THE FINANCIAL REGULATOR has failed in its job of protecting consumers by providing a safe and fair market, according to a damning assessment by a Government-appointed watchdog.
The report by the regulators consumer panel accuses it of being too lenient with the big banks, carrying out useless investigations and failing to understand many of the sectors and financial products it regulates.
It says consumers have been hard hit by the regulator’s failure to deflate the property bubble, clamp down on risky products, investigate rising insurance premiums and provide meaningful protection for those in mortgage arrears. “Many consumers with mortgages, pensions or shares have and will pay the price for this failure for many years.”
The Consumer Consultative Panel, in a submission seen by The Irish Times, also accuses the regulator of sidelining consumer interests at the height of the financial crisis and warns the reforms announced to date will not be sufficient to avert a similar crisis in the future.
The report calls for an independent investigation into what went wrong and says it is unacceptable that so little has been done to enhance corporate government since the crisis blew up.
“We believe it is unacceptable that the board of the Financial Regulator has failed to take responsibility for their stewardship of the organisation during the last six years. This failure undermines their ability to enhance or enforce corporate governance in the wider financial services sector.”
According to panel chairman Raymond O’Rourke, it was unable to function for almost a year because officials ignored requests for meetings and because of a delay in appointing a new panel when the mandate of the old one expired.
Separately, Mr O’Rourke is seeking a meeting with the regulator over the €18 million being repaid by credit card company MBNA to customers it overcharged.
The panel wants to know why MBNA was not fined for overcharging when much smaller operators are penalised for minor infractions.
In its submission, the panel says it is concerned that no serious effort has been made to make the public aware of consumer protection rules, and says the failure to review the code this year is unacceptable.
It also criticises the regulator’s code on mortgage arrears for failing to provide additional protection for consumers. The code prohibits lenders from taking repossession proceedings in the first six month of arrears, but the report points out that this rarely happens anyway.
The report says the findings issued by the regulator following an investigation are of little use in informing policy and of no use to consumers. The letters the regulator sends to a company following an inspection are “vague and opaque”.
The regulator’s failure to “get tough” with overcharging by Irish Nationwide and the concealment of director loans in Anglo Irish Bank sent out a signal that it was not serious about policing the big banks, the report says.
The failure to ensure sound financial service providers has hurt consumers hard, the report states. “They have suffered from negative equity on their homes, falling share prices, poorer returns on pension funds and the lack of availability of credit. The cost of bailing out the banking system has contributed to rising unemployment, wage and social welfare cuts and higher tax rates.”
The 11-member panel is appointed by the Minister for Finance to monitor the performance of the regulator, which is obliged to respond to its submissions.