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.


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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