Franchisees make great Scapegoats

Someone’s gotta pay! the public demands.

And it is usually ends up being the least able to defend themselves in any well thought-out scam.

Franchisees become convenient fall-guys which allow “the criminal masterminds”, extremely powerful corporations and governments off the hook.

In this very important article, a “source” in the Kiwi mortgage market said:

…there appeared to have been a “double-edged fraud“, a fraud on the mortgagee (who provides the funds) and fraud on the “little old ladies” who have mortgaged their houses.

This anonymous source goes on to say:

No mortagee in their right mind would lend a 90-year-old lady $300,000 when she has no income. Somewhere in the middle, in the paper-flow to get the mortgage approved, some fibs have been told. Some middle men have made a lot of money,” the source said.

And Paul Dale is true when he said:

…the agents [more precisely, the Blue Chip franchisees] who had persuaded people like the North Shore couple to sign had “misled them in various ways”.

But I ask you to consider the following:

  • most Blue Chip franchisees were ordinary Joes and Jills that advised their relatives to join up in with good faith while
  • the finance companies had a statutory duty to refrain from predatory lending practices and exercise adequate lender’s due diligence.

Yes franchisees were overly trusting in Blue Chip and they deserve some criticism.

But:

The banking professionals should shoulder the vast majority of the liability for failing to do their duty. Not only is lending a credence good (imbalance of information and bargaining power) but they have been clearly identified for decades as having an undue influence on governments (ie. regulatory capture).

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