THIS autumn marks a decade since the full scale of the payment protection insurance (PPI) mis-selling scandal began to emerge.
It was in late 2005 that the Financial Services Authority, the then regulator, began warning firms they would face action unless they sorted out their PPI sales practices. The financial pages were already reporting on the alarming number of instances where readers had discovered they were paying monthly for PPI policies they hadn’t even taken out, or which they’d been sold even though they would never be able to claim on them.
Fast forward to August 2015, and we’re still waiting for the banks involved to accept responsibility for what was fraud on an enormous scale. Instead they continue to do everything they can to avoid doing the right thing by those they ripped off.
Clydesdale Bank last week said it needs to set aside yet more cash for compensation claims, expecting to pay out up to £420 million more to victims of PPI mis-selling.
This came just months after landing a £20.7m fine for “serious failings” in handling PPI complaints.
That was a record penalty, but not for long. Lloyds, which last month revealed that it too has made further provisions, taking its PPI costs to £13.4 billion (and rising), was fined £117m in June for similar failures.
Lloyds boss Antonio Horta-Osorio said in September 2012, in a half-hearted mea culpa, that banks had focused excessively on sales targets and needed to change if they were to restore trust. As it happens, the same week the regulator had warned that an investigation of sales incentives had uncovered “serious failings”. That probe led to a hefty fine for – guess who – Lloyds, which had continued to mis-sell products well into 2012.
Horta-Osorio, you’ll notice, is still in the job. It’s remarkable, given the extent of the mis-selling, the complaint handling shambles and their failure to get their houses in order, how few senior executives have paid the price.
The Financial Ombudsman Service still gets thousands of new PPI cases each week and has warned that they will continue for years to come.
No wonder the banks want a cut-off date for complaints. Their pleas have so far fallen on deaf ears, but they’re now getting a more sympathetic hearing.
Their case centres on the argument that PPI payouts are undermining their efforts to meet increasingly stringent capital adequacy requirements, hindering their ability to lend and to contribute to the (alleged) economic recovery.
A time limit on complaints, perhaps as early as next spring, looks increasingly realistic because the government wants the so-called “bank bashing” to end. The chief executive of the FCA, Martin Wheatley, has been sacked by the Treasury so that it can replace him with someone more in tune with the demands of the industry.
It was Wheatley who insisted in February that he would only accept a time limit if it worked in the interests of all PPI mis-selling victims. It was quite obvious then that it could not. That hasn’t changed, but the mood has.
And yet any temptation to let the industry off the hook should be resisted. Even as the costs have mounted up and eaten into profits, the banks still haven’t grasped that it’s their mess and their responsibility to clear it up.