The FSA must press ahead with PPI reform

Radio presenter Jamie Theakston explained some of his nervousness about money in an interview in last week’s Sunday Telegraph: “I have this nagging fear,” he said, “that whoever I am dealing with regarding financial matters knows significantly more about the issue being discussed than I do, so I could get shafted at any moment.

“It’s one of the reasons why I rarely gamble on horses because all I see around me are people making a killing out of ignorant b——- like me. I feel the same when I have to talk to anyone about my investments.”

Theakston may not know much about money, but you can’t say he hasn’t got a good instinct about much of the financial industry.

There was another example of that today, as the FSA announced that it was to revise its plans for tough reform of the payment protection insurance (PPI) market after receiving “highly critical” comments from the industry.

PPI has been one of the greatest rip-offs the financial service industry has come up with in the last few decades. Sold to consumers every time they take a loan out, it tends to be insanely expensive and very, very difficult to claim on.

Tens of thousands of people have been charged huge sums for insurance they were never going to be able to use in the first place – all so that bank employees could make bonuses, and banks could up their profits.

So awful a product is PPI that a record 31,000 complaints relating to it were registered with the Financial Omsbudsman in the year to March 2009, with the vast majority of them being decided in the consumer’s favour.  That, as David Prosser points out in the The Independent, “is not a record of which the industry can be proud”.

Prosser is right, of course, but no one should think shame will ever stop the financial services industry from doing anything – only money and regulation can do that. Which is why the FSA must press ahead – regardless of how many “highly critical” comments they get – with making sure new customers stop being sold overpriced rubbish and making sure old customers get their money back.