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Nothing changes

Fifteen years ago, when I first started at Money Marketing, the paper’s then editor sent me to Cornwall for the day. The aim was to see if we could expose an alleged “advance fee” loan fraudster, whom several IFAs had dealt with – losing thousands of pounds of their clients’ money in the process.

Today, there is a reasonably healthy sub-prime market but back then many clients with adverse credit problems found it almost impossible to get loans. They would often go to see a local IFA who, in turn, would contact “brokers” promising to be able to arrange credit in return for big non-refundable fees. You can guess the rest.

It was in the course of researching that particular story that I came across the Office of Fair Trading, then based in a grimy building off Chancery Lane, for the first time. Sure, I had read about its work often enough before but this was my first personal experience of how the OFT applied its rules in practice.

To be honest, I was not impressed. It seemed to me that the OFT was incapable of policing credit in any meaningful fashion, with the result that all sorts of shysters and crooks were able to ply their trade over the years without any effective controls on how they operated, certainly not from the good people then in Bream’s Buildings.

Nothing in the intervening years has changed my mind about the OFT’s effectiveness. Sure, there have been some intriguing pieces of research emanating from its offices, most notably on commission disclosure.

But people sometimes forget that the initial drive to scrap polarisation came from a ludicrous document published in 1999, in which the OFT claimed that polarisation was fine for life and pension prod-ucts advice but not for unit trust sales.

I still recall with amusement the incredulity of assembled journalists as its plainly uncomfortable and totally underbriefed director general John Bridgeman tried to explain how it made sense to depolarise one form of advice but not the other.

More recently, we have seen the glacially slow pace with which the OFT has dealt with a “super-complaint” by Citizen’s Advice into PPI sales in September 2005 – quite apart from the fact that it should never have been the CA’s job to prod this supposed watchdog into action in the first place over a long-running scam operated by the big banks.

It has taken the FSA’s more recent – and also highly belated – intervention to end some of the worst misselling excesses in this market.

But at least, one might plausibly have argued in the past year or so, the OFT was doing something about excessive bank and credit card charges. It is true that, in the case of cards in particular, the OFT issued guidance last year to the effect that a 12 late payment charge might be more appropriate.

Yet what many people were waiting for, not least the millions who have been hit by a raft of unfair overdraft penalties, was to see what the OFT would say about a scandal where people, often the poorest in society, can be hit by a succession of huge penalties by banks, sometimes for going overdrawn by a few pounds over their agreed limits.

Bear in mind that the OFT has been examining this issue since last May and that, to most of us looking at it from the outside, for any bank to claim that its charges reflected the “true” costs of administering a customer’s overdrawn account was nothing other than a bad joke.

Last week, after a 10-month wait, the OFT, now based in nearby Salisbury Square, finally revealed what it intends to do – continue with its investigation but broaden its scope.

Chief executive John Fingleton gave the game away when he said: “The issue of bank current account chargesraises wider questions about competition and transparency of pricing.

“The initial scoping work we have undertaken has demonstrated to us that this is not only an issue for those people who are being charged but also for customers who are not defaulting on their bank accounts. A quick-fix solution is not the answer as thiscould have unintended and far-reaching consequences across the whole sector and on consumers as a whole.”

Any sensible reading of Fingleton’s comment would have deduced a number of things. First, that after 10 months’ “scoping”, the OFT suddenly realised that the issue of overdraft charges are part and parcel of the banks’ pretence of offering “free banking” to their customers while making their money through the back door.

My seven-year-old rough collie could have told Fingleton that – and perhaps thanks to her, I have been saying the same thing for ages, along with most other journalists. But the second and even more important point that flows from Fingleton’s statement last week is that the OFT was clearly told by the banks that any attack on their overdraft charging structures meant they would retaliate by scrapping “free” accounts.

So what did this brave watchdog do? Put simply, it ran away. What we are now faced with is yet another investigation, almost certainly with a gestation period to rival that of an elephant, which in the meantime leaves millions of customers at the mercy of the big banks and how they choose to rip them off.

Fifteen years on and nothing has changed at the OFT, bar its address.

nic@inspiredmoney.co.uk

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