Explain this mis-selling thing to me
Discussion
In the recent round of result reporting, the banks are saying this is going to hurt, so have made huge provisions to cover it.
The bit I am having trouble understanding is the acceptance that, OK they did it move on.
The way it is being reported seems to be "Come on now be good boys give the money back and don't to it again"
Yet if I committed the same offence or conned people in the way the banks seemed to have I would be prosecuted for some type of fraud. Can someone please try to explain what happened to me.
The bit I am having trouble understanding is the acceptance that, OK they did it move on.
The way it is being reported seems to be "Come on now be good boys give the money back and don't to it again"
Yet if I committed the same offence or conned people in the way the banks seemed to have I would be prosecuted for some type of fraud. Can someone please try to explain what happened to me.
Without telling borowers, the banks included in the loan repayments an element to cover "loss of earnings insurance". In many cases they never explained to the borrowers that they were doing this.
In some cases, the insurance was not appropriate to the individual. An example would be a policy which paid up if a person lost their employment - but the individual was a sole trader or the director of their own limited company or a partner in a partnership. The policy was therefore not appropriate for that individual.
The banks have been instructed to set aside provisions in their accounts to cover repayments to those individuals who can reclaim from the banks the total amount they paid inadvetrtantly for insurance they didn't want, need or weren't eligible for.
Lloyds TSB were the biggest offender and the making of this provision has resulted in them showing a loss in last year's accounts,.
In some cases, the insurance was not appropriate to the individual. An example would be a policy which paid up if a person lost their employment - but the individual was a sole trader or the director of their own limited company or a partner in a partnership. The policy was therefore not appropriate for that individual.
The banks have been instructed to set aside provisions in their accounts to cover repayments to those individuals who can reclaim from the banks the total amount they paid inadvetrtantly for insurance they didn't want, need or weren't eligible for.
Lloyds TSB were the biggest offender and the making of this provision has resulted in them showing a loss in last year's accounts,.
Adrian W said:
Sorry, I maybe I wasn't clear, I understand what they did, as a company director I was advised years ago that these types of policies would not pay out, because technically I would be sacking myself.
Its the acceptance and apparent lack of punishment that I don't understand.
What?Its the acceptance and apparent lack of punishment that I don't understand.
The banks have had to set aside BILLIONS to pay the money back.
Technically would it not be possible for individuals to pursue their case in the Courts but in practical terms if a Bank rolls over and pays out with interest, it saves both parties the legal costs? If somebody has received one could they confirm that the payouts are made as goodwill gestures without any acceptance of liability as I imagine this is what the banks will be aiming for, if they can get it.
Soovy said:
What?
The banks have had to set aside BILLIONS to pay the money back.
I think the point being made is their punishment is apparently just paying the money back. No criminal proceedings.The banks have had to set aside BILLIONS to pay the money back.
But who would you prosecute? The whole bank? If any fines were levied then we own the bank so we'd be paying again.
hornetrider said:
Soovy said:
What?
The banks have had to set aside BILLIONS to pay the money back.
Tis only the billions they took in the first place - hence no eliment of punishment.The banks have had to set aside BILLIONS to pay the money back.
So far as I understand it there is certainly an element of punishment. The banks collected the premiums which would have been passed on less commission to the insurers.
What they are having to pay back now is the full premiums they collected not just their commission. So say they collected £100 for PPI cover over the course of a loan. They might have earnt £30 commission but would still have to pay back teh client £100.
My branch tried it with me. Couple of years ago my father died and I had to go in and transfer the accounts and wot not for the family business into my name. I spent a couple of hours in the branch setting up business accounts and then a credit card for business expenses. 'Of course you'll need PPI on that' I was told. I pointed out that I would be unlikely to be able to claim on it and they backed down but it did appear the ethos was to sell it to everyone regardless.
What they are having to pay back now is the full premiums they collected not just their commission. So say they collected £100 for PPI cover over the course of a loan. They might have earnt £30 commission but would still have to pay back teh client £100.
My branch tried it with me. Couple of years ago my father died and I had to go in and transfer the accounts and wot not for the family business into my name. I spent a couple of hours in the branch setting up business accounts and then a credit card for business expenses. 'Of course you'll need PPI on that' I was told. I pointed out that I would be unlikely to be able to claim on it and they backed down but it did appear the ethos was to sell it to everyone regardless.
Adrian W said:
Sorry, I maybe I wasn't clear, I understand what they did, as a company director I was advised years ago that these types of policies would not pay out, because technically I would be sacking myself.
