Wednesday, 17 December 2014

Weasel Words of the Week (2) - Mis-selling


The Stigler reminded me of this one in a response to a previous WWotW.
This is probably my pet hate of all Weasel Words.  It is concrete evidence that The Powers That Be have been reading 'Nineteen Eighty-Four' and think it a manual, not a caution.  'Mis-selling' is Newspeak, pure and simple.

'Mis-selling' is in direct conflict with caveat emptor. In fact I consider it a deliberate attempt to destroy caveat emptor and personal responsibility.

It is impossible to 'mis-sell' anything.  Selling (and buying) are quite without coercion.  They are entirely voluntary acts of exchange between willing parties. 

The buyer buys, voluntarily, on his own cognisance, that what he is getting in exchange is what he wants. 

The seller sells at the maximum price he can, and quite rightly so.
And, quite rightly, there are Laws about merchantable quality. (  for a good read and lots of links) and a 'confidence trick' is a crime.
Anyway, if you have 'mis-selling' you must also have 'mis-buying' which is clearly nonsense.

But of course, in a world where TPTB use Behavioural Economics to justify endless interventions, 'mis-selling' might make sense.  But if that is the case, then we might just as well go the whole hog and nationalise and ration everything.

That's been tried, and it failed.


The Stigler said...

I'm not sure it was me.

My own view on cavaet emptor is that it's generally right, but for certain things with dangerous consequences, you may want government regulation (e.g. developing medicines) where the buyer could die, and can't reasonably be expected to understand the dangers of a product.

I remember noticing some time ago that Watchdog changed from a programme in the 80s that highlighted dangerous products and pushed for quite sensible regulations in that area, to being about things like people having to pay fees to change names on flights or how Now TV only gives you limited time to watch a series.

The most effective mechanism against crap is the free market. Rover went to the wall because they made crap cars and didn't care about their customers. Toyota became the biggest car maker on earth by making good cars.

paulc156 said...

Well it might just as well have been me. I referred to the 'feral' world of big finance with regards to the mis-selling of financial products [one after the other] among numerous other crimes.
The problem with taking the market view of such behaviour [bank x shafts it's mugs/customers so go to bank y]is that banks, from 'A' all the way to 'Z' pull the same trick at the same time so no bank suffers loss of market share due to it's habit.
More specifically regards the term 'mis-selling' being the equivalent of 'mis buying', this is not justified in my view. Banks are selling what are often complex financial products which they understand perfectly well [or not in the case of CDO's]to retail customers who are obviously at some considerable disadvantage in such a trade. If they weren't protected by the law they might be expected to be fleeced for decades without even realising it [as in the case of PPI] possibly to the tune of £50 billion or more [as in the case of PIP]. so in this case at least, mis-selling is absolutely the correct term to use. Any suggestion that it's otherwise is just being mealy mouthed, imho.

mombers said...

Isn't it all about the marginal cost of production? It's very hard to make an absolute killing on something that takes a reasonable amount of effort to fake, e.g. a car that has a dodgy gearbox disguised by sawdust - you still need to produce a crap car that can be dressed up like a decent one. But something like a wildly mispriced annuity or useless insurance product like PPI is literally free to produce, so if you can pull the wool over a customer's eyes, the potential return is enormous. Another good example is illegal drugs. The cost of production is so small compared to the artificially created selling price that you can make a killing by cutting the good stuff with flour or worse.

Steven_L said...

The phrase "merchantable quality" was actually replaced with "satisfactory quality".

Caveat Emptor is pretty much a dead concept in UK (EU-led) consumer law.

I'm not sure I agree that selling is without coercion. When I worked in telesales it was all about coercion.

Rich Tee said...

With PPI the whole scandal might not have happened if British consumers would simply accept that it is reasonable to pay an admin fee for a current account, as is commonplace in other countries.

Then the banks would not have to cross-subsidise current accounts by selling complicated financial products that the public don't understand.

Bayard said...

"Then the banks would not have to cross-subsidise current accounts by selling complicated financial products that the public don't understand."

The current thinking appears to be that they would have done it anyway, even if they didn't need to, because they are unscrupulous bastards.

Lola said...

