Christopher Fildes

Keeping them busy at North Colonnade — it’s time for a Trouser Authority

Keeping them busy at North Colonnade — it’s time for a Trouser Authority

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Oh, look. In response to widespread lack of public request, the people at North Colonnade have found something new to regulate. A sequence of count-down advertisements — only so many days to go — have been preparing us for the joys of general insurance regulation, which comes into force on Friday. If you are in the business and your application form has not gone in by then, you are (as the ads remind you) committing a criminal offence, so there. What business? Well, insuring things: selling insurance, advising on it, arranging it, being an agent for it or helping with the paperwork. Even if it is only a marginal part of your business, or something you do in your spare time, you’re caught. In its waterside home, the Financial Services Authority will need to add another colonnade, cantilevered out over the West India Dock. Already it has to accommodate the regulators of mortgages, and the building must be bulging. The insurers to be regulated glumly settle down to fill in their returns, send themselves on courses and hire compliance officers by the dozen. They can sit at the desks vacated by all those unlucky clerks whose jobs have been relocated to Baluchistan to save money. Who will pick up the bills for this? Wait until your insurers next ask you to stump up for your premiums, and then work it out for yourself.

Back to square one

A coy little house, with a car on one side and (I think) a battered-looking owner on the other, prop up the FSA’s ad, above the legend ‘Mortgages & General Insurance’. Apart from the urge to be neat and complete, it is not obvious why these markets now need an additional regulatory hand. Time was when they were cosy cartels, with the building societies clubbing up to set the mortgage rate and the insurers sticking to their tariff, but competition broke in on them — that jumping red telephone was once an innovation — and their customers can pick and choose. People may claim to have been mis-sold endowment policies, and the FSA might like to put them back to square one, but few people now rue the day when they were persuaded to take out a mortgage and buy a house with someone else’s money. As for general insurance on our cars and houses, most of us find out the hard way that we have not bought enough of it. Never mind: the regulators will be sure to find ways of making it more difficult and more expensive.

Defective gussets

Brooding on this regulatory outreach, I find myself mentally deleting the words ‘Financial Services’ before ‘Authority’ and replacing them with ‘Trouser’. The effect is alarming. How many people, every day, are at risk of being mis-sold trousers? All round them, lying in wait on their racks, are trousers with defective gussets, trousers in unbecoming patterns, trousers that are liable to fall down. Where is the Authority that should insist on belts and braces, on cooling-off periods and best advice, no doubt from an independent sartorial adviser? We are always buying things more problematical than trousers — or mortgages or house insurance, for that matter — and acting on incomplete information and knowledge. However do we get along without an authority to hold our hands? Quite well, in fact. We shop around, we ask around, some brands earn our confidence, some lose it — and how punishing this can be for the losers, a glance at the changing High Street may now serve to show. Some businesses — travel agents, for instance — have a mutual guarantee scheme, and we learn to look for it. An old-fashioned term for this might be self-regulation.

The law’s long arm

In all this we are surrounded by a framework of law, which lays down that the goods we buy must be fit for their purpose, and gives us a remedy if they are not. If the law that provides that framework were extended to apply with equal force to the sale of financial services, the bulging building on North Colonnade could slide into the dock and leave barely a ripple. Even without that extension, the law’s reach is long, as we may find out if the housing market boils over and householders come to regret the size of their mortgages and want to be put back to square one. The last time this happened, a pair of them found themselves sued by Lloyds Bank, which wanted its money back. In their defence, they pleaded that Lloyds’ persuasive manager had lent them too much money. Plea upheld, case dismissed.

Just the job

The Organisation for Economic Co-operation and Development seeks to appoint a secretary-general. Location: Paris, in agreeable period ch