Personal Finance: Who guards guardians?

WHICH company pays its directors in excess of pounds 200,000 each annually, gives its top executives golden handshakes equivalent to a year's salary and inflicts annual price increases of 18 per cent on a captive customer base - safe in the knowledge that they have nowhere else to go?

Most people would probably reply with the name of a water company or a Top 100 monopoly.

Many would be surprised to discover that this profile also fits the self-regulating organisations that monitor the activities of the life insurance companies, investment houses, banks and independent financial advisers.

These companies also have to foot the self-regulation bill, but in the end it is the consumer who pays for their profligacy.

Last week, it was revealed that Sir Gordon Downey, chairman of the Personal Investment Authority for just a few months, received a full year's salary, pounds 110,000, when he resigned last year. At the same time the PIA, the Government's latest attempt at self-regulation, announced membership fee increases of nearly 18 per cent - costs that will inevitably feed back to the consumer.

The regulators will inevitably argue that the increased costs amount to only a few extra pence per policy, but are these extra costs producing a system of investor protection that is working and is seen to be working?

Philip Thorpe, chief executive of yet another self-regulatory body, the Investment Management Regulatory Organisation, is calling for greater openness from the other regulators about the way they function.

He has instigated a series of performance measures for his organisation, the results of which he intends to make publicly available, and he is urging the other regulators to do the same.

Andrew Large, chairman of the Securities and Investments Board, the principal city regulator - who, incidentally, was paid pounds 231,000 last year - should take Mr Thorpe's call for greater openness on board.

MANY PEOPLE who find themselves in financial difficulties are attracted by the promises made by credit brokers in the small ads of tabloid newspapers.

The idea of being able to pay off all outstanding debts by simply taking out another loan is appealing for many facing financial hardship.

However, a survey published in the consumer magazine Which? last week shows that in some cases these credit brokers will lend money to people who simply cannot afford to make the repayments.

The money lent by credit brokers comes from other lending institutions. The survey from Which? found that the brokers get higher commission if they lend to people who are in more severe adverse circumstances.

The worse the debtor's situation, the higher the commission and the greater the APR on the loan. In some cases, commission can be as high as 15 per cent.

The survey found that some brokers were quite willing to arrange a loan for people when it was clear that their monthly outgoings were already outstripping their income.

The APR on unsecured loans of this sort, offered by credit brokers, can be nearly as high as 50 per cent - three times the rates offered by high-street lenders.

The APRs on secured loans from credit brokers were typically about 15 to 18 per cent, only slightly in excess of high street rates.

SAVERS with the Halifax will not greet the news that their society managed to topple the Cheltenham & Gloucester as the best performing building society with any great whoops of excitement.

The annual survey on building societies carried out by UBS reveals that the society made profits before tax of pounds 866m, a rise of nearly 27 per cent. This will be of little comfort to those who are continuing to earn low levels of interest on their accounts.