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 paycheque every 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.
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.