TS. Yes, generally.
P156. Erm, the bank employees have generally very little idea about the ‘complex’ products they are selling, in my experience. Endowments and PPI are not complex products.
Mombers. New cars are now in general very good, broadly thanks to completion. Used car sales are more likely to produce buyer dissatisfaction. (I discuss PPI and annuities below).
SL. Indeed. The EU bit is telling. Telesales may be more manipulation or intensive motivation. It is not coercion.
Bayard. Well, yes, but.
In regards to PPI I can tell you all categorically that the retail FS industry was coerced into selling the crappy stuff by the regulators. (I will expand if you like, but pro tem just take it from me).
In regards to Endowment policies the whole review was a hindsight based construct designed to provide a boost to statist interventionism. Only a miniscule number of sales could be considered bad and pretty well all sales were conducted under the accepted standards of the time.
The weasel words ‘ mis-selling’ were invented to justify these actions.
Whatever, I still hold that ‘mis-selling’ is a nonsense phrase.

paulc156 said...

"P156. Erm, the bank employees have generally very little idea about the ‘complex’ products they are selling"

i'm not accusing the junior staff given the job of fleecing unsuspecting customers/mugs but the senior executives right up to board level who saw to it that the fleecing was routine in every branch.

"accepted standards of the time"... and those aren't weasel words?!...hmm. I think I get it. ;)

Lola said...

P156. Taking the endowment thingy. The standards of the time were adhered to. Banks and Building Societies provided mortgages and sold associated endowments. This is and remains an entirely reasonable 'linked sale', since Banks never 'sold' advice. They are product makers and distributors. Whether or not you think endowment mortgages are a good idea is irrelevant. They were doing what they were supposed to be doing. At the same time you could get your mortgaged sourced and organised by a broker, who generally was more likely to 'advise' you. During the 80's the vast majority of applicants pressured brokers and banks to get them a mortgage so that they could 'get on the housing ladder'.
Then when it all goes tits up the regulators see a golden opportunity to buy approval by using later standards on past business practices, and a wholesale redefinition of 'sales' and personal responsibility.
I hold no candle for banks, but the whole endowment thingy was a giant scam to buy votes. I have about 15 clients who made successful claims (none on sales I had made) and all except one freely admitted that they knew just what they were doing at outset, but now they were being offered free money so they would be mugs not to take it. The 15th was genuinely badly advised, but the regulatory system completely failed to help her.
'Mis-selling' was created as a phrase and a philosophy to justify all these machinations.

Mark In Mayenne said...

Mis-selling, as I understand it means lying about your product or concealing aspects of it that materially affect the buyer's decision.

Mark Wadsworth said...

The UK banks, like most banks worldwide, have been stumbling from scandal to scandal for decades, some major, some minor, so I'm with the majority on this.

The banks were clearly 'mis-selling' stuff. They were making money in return for doing pretty much naff all. It's an ugly word, but it is true.

Steven_L said...

Over the years I've met a few otherwise honest trading standards officers who have admitted claiming endowment 'mis-selling' compo when they knew fine well the risks.

Some of them knew they were taking the biscuit, but all their friends were doing it and they wanted the few grand.

Others actually believe that even though they understood the product, it was 'mis-sold' because of the graphs and projections etc in the sales material and thought themselves entitled.

I do wonder if TPTB are quite happy with all the crappy products when they are being sold, creating thousands of telesales jobs. Then equally happy when the compo is being paid out, boosting consumption and proving thousands of claims handling jobs. Often for the sale folk that sold them in the first place.

Lola said...

MW & Co. No, I don't think that they were 'mis-selling' as such. And with PPI they were absolutely told to sell the stuff (as were we, only my general principle if told to do something by a bureaucrat is to do the opposite). So in the case of PPI Blair and Tiner (I think) were more culpable.
The endowment thing was on the crossover from there to here, and undoubtedly hindsight judgements were made and exploited to further the regulationist agenda.
Subsequent to the FSMA 2000 all sorts of other crap took place, but the FSMA 2000 proto nationalised the banks, so....?
I am no friend of the current banking settlement, and undoubtedly they have behaved abominably, but 'mis-selling' is not the word for that. The word for that is criminality.

Derek said...

Agreed. It's not mis-selling. It's criminality, specifically fraud. Just as writing a dud check, using a stolen credit card, or spending a counterfeit tenner isn't mis-buying. It's theft.

Lola said...

Thank you all for your insightful comments. in the case of this WWotW I am particularly keen to have my arguments pat, in order that on demand I can take apart any grotty FCA apparatchik that turns up...(Fat chance - they lie, I don't).