Some things come in threes: buses, bad luck, BeeGees. Others come round in a steady stream: sushi, airport luggage, financial scandals. So what’s next?
Another financial mis-selling scandal hit the headlines recently as the regulator, the Financial Conduct Authority (FCA), announced a £1.3bn compensation deal for customers mis-sold CPP card protection policies and ID fraud insurance.We’re pleased that the FCA is taking action, but it’s taken a while.
Which? first raised questions about these poor-value policies back in July 2009. In 2011, we submitted evidence of numerous examples of aggressive selling techniques and companies flouting the rules to the FCA’s predecessor, the Financial Standards Authority.
PPI, mortgage endowments and Libor-fixing
Unfortunately, ID fraud insurance mis-selling is just the latest in a long line of financial scandals, including the mis-selling of mortgage endowments, split capital investment trusts, personal pensions and interest-rate swaps, not to forget Libor-fixing.
The dubious honour of biggest scandal goes, of course, to payment protection insurance (PPI). Earlier this month, the total put aside by banks to cover PPI mis-selling hit a staggering £18.8bn, dwarfing even the £12bn personal pension debacle and the £3bn cost of endowment mis-selling.
Sometimes the problem stems from a poorly-designed product, other times the sales and advice process is to blame. Sometimes it’s a case of a company spotting an opportunity to cash in on weaknesses in the regulatory system. Often it’s a combination of all three.
Banks ‘they’re all the same’
The risk is that the seemingly endless stream of mis-selling scandals not only put us out of pocket, but also make us distrust the financial services as a whole. We’ll find ourselves in a difficult situation if people believe that no financial service provider can be trusted and ‘they’re all as bad as each other’. These views will stop us taking out products that could be beneficial, put us off seeking financial advice and finding the best deal.
The banking regulator has the potential to be a real watchdog, rather than a lapdog to the financial services industry. It has the power to stop poor products getting to us rather than having to take retrospective action. In the meantime, though, I fear that we haven’t seen the last in the conveyor belt as banking issues from previous years bubble away under the surface. What do you think will be the next scandal to hit the headlines? Have we really seen the last of them?
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