William Kay: It's high time the toxic lenders cleaned up their own act

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The Independent Online

The financial education bandwagon starts rolling in earnest next week, when I and the several dozen other people involved in the Financial Services Authority's financial capability project are due to turn up at 11 Downing Street to report just what we have been up to.

The financial education bandwagon starts rolling in earnest next week, when I and the several dozen other people involved in the Financial Services Authority's financial capability project are due to turn up at 11 Downing Street to report just what we have been up to.

But after the mutual backslapping, there is serious work ahead. The FSA has already decided to undertake a national survey of financial capability, to see the extent of the problem. Some of those with their ear to the ground are convinced that not only is the present level pretty low, but the potential is not enormous.

These would be grim tidings for those of us, including John Tiner, the FSA's chief executive, who see financial education as the main bulwark against mis-selling. The case of David Aaron, and other advisers who mis-sold so-called precipice bonds, should surely become consigned to history with some basic lessons in judging risk and remembering that if something looks too good to be true, it usually is.

This week Stephen Richards, chief executive of GMAC RFC, the UK finance arm of the US-based General Motors, hosted a breakfast at the House of Commons which made it plain that loans, in whatever form, are now regarded as being at least as toxic as alcohol or tobacco.

Indeed, John McFall, the MP who chairs the no-nonsense all-party Treasury Select Committee, called for a health warning on loans. He was echoed by several others round the breakfast table who want simpler summary and key-features boxes.

They are pushing at an open door. Although Mr Richards warned against the danger of borrowers being flooded with key-features documents, there is no doubt that lenders are on the back foot. This week we also saw Apacs, the banks' payment trade body, boasting about the extent to which it tells credit card holders to pay more than the minimum monthly repayment, which was never meant to be a long-term repayment schedule. Well, they kept that quiet for a good few years, didn't they?

Next week we can expect to see another big US lender, GE Finance, part of General Electric, wringing its hands over the Competition Commission's strictures against store cards, and how much more straightforward these are than nasty credit cards with their hidden penalties.

They don't seem to get it, do they? One at a time, both credit cards and store cards will get their come-uppance. This is not an either/or, or even "if they can do that, surely we can do this". The days when banks could fleece the public are numbered, and they will have to do something more than pay lip service to financial education to get themselves off the hook.

The mood, as expressed by the National Consumer Council's chair, Dame Deirdre Hutton, is not to ban types of lending or impose ceilings on interest rates. If someone wants to expose themselves to 30 per cent interest rates on a store card for the sake of a 10 per cent introductory discount, that's up to them. Adults have to take some responsibility, after all. But, as with cigarettes, the warnings are going to become bigger and bigger, and more explicit. Do lenders really have to be treated like drug pedlars to bring them into line? Are they really incapable of behaving themselves?

* While the $450m (£254m) Securities and Exchange Commission penalty imposed on Amvescap should have no effect on its Invesco funds in the UK - indeed, it should be beneficial as it removes a distraction - I and my fellow shareholders in the London-listed group face a tense weekend.

In his recent half-year report, the chairman, Charles Brady, said the board had put off deciding on the interim dividend until it knew the extent of the SEC's punishment. Now it does, and the vital board meeting is on Monday. The bad news is that the penalty - damages and fines for trading in and out of securities in different time zones - is twice as big as expected.

My bet is that Mr Brady will opt for a heavily reduced dividend, to keep faith with the stock market.

Can any party grasp the pensions nettle?

Harriet Harman, Alistair Darling, Andrew Smith and now Alan Johnson. Tony Blair's first three Secretaries of State for Work and Pensions found it difficult to make their own mark, despite their Cabinet status, because they have been under the thumb of the Chancellor, Gordon Brown.

Whether the new incumbent is any more successful will be as much as anything a consequence of the Blair-Brown power struggle. But, after seven years of a Labour government, it is clear that pensions are one of its greatest failures. At state, company and personal level, the system is unfair, confusing, inadequate and unlikely to deliver the financial security that people are entitled to expect as they near the end of their working lives.

The Conservatives do not have much of an answer, apart from raising the basic state pension. And this week the Liberal Democrats published a mealy-mouthed manifesto for what it cringingly called the Third Age (over 40s, to you and me).

Charles Kennedy, the Lib Dem leader, wants to create a "flexible decade of retirement" in which older people can work longer and more flexibly. This ignores the fact that about a third of over-50s are out of work, and employers are not about to take them on without a financial handout.

Otherwise, says Mr Kennedy, they could offer "non-essential assistance" in police stations. Just what the police need when they're trying to cope with a riot or a terrorist attack.

No political party wants to face the fact that by 2020 there will be so many over-70s, never mind 65-year-olds, that the then working population is going to have to be taxed to the hilt.


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