FSA tackles binge borrowing

We’ve all been there. The morning after the night before and promises that we will never drink again. If there was an ‘offbooze’ we would all be chastised regularly for our irresponsible moral lapses. It seems the FSA has finally stepped in with some nice new bolts for the stable door.

Again the answer to the question, ‘how do we stop people acting "irrationally" and "irresponsibily",’ is to replace the old application process with a shiny, new application process but this time based on the assumption that we are all one step away from getting a financial ASBO. This faith in hard and quantifiable ‘facts’ (i.e. that a question was asked and the respondent answered it a) truthfully and b) using the assumptions, moral interpretations and cultural field of the inquisitor) frankly still makes me choke on my cornflakes every time Radio 4 feels the need to promote the idea that we all just need to rein in our animal spirits and then recreate the enlightened morals of the 1950’s when nanny (state) knew best and the Archers was an educational programme.

Stepping back into the real world for a minute do we really think that asking ‘clever questions’ will create better lending decisions and transform the moral economy of credit relations? I suppose it is better than asking no questions at all, and speaking as someone who renewed his self cert mortgage over the phone in 20 minutes in the no man’s land of days between Christmas and the New Year, I guess that the old system had become about as reliable as tax credits or the benefits systems for creating just outcomes. What the FSA have put forward is essentially a political statement as in reality there is little they can do to affect the proceedings of millions of conversations through regulation. Making lenders more liable for offering money irresponsibly may create some financial incentives for banks to curb their enthusiasms the next time the music is playing and we are all dancing, but I suspect that rather than take on the double cost of investment in new processes (or more to the point, better trained and more expensive people in the front line) the effect of these ‘incentives’ will be for people to lend less and only to those who have a good credit history. Nice for your average listener to Radio 4 but not necessarily promoting social mobility.

Can we really expect banks to start putting significant costs back into their branch networks in the middle of a recession just to avoid potential penalties if they start selling too much of a good/bad thing to the wrong people? Where are all these trained and experienced individuals going to appear from who will carry out these interviews? Perhaps we will see a reverse flow out of the likes of B&Q (who recognize the benefits of employing people who can remember what it was like when you fixed something yourself and didn’t throw it out, ebay it and buy a new one).

My prediction is that mortgages, now the state has started tinkering with them, like the systems which bring you tax credits, benefits, and many other centrally organized schemes will go through an endless cycle of reform and renewal – including expensive ad campaigns, creation of some quangos, at least two reports by experts and in reality very little change on the ground.

I am speaking at a CSFI Round Table on the 29^th October which is looking at non-bank sources of consumer finance – once again a timely debate and what will hopefully generate some lively discussion on this and other issues of how much we want politics to define the way our money works.

Comments

[www.facebook.com/profile.php?id=671176264]

It has been an interesting process over the last few years - and from a background in markets (I used to be a Director of the International Petroleum Exchange) - getting to the bottom of how finance may be in a world of direct instantaneous connections.

I remember dropping in to Zopa before they dived into the US, and they were interested, but distracted.....

My take on what I call Money 3.0 is here

http://www.slideshare.net/ChrisJCook/money-30

and Dave Birch has asked me to present it at the next Digital Money in 2010.

Also an article re Peer to Peer finance, here

http://www.policyinnovations.org/ideas/innovations/data/000085

[Bruce Davis]

Thanks Chris, definitely food for thought and very relevant to the concepts I am trying to get off the ground currently in terms of finding new forms of investment for individuals.

Arguably money constantly has to adapt and re-invent itself for new social contexts. It is perhaps not a new version of money that we need but a new philosophical perspective on what money is that frees us from the current institutional mindsets that constrain current beliefs about the possible.