PPI should bother shareholders

The PPI saga should obviously bother consumers – but it should bother shareholders too, says Merryn Somerset Webb.

I took out a mortgage in 2000. Before signing, I noticed something called mortgage insurance being added to my monthly payment. Things were tight already, it seemed very expensive, and I didn't want insurance. So I went back to the broker and asked to have it removed. You must have it, he said. What if you die? There is no what if, I said. I haven't any dependents. What if you get a terminal illness?, he said. I'll sell and move back to my mother, I said. He tried a few other things. Then, with him close to tears (he was young), we got to the crux of the matter. You have to take it, he said. "It's how I get paid."

PPI was his main source of income. If he wanted a paychequeevery month, he had to sell mortgages, and then do his best to tag PPI on at the end, at a shockingly high average commission of about 67% of the cost. He was a perfectly nice kid trying to make a living. His employers the ones setting the incentives? Dishonest manipulative charlatans.

It took a while. But the financial regulator eventually noticed. The game has been up for a while now. Anyone mis-sold PPI or who paid commission on it of more than 50%, can still claim to get their money back with a handsome interest rate payment (8%) on top (claiming back commission is new, so even if you weren't mis-sold your PPI, check your documents now). That's turning into a very expensive business for the banks: £28bn so far. But the Financial Conduct Authority (FCA) is making them offer to pay even more by financing a new marketing campaign featuring Arnold Schwarzenegger (I have no idea why him, other than that it might amuse the FCA to make the whole thing extra expensive for the banks) with a view to getting thousands more to claim.

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The final bill could easily hit £40bn. The whole saga should bother consumers asking anyone to help you with your money involves huge amounts of trust. Seeing that so comprehensively abused is very trying. But it should bother bank shareholders just as much. Every time something like this happens, the UK's financial providers promise to improve their corporate cultures; to put their clients' interests first; and to cut the risk of their profits being slashed by fines and compensation in the future. They never actually do it. This week, Citizens Advice called for credit card providers not to raise card limits presumably to tempt people into taking out more debt than they want without asking them if they would like the "service" first. It seems it takes more than £40bn to turn a culture that tolerates dishonest manipulative charlatans into one that does not.

PS If you think you may have a PPI claim and aren't sure how to get started, go to FCA.org.uk. It's very straightforward.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.