Ms Isolde Goggin:

I thank the Chairman and members of the committee for giving us the opportunity to appear before the committee today to speak about the issue of tracker mortgages and the role of the Competition and Consumer Protection Commission, CCPC, in the context of consumer protection. My name is Isolde Goggin and I am chairperson of the CCPC. I am joined by Mr. Fergal O'Leary, who is a member of the commission. Although the Central Bank's tracker mortgages examination is ongoing, let there be no question that it is the CCPC's view that the way in which financial institutions have treated their customers is totally unacceptable. Consumers have been categorically let down. Regardless of the financial crisis, consumers' contracts should have been, and must be, honoured.

We believe that the best way for consumers to get redress is through the Central Bank's examination and, if required, as Mr. Deering outlined, through the Financial Services Ombudsman. As demonstrated by this situation, consumer protection is particularly important in financial services where consumers are extremely vulnerable. We are happy to share our views today with the committee on these important matters.

We have been before the committee on a couple of occasions with regard to insurance and a report on options for standard variable mortgages so some members know what we do but for completeness, I will provide some detail about our work. The CCPC, which was established in October 2014, enforces competition and consumer protection legislation in all sectors of the economy so basically, everywhere a consumer buys something, competition and consumer protection legislation applies. We have 90 staff members all working towards the common purpose of protecting and increasing consumer welfare. Each year, we receive in excess of 40,000 contacts from consumers and traders. These contacts enable us to identify systemic breaches of the law across many sectors. We use general consumer protection legislation and competition law to end illegal business practices. In our three years of existence, we secured Ireland's first conviction for bid rigging, which is a competition offence, secured the first custodial sentence in a motor vehicle crime; and opened investigations and taken enforcement action across a wide range of sectors, including event ticketing, the bagged cement sector, online hotel bookings, retail and motor garages. We are currently undertaking a study of the household waste collection market in Ireland. In addition, we have launched a project on standard term contracts in residential care services for older people and have stopped thousands of unsafe consumer products from entering the Irish market. That is the big picture regarding what we do across the economy.

With regard to financial services, our primary statutory role with regard to financial services involves education and information. Informed consumers are a vital component in an active market, particularly given the increasing choice and complexity of financial services products. As part of its mandate, the CCPC runs numerous public awareness campaigns and has developed specific online tools to help consumers assess their mortgage rate and compare other products, including savings and current accounts. Our website annually receives over 1.6 million visits and the price comparison tools I have outlined are the most frequently visited pages.

In addition to this specific statutory remit, our efforts in the financial services area are particularly focused on where we believe there are gaps in consumer protection, for example, PCP car finance, at which we are looking, or where we believe an external perspective can be helpful to develop policy. An example here is our mortgage options paper, which we discussed with the committee earlier this year. With regard to competition enforcement, the committee will also be aware that we have an open investigation into potential price signalling in the insurance sector. The European Commission also has an open investigation into a different aspect of the sector which the CCPC supported by making our staff available to assist with local searches.

We also operate a consumer help line and through that, receive information from consumers regarding issues they are experiencing across the economy, including financial services. We share this information with the Central Bank so that it can take further action as necessary. Out of the 131,000 calls and emails we have received from consumers since we were established, 153 related to the scope of the Central Bank's tracker mortgage examination. The Financial Services Ombudsman would have received many more contacts of this nature, as would be expected.

As is the case with all consumer contacts we receive relating to financial services, those who contacted us were given information to help them take the next steps to address their problem and the information we obtained through these contacts was provided in summary reports to the Central Bank.

In terms of consumer protection in financial services, the primary objective of consumer protection law is to prevent consumers from being exploited, either in the sales process or by the nature of the product or service that they buy. There is an important distinction between the CCPC’s powers and those of sectoral regulators, both in Ireland and other jurisdictions. Many sectoral regulators have legislative powers to develop industry-specific rules to prevent issues from occurring. In other words, they are not going after something that has already happened but are trying to prevent it from occurring in the first place. Many also have the power to impose fines directly when breaches occur and to compel firms to compensate consumers.

In financial services, consumers are particularly at risk. Products can be very complex and there is a significant information imbalance between the consumer and the seller and the potential for consumer detriment is high. This means it is essential that consumers are protected by legislation and regulatory systems that reflect the characteristics of the market. It is also essential that there is robust enforcement with significant implications for traders who exploit consumers, both in terms of their reputation and financially.

The Central Bank and the CCPC both have powers under the Consumer Protection Act 2007. In addition to this Act, the Central Bank as the sectoral regulator also has a broad suite of sector-specific legislative powers, which empowers it to introduce codes of conduct, fitness and probity rules and so forth. The Central Bank’s tracker mortgage examination is assessing compliance with the code of practice for credit institutions, the Central Bank’s consumer protection code, the code of conduct on mortgage arrears and the Consumer Protection Act. The Central Bank’s ability to compel compensation for consumers, in addition to the presence of the Financial Services Ombudsman's Bureau, is vital in ensuring that when financial services firms break the rules, consumers are financially compensated. The Central Bank also has the power to directly fine firms for serious breaches of regulations, a power which the CCPC does not have.

In the context of the Central Bank's tracker mortgages examination, as I have already said, consumers of financial services are vulnerable at the best of times. However, difficulties with a mortgage can have a devastating effect on families. We are aware that it has been suggested that banks were operating as part of a cartel and that they agreed together to deny their customers access to tracker mortgages. Through our relationships with the Department of Finance, the Central Bank and the Financial Services Ombudsman, we have closely followed the steps being taken and the scope of the Central Bank examination. There are formal structures between the CCPC and the Central Bank, which compel the Central Bank to inform the CCPC of any information that may indicate a potential breach of competition law. I can advise the committee that no such report has been made; nor have we uncovered through our own market surveillance any information to allow us to open a criminal investigation. We cannot stress enough how important it is for any individual who has information of criminal behaviour, including cartel behaviour, to bring this information to us and we will take appropriate action. Notwithstanding this, there can be no question but that consumers have been badly let down and exploited. It is conceivable that consumers have been the casualty of opportunistic behaviour within the market as it would appear that each of the banks made a decision that was in their financial interests but which was extremely detrimental to the customers involved. This form of conduct should not and cannot be tolerated. What is most concerning is the apparent lack of a culture of compliance, which appears to be deeply ingrained in the financial services industry. This is despite the radical changes made in the boards and management teams in the post-crisis era.

Finally, the CCPC firmly believes that for consumers to be adequately protected in this sector, there must be strong legislation, vigorous enforcement and well-informed consumers. At the end of this process consumers should be fully compensated, providers held to account and measures put in place to ensure that consumers are adequately protected in all financial services products. We believe the immediate priority must be reimbursing and compensating consumers as quickly as possible. In this regard, we share the frustrations of many that this process has been slow. We are particularly disappointed in the lack of concern and slow response from the industry and in the apparent resistance from the lenders reported by the Central Bank. Compensating consumers should not be the end of the matter. It is vital that the Central Bank’s final report clearly explains exactly what occurred in each financial institution that led to consumers being treated so badly and that appropriate enforcement action is taken to address breaches to ensure accountability and drive a culture of compliance. Crucially, we believe that this clarity and accountability is essential in ensuring that consumers of financial services are never mistreated in such a manner again.