Back in 1998, Which? drew attention to the banks mis-selling personal protection insurance as add-ons to mortgages, loans and credit cards. The topic has rarely been out of the media in the following 19 years. In January 2005, Gordon Brown’s Financial Services Authority became the regulator for insurance and made PPI mis-selling a top priority. In 2006 the FSA started fining small companies for mis-selling PPI and big companies the following year. In the coalition government’s bonfire of the quangos in 2010, the FSA duly perished and was promptly replaced by three new ones. The Financial Conduct Authority, which largely duplicated the Financial Ombudsman Service and other regulators. The FCA, and the others, inherited PPI. In 2011, the banks gave up their fight against paying compensation for mis-selling and the ban on selling insurance jointly with loans.
The PPI claims industry was unleashed. At one point 50% of all nuisance phone calls were from “advisers”, honest or otherwise, offering to recover compensation. This was not policed by the FCA (it still isn’t) and no regard was given to personal data protection or the risks of identity fraud. One of the FCA’s three key roles is to protect consumers: it would be easy enough to ensure that claims can only be made by the individual claimants to the providers (banks) or the FCA itself.
The FCA is not short of staff. The City paid the FCA £554M last year, not counting fines which go to the Exchequer. That comfortably covers the cost of its 3,500 employees and their accommodation. And the Office of Fair Trading, The Competition Commission and the Financial Ombudsman Service have all been piling in too. The last, which is about half the size and cost of the FCA, had received 1.6M PPI complaints by the end of 2016. Add it all up and the regulators policing of PPI is costing the City about £1bn. That’s about 9% of the total cost of Britain’s 43 police forces.
So in this munificent context, it should be no surprise that the FCA bullied the banks into spending £42M on prime time TV to tell us all what we have been repeatedly told for 19 years, namely that if we have a PPI claim we should make it. The ad, possibly the most irritating ever made by M&C Saatchi, is even more annoying than the nuisance phone calls from which the FCA should have been shielding us.
Why is the FCA doing this? The 18 banks funding the campaign communicate regularly with their customers. It would cost them little to remind those customers of their rights and potential windfalls. Indeed it would be good PR for the banks themselves to do so. Instead the FCA takes all the credit and then tells those who go to the website to register claims, and get advice from, the banks. No mention of the Financial Ombudsman Service. Better still, the FCA website says “Today also marks the start of a new basis for complaining about PPI, meaning customers could be entitled to compensation – even if they were not mis-sold.” Yes, you read it right. We are entitled to mis-selling compensation even if we were not mis-sold if we think the bank made too much profit from the sale.
Even by their Alice in Wonderland standards, this is odd FCA behaviour: there are cheaper and more pragmatic options. Might they just be trying to impress their masters in the Exchequer?