IF YOU’RE among the millions of people duped into taking out payment protection insurance (PPI), the argument that there’s little wrong with the product itself may seem contrary.
The basic premise of PPI – short-term cover for loan repayments in the event of being unable to work due to illness, disability or an accident – is sensible. In fact, it’s a rare example of a product sold by banks in recent years that meets a clear customer need.
That only makes the rampant mis-selling even more inexcusable. Not only did banks charge way over the odds for PPI – it has long been far cheaper on a standalone basis – but they decided that selling it to customers who wanted or needed it would be insufficient to satiate their greed.
This week we finally heard an apology of sorts from the former head of retail banking at Lloyds Banking Group.
Helen Weir, who had previously been chief financial officer at Lloyds, told a parliamentary commission on banking standards that she regretted her part in the bank’s mis-selling of PPI.
In saying sorry, however, Weir is in a very small minority.
Carol Sergeant, an ex-colleague of Weir’s when she was chief risk officer at the bank, insisted that the regulator was partly at fault for PPI mis-selling at Lloyds, which has so far coughed up more than £5.3 billion in compensation.
Sergeant claimed there had been a misunderstanding of rules over the period between 2005 and 2008 in which the regulator was scrutinising the bank’s sales. Of course, she was right about regulatory culpability. When the FSA score sheet is finally marked up as it hands over to the Financial Conduct Authority in April, PPI will be up there as its single biggest failure.
Yet it still takes the breath away to hear someone who had been a senior figure at Lloyds attempt to mount a defence of its record during the period in which it was mis-selling PPI on a heroic scale. Whatever happened to taking responsibility?
When they’re not fudging complaints in the hope that people won’t bother to take them up with the Financial Ombudsman Service, they’re failing to meet their obligation to write to all customers who may have been victims of mis-selling.
Now they want a cut-off date for compensation claims, even though the regulations give people six years in which to complain. And the worst part? Despite the regulator’s attempt to play down the possibility of a deadline, I wouldn’t bet against them getting one.
IT WAS the great revolution in the investment advice world. Nothing was going to be the same again once the retail distribution review (RDR) came into force on 31 December.
Or was it? The industry was never going to change its way overnight and the early indications are that in some senses, it’s business as usual.
The reforms, which feature what’s effectively a ban on commission payments from investment provers to advisers, were always going to take time to bed down, even after six years in the planning.
One widely predicted outcome was cheaper funds, as fund management firms no longer need to factor in the cost of paying commission to advisers. But while some companies have cut their initial and annual charges, there are complaints that many investment firms are resisting pressure to lower their annual management fees, with some even increasing them.
It may be that predictions of cheaper investing were too optimistic. Indeed, some experts have been warning for some time that the opposite will be the case. Other regulatory changes, including changes to rules governing fund platforms, may well drive costs up.
Ideally, the post-RDR transparency would help consumers know exactly how much they are paying for their investments and why. Except there’s also evidence of insurers and fund managers finding ways around the commission ban that may still result in bias.
It’ll all become clearer as the dust settles. But it will be a while before we know whether the intended beneficiary of the new rules – the investor – is really getting a better deal.