# Charlie Weston: 'Time to look at stripping Central Bank of its consumer protection role as people are let down again'



## Brendan Burgess (27 Jul 2019)

Interesting article by Charlie today

*Charlie Weston: 'Time to look at stripping Central Bank of its consumer protection role as people are let down again'*

Charlie is right in saying that dual pricing of insurance products should be banned. So I would agree with him that on the insurance issue, the Central Bank is not doing a good job.  But how are they doing in other areas? 

Depends on the issue.

*Mortgage rates   0/10 *

Their performance on mortgage rates has been shockingly bad. They published misleading information claiming the rates were just a bit higher than the rest of the eurozone for years. Even after I corrected them, it took a change of Governor to start publishing the correct information.

They do nothing to bring the outrageous rates under any form of control. They allow cash backs to distort the market and fool customers. They don't require banks to treat existing customers fairly.

They published a really rubbishy report justifying the high rates in Ireland.

They impose capital requirements on banks which mean that a foreign lender would need higher capital the Irish banks with their history of reckless lending.

Of course, the Central Bank is not the only party to get 0/10 for this. The political system which allows people to continue to live in their homes for years without paying a penny on their mortgage is more to blame than the Central Bank.

*Trackers  8/10 *

After a very slow start, they have done a great job.  About 25,000 people have got trackers back and substantial redress and compensation. This simply would not have happened without the Central Bank's involvement.  A few hundred might have been organised enough to go to the Ombudsman and only some of them would have succeeded. The Central Bank persuaded the banks to go well beyond their legal obligations.

Of course, I disagree with the Central Bank on their interpretation of some cases. But that is not to say that they are wrong and I am right. For example, I disagree with the way they have agreed with AIB on  the prevailing rate issue.  But, I have to admit, that without the Central Bank, the prevailing rate issue would be dead. By forcing AIB to acknowledge a "service error", they opened up the Ombudsman and High Court to these 6,000 customers

*Mortgage lending limits  9/10 *

These have been very cleverly designed and calibrated. They are preventing the borrowers from reckless borrowing and the banks from reckless lending.

*Mortgage Arrears - Not sure*

The Code of Conduct on Mortgage Arrears is great for protecting borrowers in genuine difficulty who are being treated badly by their lenders.

But it allows the chancers to get away with not paying for years.

*Insurance *

I suspect it's a bit like putting 100% of the blame on the Central Bank for high mortgage rates.

The fundamental problem is the claims culture. There isn't much that the Central Bank can do about that.

And given the history of insurance company collapses in Ireland, the Central Bank is right to prioritise the solvency of the insurance companies. That is the most important aspect of consumer protection.

And just as the Central Bank should ban lenders from treating existing customers unfairly in relation to new customers, I agree with Charlie that dual pricing in insurance should be banned. 

_Several insurers in this market are using big data to segregate consumers into those who will bear a big price rise, despite being a loyal customer, and those who will not.

This is known as dual pricing and it is effected by use of what is known as price optimisation software.

These software packages use algorithms to separate out customers and identify those ripe for predatory pricing, so-called dual pricing._


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## Brendan Burgess (27 Jul 2019)

So should the Central Bank be stripped of its consumer protection role?

Absolutely not.

It is very unlikely that any alternative would or could have the legal and persuasive powers that the Central Bank has. And even if we could design such an alternative, how likely is it that it would be staffed by competent people fit to do their job?


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## odyssey06 (27 Jul 2019)

If you're not going to split out then there need to be a deputy governor of the CB whose specific role is consumer protection with a dedicated department within the CB reporting directly to them.
Very hard for one organisation to have focus on two such different aspects. At the moment it is not the competence of the CB, it is that this is obviously a role they dont appear to want to be doing.


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## Hanata (29 Jul 2019)

There already is a separate deputy governor in the Central Bank with responsibility for financial conduct, including consumer protection. [broken link removed]


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## odyssey06 (29 Jul 2019)

Hanata said:


> There already is a separate deputy governor in the Central Bank with responsibility for financial conduct, including consumer protection. [broken link removed]



Thanks for that chart, but perhaps it's time to drop the "including" and to have a deputy governor with that as sole\core responsibility.

As an aside, I see one of my old bosses on that chart, small world :L)


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## DeeKie (29 Jul 2019)

The CBI has ramped up the enforcement arm. Has there been any improvement yet though?


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## NoRegretsCoyote (29 Jul 2019)

There are conflicts in other central banking activities too.

For example low interest rates can reduce bank profitability, undermining financial stability, which is another objective of a central bank.

Staff planning for bank resolution may look for a different set of policies than those involved in ongoing supervision.


It should be possible to manage these conflicts once reporting lines are clear and arrangements are in place for independence.


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## Ndiddy (30 Jul 2019)

Is this not the role of CCPC?


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## Brendan Burgess (30 Jul 2019)

Ndiddy said:


> Is this not the role of CCPC?



No. Their role is to make sure that restaurant owners don't forfeit the deposits of customers who book big tables and don't show up.

Brendan


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## Sarenco (30 Jul 2019)

I don't really see the problem with "dual pricing".

It effectively offers a discount to pro-active consumers and penalises inertia.  What's wrong with that?

Why anybody believes that loyalty to an insurer (or bank) should be rewarded is beyond me.

Price-fixing (in any guise) is anti-consumer.


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## Brendan Burgess (30 Jul 2019)

Sarenco said:


> I don't really see the problem with "dual pricing".
> 
> It effectively offers a discount to pro-active consumers and penalises inertia. What's wrong with that?



What is wrong with that is that there are very few of us who have the resources and comfort level to evaluate mortgage deals. 

What is wrong with that is that it is not easy to switch mortgage lenders. In some cases, it's not possible. 

What is wrong with that is that lenders deliberately complicate products to discourage people from shopping around. 

What is wrong with that is that we want to encourage competition and the best way to encourage competition on mortgage rates is for lenders to offer a simple clear mortgage rate uncomplicated by discounts and cash backs. 

Brendan


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## Sarenco (30 Jul 2019)

I disagree with all the above.

Regardless, competition shouldn't be about what's "right or wrong".  I'm happy to leave that to the moral philosophers.

I don't agree that any regulator should specify how market participants should compete with each other.  Frankly, that's not their job.


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