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Philip Macalister

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Where are the regulators when you need them?

Tuesday 6th of September 2011

We are still trying to get to the bottom of this and will report in again when we know where regulators sit on this.

Meanwhile the organisation they worked for reference checked them using Google and was happy with what he found.

I plugged their names into the search engine and the top results were ones which would make anyone wary about employing these people in a role like this.

The second is a speech Simon Power made a little while ago at the loan sharks conference.

While we didn't attend the conference there was some interesting research which showed how many low income earners were being ripped off by loan sharks.

The stories are truly ones of woe. Ones where unscrupulous operators prey on the vulnerable.

These are people who are being ripped off daily. These are people who are having their lives ruined.

If there was an area of financial services which needed cleaning up it is the loan sharks. It's not the financial planners and fund managers.

Yet, Power disclosed that between 35 and 40% of third-tier lenders are not on the Financial Service Providers Register, as they are required to be by law.

It is disgraceful that the good end of the financial services market is being maligned and put through significant regulatory hoops and hurdles, but this crowd isn't. Yet the government knows they are out there breaking the law.

Here's what Power said: "It's clear to me that this fast-growing industry fuelled by advertising focused on ease, speed, and normality of third-tier loans all aimed at those on low incomes and beneficiaries is a recipe for, if not disaster, then danger.

"Add in the fact that sole lenders are not complying with regulations and do not belong to a dispute resolution scheme and you know we have a lot of work to do.

"I know that the Registrar of Financial Service Providers is taking a keen interest in this aspect," Power said

Surely more than a keen interest (and a gabfest) is required here.

Comments (6)

Clayton Coplestone

Whilst early days - the Regulators appear clumsy. On the one hand, they are disenfranchising themselves from the very community whom they regulate, through a poorly considered ‘cowboy’ scare-mongering campaign (apparently soon to be followed up with a tasteless Christchurch red-zone recipient campaign). On the other hand they appear under-prepared in satisfying the basics in regulating the industry. This includes a poor understanding of how the industry works, poor communication with industry participants, and an apparent lack of vision as too how the industry could/should operate. I have often found that a more collaborative approach yields a better outcome, with errors and oversights being quickly resolved or forgiven. Perhaps the Regulator should recalibrate their current “all are evil” philosophy and attempt to work alongside those participants who actually care about the industry that they operate within.

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13 years ago

Simon Rule

"If there was an area of financial services which needed cleaning up it is the loan sharks. It’s not the financial planners and fund managers" Well said Phil. A totally accurate statement of the current state of affairs for the financial services industry in New Zealand. What’s the point of regulating the “honest” operators if the “real crooks” can just continue to trade? What a bloody joke. The FMA instead of disrupting honest advisers and their businesses should be focussing on the loan sharks as a priority at present. I would have thought that this would be a logical and “smart” approach to policing the industry? We kept hearing from the FMA that those individuals who remained “unregistered” after 1st July would be in the authority’s cross hairs so let’s see some action to back that statement up! The FMA will fast lose all credibility if it continues this lacklustre start to protecting the consumer (the whole point of regulation in the first place) To the FMA - Get your priorities in order guys, this is not rocket science!!

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13 years ago

alan milton

Curious is right. Intelligent investors should have been in gold at least five years ago and by now should be starting to take some profit and downsize their exposure. But as seen with dot.coms, finance companies etc the average man in the street will be sucked in and then complain when things go wrong.

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13 years ago

Tony Vidler

My concern at present as the Market Surveillance begins with its "Monitoring Review" process for AFA's is the (in my view unreasonable) requirement for the soon-to-be-inspected-AFA to make themselves available for such a large proportion of a given working week at reasonably short notice. The introductory letter I sighted advised that the "the visit should take between one and one and a half days during normal business hours". I don't know about anyone else, but if I suddenly had to find a "spare" 1.5 days in the next fortnight it would involve a heck of a lot of re-shuffling of the stuff that generates the dough to pay the costs of complying, inconvenience to a number of other people called "clients", and also result in me trying to balance the conflicting time demands by working extra hours into the evenings and weekend for a week or so, resulting in me losing that thing called "having a life outside of work". Far better one would have thought to suggest a process that is deployed in digestible chunks for a business person, such as having an introductory visit that takes 2 hours, and perhaps the FMA only covers off a part of their monitoring activity. By all means come back in a couple of weeks for another hour or 2 and then tell me what you want to go over next....but asking me to block off perhaps 30% of a working week at relatively short notice? Probably followed by further significant chunks required to be set aside as the Monitoring undoubtedly uncovers "concerns" that require rectifying and re-monitoring....probably at even shorter notice....That is just a headache and guaranteed to get everyone off on the wrong foot. The headache is not the monitoring itself, it is the disruption caused by trying to schedule it in such a big chunk at the outset. There needs to be a recognition that the majority of AFA's have reasonably heavy workloads that involve a large number of other people's diaries, so there has to be a process that disrupts as few lives as possible in manageable allotments.

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13 years ago

W K

@abouttime: do you think it is better to take on a few with deep pockets who can hire QCs to take you on all the way to court, and you are not guaranteed a successful prosecution, or for you to take on many minnows who have not much or no money, and have more than 90% success rate?

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13 years ago

Austin Fisher

Related to Curious' point, most days I hear a breathless radio ad promising the earth re Gold. "They" don't want you know about it. It's now "your turn" to make serious money, etc. I know that these people have some form of exemption from the regs and it really shows. Property developers advertise in a conversational way, with a faux-presenter - who agrees wholeheartedly that residential property investments are great. I heard one yesterday about a development that hasn't been built yet - "Now - how would you feel if someone gave you half their paypacket every payday - and said, 'here you are, do what you want with it'. It's called rent. Wouldn't that be great? Well, that can happen to you - for just $1,000 down. It's a free call!" Buried in there somewhere (I think) was a rushed disclaimer but the whole tone glosses over the risk. I have nothing against ads for precious metal investing and property, but they understate the risk and, which is worse, give the impression that there is no risk at all.

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13 years ago

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