I noticed a new law aimed at ‘protecting consumers against rogue traders’ has come into force in the UK recently. 31 specific practices will be banned, and amongst those affected are fortune tellers, astrologers and mediums, who will be required to say their services are for ‘entertainment only’.
Whilst I applaud any changes towards consumer protection in general, and the outlawing of rogue traders in particular, I think it is slightly foolhardy of the lawmakers of Britain to dismiss these practices as mere ‘entertainment’.
Entire civilisations have been built and destroyed on the basis of a belief system which may or may not involve stars, predictions or similar. You only have to look at the very unentertaining mess Julius Caesar ended up in by ignoring the soothsayer and Ides of March and going out anyway. Or how different Joseph’s wardrobe might have been if his dreams about Egypt been dismissed as mere ‘entertainment’. (Although I must admit that if that Russian cult had had a bit of this consumer legislation on their side, some of them might have had a slightly pleasanter and more productive winter…)
But seriously, and more to the point, I note wearily that this 88-page document makes no specific reference to foreign currency transactions and consumer protection. Given that the overseas property market is worth some £20 billion per year in the UK, with the average transaction in excess of £100,000, it seems curious that the compilers of the document think it is more important to give an example of the correct selling techniques for pencils than for currency.
Now, I am not for one moment suggesting that the banks or currency companies which deal with consumers in significant amounts of foreign exchange are trading in any rogue way, or employing any of the now banned sales techniques.
What I am saying, though, is that shouldn’t consumers buying currency also be protected from any selling practice that ‘materially distorts, or is likely to materially distort, the economic behaviour of the average customer’.
Surely, and correct me if I’m wrong, the lack of price transparency in the consumer foreign exchange market does just that. How can a consumer make an informed economic choice if he is unable to shop around and compare foreign exchange rates?
And yet, current legislation does not require either banks or foreign exchange companies to provide that information as a matter of course. They may do, but they may equally choose to give the customer only an ‘indication’ of what price he may expect, making it impossible to make an accurate comparison.
There are not just pennies at stake here, or even a few pounds. Choosing the right currency provider can make a material difference of many hundreds if not thousands of pounds. The overseas property market has been growing steadily over the last years, and now something like one in 10 Brits owns or plans to own a place in the sun. This must be one of the biggest consumer groups around.
Maisha Frost of the Daily Express is the first national journalist to pick up on the transparency issue, and I thank her very warmly for that and her extremely accurate article about 4X in last Wednesday’s Your Money section.
In the next weeks and months we will be announcing a number of new initiatives, to try and raise awareness of the issue in the media - watch this space!
I can only hope that this recent law will help to change the way consumer foreign exchange transactions are executed. My crystal ball tells me it will…
Recent Comments