KEN HOUSTON DECEMBER 6 2016
One of the biggest scandals to emerge from the financial crisis was not just the cavalier attitude of some banks but the fact that the government’s own regulatory body – the Financial Services Authority – fiddled while ‘Rome’ (in the form of RBS, HBOS, etc.) burned.
No one, of course, was ever held responsible; as in the aftermath of most government or local authority failures, it was a case of ‘lessons will be learned; time to move on, etc. etc.’
Since then the regulator has dropped the ‘S’ word in favour of the ‘C’ word yet the Financial Conduct Authority seems to be the old FSA in all but name; it continues, for example, to use the same blunt instrument to punish bank misdemeanours by piling in with multi-million fines, the ultimate victims of which are innocent private shareholders (i.e. those without block voting power) and customers.
Can someone explain what exactly the point was in fining RBS, that sick man of British banking, £56 million for a computer failure two years ago?
One hopes that the FCA will be more imaginative in dealing with ‘rent-to-own’ companies into which it is about to launch an investigation.
Rent-to-own is a modern euphemism for ‘hire-purchase’, the mechanism which the great bulk of the population once used as a means of acquiring higher-value consumer goods until the onset of credit cards and personal bank loans. Consequently, rent-to-own is now focussed on people who, because of low incomes or poor credit ratings, do not qualify for a Visa or MasterCard nor a bank loan.
Concerns have been raised that the rent-to-own companies apply excessive charges, the cost of goods sometimes equating to three times the cash price average, accusations which the sector counters by pointing out that the credit risk of its customer base is about three times the average.
Andrew Bailey, chief executive of the FCA, raised the possibility that rent-to own retailers might become subject to a cap on charges but insisted this would be very much a last resort.
“The price cap is very much the thing we do when all other price measures don’t look very promising,” Mr Bailey told the BBC. “So we would start elsewhere, and work our way through the possible remedies.”
Sounds a bit airy fairy if you ask me. But then this may have something to do with the fact that FCA involvement follows pressure from Citizens Advice, which is strongly in favour of a price cap.
So is this investigation simply the FCA ‘going through the motions’ to placate the self-styled consumer protectors at CA…..or does the FCA see the rent-to- own sector as a soft target which provides an opportunity to show it still has relevance?
As for Citizens Advice, in addition to bashing suppliers, perhaps it should live up to its name by promoting this particularly sound form of consumer wisdom: “Don’t buy on tick what you cannot afford to pay back.”
While not in any way justifying the charges imposed by rent-to-own companies, they do operate within the regulated market and give poorer people access to white goods that are no longer considered luxuries but essential to daily life.
But let’s be honest, rent-to-own products are not simply confined to essentials such as washing machines or refrigerators.
At one of the leading retailers, Bright House, you can buy Thrustmaster TX Ferrari 458 Racing Wheel Bundle (a digital game box and accessories apparently) for £339.98 (including a service agreement). On credit, the option one assumes most customers take, the cost is £624 spread over two years – an interest rate of 99.9 per cent.
For someone struggling to make ends meet this might not be the wisest of buys. Yet I bet it won’t deter thousands of rent-to-own customers snapping up this and similar gadgets in the run-up to Christmas, without a thought given to the first statement that will inevitably arrive with a dull thud through the letterbox sometime in January.
While the CA website says plenty about getting out of debt there’s next to nothing about avoiding falling into debt in the first place.
So perhaps Citizens Advice should balance its criticism of the rent-to-own sector by emphasising to individuals the need to live within one’s means and accepting personal responsibility for one’s own actions.
RED BUS…BLACK EYE
With Brexiteers taking a bit of a bashing of late in the courts, parliament and the media, it was great to see someone from Scotland perform a brilliant put down in response to a pro-Remain spoof in the satirical magazine Private Eye.
For the last but one issue, the posh boys at the Eye thought it would be a jolly jape to illustrate the front page thus: the top half devoted to the Leave campaign’s big red battle bus back in June; the bottom half showing a clapped-out bus lying derelict on a remote croft some months later. The metaphor was glaringly obvious.
In the following issue, however, the magazine was brought down to size by reader Peter Myers, based in Aberdeenshire, who wrote to say that the 40-year-old derelict bus had been bodied at the Falkirk factory of Alexander (now Alexander Dennis), a company which today, he pointed out, has a healthy overseas order book.
Mr Myers went on: “None of its sophisticated and highly-rated buses is bought by our dearly beloved friends in the EU but instead are built for operators in Australia, Canada, Hong Kong, Malaysia, New Zealand, Singapore and the US.”
Cue, faces at Private Eye redder than the Brexit battle bus?