Today the FSA launched a consultation paper about rip off Britain, sorry I mean, how to regulate credit companies. By credit companies, I mean those that offer money to you and I. That includes those wonderfully cheery puppets and reworked versions of old familiar tunes to bombard us with the opportunity to borrow. The Government have finally drawn up some headline principles (Lord knows why it takes politicians so long to do anything that really matters) and put this into the safe hands of the FSA (not to be confused with Food Standards Agency).
So the FSA has outlined its initial thoughts and guidance in CP13/7 a consultation paper. You really ought to read this if you have the vaguest concern about the easy credit that is available at 1000%. Mind you, I’m guessing if you are like most people, the small-print is often overlooked (its small right?). You always read the small-print… except for those wretched 1000 pages from a well known online music rental company that you thought you were buying music from (and many others) as you tick that, well.. yes you did read the terms and conditions..but you didn’t. CP13/7 has 201 pages – good luck. Designed to be thorough or off-putting… you decide.
So why is this important? well first of all because people that lend money need regulating. This is and always will be, the most obvious form of exploitation in Britain – providing people that cannot afford something with ability to spread payments that feels less painful, but is invariably 2 or 4+ times the original price. This is the most basic financial planning building blocks – yet our politicians, think tank experts all believe that borrowing is the way to get us out of recession. Paying off debt is the opposite of what Government wants us to do personally, but precisely what they want us to do with public finances. Spot the irony?
Ok, we don’t want a nanny State, well I don’t, but I would like a society that enables people to borrow money sensibly and not at exorbitant rates of interest, and yes provided by institutions that are accountable rather than the local mob and bully. Sadly, when people get into money problems it isn’t very easy to get out of them and the numbers are continuing to go in the wrong direction for those that are in the deep stuff. This then comes back in two forms – more assistance from the State and more money owed, never to be repaid to businesses of all sizes, threatening viability and so the cycle continues. At some point, someone has to be told a truth. No. But a cold reality is not enough without a proper plan and strategy to recover. Obvious lessons from AA or any addiction teach us this (we have to alter belief and behaviour, which is more complex). This is of course precisely what the public finances have been grappling with, not just here but also in Europe and, well everywhere. Whilst we might want to blame “the bankers” (without really understanding what that means) actually this is the result of not living within our means and this is precisely why having a financial plan is not just “nice to have” but frankly pretty vital. So I was fairly amazed to learn that most financial advisers still don’t do any proper financial planning for their clients (that means cash-flow planning). I will guess that few will offer thoughts to the FSA and this will be yet another missed opportunity. Rip off Britain (well parts of it) will probably continue to thrive…unless you and I take some action…over to you.