It’s tempting to demonise particular individuals or institutions, but that misses the point, the systemic reasons why we are all in the current mess. After all, you can’t blame the scum for rising to the top of the liquid.
Now, I used to think of banks as institutions that looked after my money, as a matter of sacred trust. How old fashioned! Modern banks, with the blessing of government, use my money as an ante into a global poker game. But the writing has been on the wall, quite literally, for some time ‘ banks’ logos on their walls look like logos for casinos. Dropping all pretence at prudential probity, one of our Australian banks recently changed its name and logo to nab (see this blog). We live in absurd times.
In the midst of all of this craziness, our regulators are scrambling to control these gambling houses, making them accountable for their actions, getting the gamblers to start looking after our money wisely and prudently, getting the gamblers to lend our money only to people who can afford to pay it back, and stopping the gamblers from putting our money into the global one-arm bandits.
Needless to say, the gamblers have no interest in complying with the regulators, and will only do so because they might otherwise end up in prison. Even that will not deter the inveterate and incorrigable gamblers amongst them. The only thing that would bring about real change would be to change the liquid, as it were, so that the scum becomes sludge, sinks to the bottom where it can be pumped out.
If banks were forced to become institutions that looked after money instead of gambling with it, and rewarded those who were the best custodians, then we would not need strong regulation. But in the absence of such radical systemic change, strong regulation is the only thing that will protect us.
Which brings me, in a roundabout way, to talk about regulating financial information for bank customers. Just as the gamblers have no interest in changing their behaviour to meet government requests unless they are forced to do so through prudential regulation, they have even less interest in providing customers, their mug punters, with information. When forced, they will only do so to the extent that it is in their interest, and to avoid penalties that will close down their casinos. This means that the regulation of bank customer information has to be particularly strong and effective, and compliance needs to be tested against the most stringent standards.
Regulators have a number of options which fall into two broad types: regulations of content, or regulation of performance.
In this, the most commonly used by regulators, the regulators specify the exact content that consumer documents should contain. In some cases, regulators go as far as specifying the layout and typography of such information.
To those of us with a background in document design, such regulations, written as they are by lawyers far removed from banking customers, are embarrassingly inept, even illiterate. They do not result in documents that are accessible or usable by customers.
This, ironically, serves the gamblers’ interests. They can produce documents that fully comply with the regulations, knowing full well that their customers cannot understand them, let alone query them. It also serves the interests of lazy regulators who can give these compliant documents a tick of approval, claiming that by doing so they have discharged their public duty. A complicity of silence protects the gamblers and their lazy regulators from further public scrutiny, leaving the customers to muddle through as best they can.
To be fair, some regulators are conscious of this inadequacy and try to encourage the recalcitrant gamblers by requiring that documents should be ‘clear concise and effective’ (see this blog) or that they should be written in plain English. This, too, encourages a tokenistic form of compliance that can be even more misleading to customers.
Faced with a document written in a plain English style—active constructions, using ‘you’ and ‘we’, short words and sentences, etc—customers, as the research shows, (see this review) are lulled into a false sense of security, believing that the documents are easily usable because of these surface stylistic features. Which one of us would be brave enough to say we cannot understand a document written in plain English? This emasculation and disempowering of the reader can achieve even greater effectiveness when such documents receive the imprimature of organisations like the Plain English Campaign and are awarded a Crystal Mark. Below, is an example of the genre from a UK bank. Who would dare complain now without feeling incredibly stupid?
The fact that the content is almost illegible at its normal size and colour, with only the Crystal Mark being legible, is a masterstroke of black irony.
Regulators need to guard against such tokenism.
In contrast to the above is the more effective regulation of performance. This is in many ways an extension of the kind of regulations and standards setting used in technical areas where the performance of materials, chemicals or machines is specified, but the design and exact form is left to the manufacturer or designer.
In this type of regulation, the regulator specifies the tasks that customers should be able to perform with the documents and the level at which they should be performed, and leave the manufacturer to demonstrate by tests and data that the document complies, in that consumers can indeed use the documents appropriately in their own interest.
This has been highly successful in the self regulation of medicine information in Australia, and has been widely (though less successfully, because inadequately conceived) applied overseas.
Of course, like any form of regulation it is open to abuse. The gamblers could lie about their tests and data, But hey! these are the guys who lie about their balance sheets. Flouting consumer regulations is, in their world, a minor risk. It seems that, after all, we do need to change the liquid in the bottle in which they float, so that the cream rather than the scum can rise to the top.