Consumers were robbed of many of their rights and protections across the financial sector during the boom because of “soft-touch” regulation, excessive bureaucracy and the authorities’ obsession with maximising the tax take from property transactions, it has been claimed.
The withering assessment of how consumers have been served by successive governments, the Central Bank and the Financial Services Ombudsman and the European Union is published by the Free Legal Advice Centres (Flac) today. The report claims regulations governing consumer protection remain deeply flawed.
According to Flac, during the boom years, against the backdrop of an EU policy shift towards a more market- than consumer-driven policy, the authorities here adopted a much more “hands-off” approach to consumer protection regulation. It says this is “most plausibly explained by the pursuit of ultimately unsustainable rather than balanced economic growth that resulted in the prioritisation of property-related tax revenues over consumer rights.”
Flac’s reports highlights multiple instances of soft- touch regulation, including the failure to “curb excessive interest charges and to properly regulate the activities of subprime mortgage lenders” and it says the bolting of European directives on to Irish laws led to a “scaling down of responsible lending provisions” and “resulted in both convolution and complexity”.
The study concludes that the legal architecture for the protection of consumers of financial services in Ireland and in particular for those using consumer credit and ancillary services remains flawed.
“The interests of the credit consumer in particular have proved over time to be secondary to the interests of other actors – policymakers, the regulatory authorities and primarily, the financial service providers whom they regulate,” it says.
Flac is an independent human rights organisation which promotes equal access to justice for all. It has been advocating for changes to Irish law that will improve protection for consumers of financial services and credit for years. Its report is co-authored by its senior policy analyst Paul Joyce and Stuart Stamp of the department of applied social studies at NUI Maynooth.
The Central Bank’s approach to regulation of the financial sector comes in for severe criticism and many of its codes would have “doubtful admissibility in legal proceedings”, the report says.
“Contrary to popular perception, there is little to prevent many of the irresponsible lending practices which contributed to bringing Ireland to its economic knees from recurring in the future,” it adds.
The study is also the first to formally interview users of the Financial Services Ombudsman service.
The overall view “was a negative one, and the process appeared from the consumer/advocate perspective to be overly formal, impersonal, onerous and confusing to the extent that many consumer respondents appeared to have become almost completely lost in the process”.
