, and understanding the past which brought us here, may allow us to change the future.
The next items of evidence I intend to present, therefore, are intended to offer evidence against Test 1. It will start in 2007, with a review of the Banking Code ... and the FSA's involvement in that review.
What did the FSA say to the Banks about being fair to their customers?
Because I believe that we need to concentrate, not on the role of the OFT, but on the role of the FSA to resolve this question of fairness in the matter of Bank charges. I have long ago concluded that resolving the issue fell directly under the control of Lord Turner and the FSA.
Now it is one thing to hold an opinion on something, it is an entirely different matter to establish "beyond all reasonable doubt" that the opinion is validated by evidence, that is what I will now attempt to do.
First therefore what would constitute evidence that would justify my opinion "beyond all reasonable doubt"?
I think it needs to meet a minimum of three criteria, but for good measure I have chosen four :
Let's call them the four crucial Tests:
Test 1 - Evidence that the Financial Services Authority regard "Treating Customers Fairly" as fundamental.
Test 2 - Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament.
Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.
Last, but very very far from least ...
Test 4 - Evidence, which must be irrefutable and unequivocal, that the Financial Services Authority expect charges to be a fair reflection of the additional administration costs faced, not a way to increase profits or offset costs from other parts of a business.
The evidence that will follow meets those criteria and passes each of those tests - and more. They will also lead to other issues where consumer detriment has arisen due to very similar and very serious regulatory and political failures. The questions over Bank charges are important in themselves, but will also point the way to other similar issues.
But do we we need to go back a bit in time? Not only to help us understand the present, but also as an essential basis for understanding and preparing for the future. A future where the role and scope of banking is already under the microscope, and where any failure on the part of Governments and regulators to get it right, once again leaves ordinary individuals to pay a heavy price, in taxes, in cut backs and in jobs. It is the present we all now face, and understanding the past which brought us here, may allow us to change the future.
The next items of evidence I intend to present, therefore, are intended to offer evidence against Test 1. It will start in 2007, with a review of the Banking Code ... and the FSA's involvement in that review.
What did the FSA say to the Banks about being fair to their customers?
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