Its the acceptance and apparent lack of punishment that I don't understand.
I think some of the banks may have been fined - or stand to be fined.Its the acceptance and apparent lack of punishment that I don't understand.
I'm not an expert on banking law so am not sure if "mis-selling" constitutes a criminal fraud or just a breach of the banking and/or insurance codes.
rsv gone! said:
I think the point being made is their punishment is apparently just paying the money back. No criminal proceedings.
But who would you prosecute? The whole bank? If any fines were levied then we own the bank so we'd be paying again.
Companies have boards of directors and senior executive staff who are responsible for the running of the business. They are paid accordingly. But who would you prosecute? The whole bank? If any fines were levied then we own the bank so we'd be paying again.
the operative word here is responsible. Even if you did not authorise the actual practice you have taken responsibility for the actions of your company by taking a seat on the board or becoming a COO/CEO etc.
So these are the people you would prosecute should a case be found for doing so.
I know its not fashionable to believe in this rule anymore and pretty much everybody ignored Myner's report way back but it was why boards were set up and CEOs appointed in the first place.
Responsibility means you have to accept the demerits with the merits of your position.
anonymous said:
[redacted]
I am not of the opinion that people should suffer just because they are not savvy. In fact, they need to be protected from themselves to some extent - especially when it somes to sharp practice by immoral or unscrupulous "salesmen" - which is what the banks had become.Having said that, there are definitely instances where the borrower was not even TOLD that this insurance was being charged. In some cases they were but it was couched in such vague terms by the seller that the borrower wasn't clear exactly what it was or whether it was correct for their circumstances. Some that did query whether it was appropriate were told it was - even when it wasn't. In many cases those that were selling the product weren't aware of its limitations.
It was a right mess and scandalous.
anonymous said:
[redacted]
Really tonker? So when the **** plc decide to freeze your accounts [despite you having made an financial agreement with them to tidy you over a "difficult" period) and then their underwriters [themselves of course] refuse to pay up your PPI that makes one a fckuwit does it?
Or an insurance broker refuses to forward your claim for unemployment insurance as "you found employment through an agency thus it was a temporary placement" [for 3yrs 6 months??) and state that they and they [the brokers] alone have the right to turn down your claim does that also make one a fckuwit??.
No.
Not according to the FSA anyway.
Mikeyboy said:
rsv gone! said:
I think the point being made is their punishment is apparently just paying the money back. No criminal proceedings.
But who would you prosecute? The whole bank? If any fines were levied then we own the bank so we'd be paying again.
Companies have boards of directors and senior executive staff who are responsible for the running of the business. They are paid accordingly. But who would you prosecute? The whole bank? If any fines were levied then we own the bank so we'd be paying again.
the operative word here is responsible. Even if you did not authorise the actual practice you have taken responsibility for the actions of your company by taking a seat on the board or becoming a COO/CEO etc.
So these are the people you would prosecute should a case be found for doing so.
I know its not fashionable to believe in this rule anymore and pretty much everybody ignored Myner's report way back but it was why boards were set up and CEOs appointed in the first place.
Responsibility means you have to accept the demerits with the merits of your position.
On the TV the other night they were showing the ten most wanted con artists in the UK, not one of them was a bank, if an individual does it, it is a crime, If a bank or insurance company do it, it is called something else
Edited by Adrian W on Thursday 4th August 11:20
Edited by Adrian W on Thursday 4th August 11:23
As I was saying on the discussion about the Catholic Church in Ireland - pinning blame/responsibility on the heads of large institutions is virtually impossible, Indeed, they are more likely to reward themselves with a promotion or bonus for getting away with whatever wrongdoing they were doing.
I really do think that some day in the next decade or so there will be some sort of violent revolution in the "developed" West.
Not that it will achieve much - but the institutions of church, state, finance and the law seem to be above all out to further their own ends and protect themselves, rather than to serve or protect their "customers".
Customers are for exploitation only.
I really do think that some day in the next decade or so there will be some sort of violent revolution in the "developed" West.
Not that it will achieve much - but the institutions of church, state, finance and the law seem to be above all out to further their own ends and protect themselves, rather than to serve or protect their "customers".
Customers are for exploitation only.
Within the funds set aside there is defacto some punishment.
The assumption has been made that the policies were mis-sold unless it can be proven otherwise. So in effect the issue, particularly with Lloyds as I understand it, is one of incomplete, or not fully verifiable, records rather than mis-selling per se.
Not that there weren't some cases of mis-selling, far from it!
The assumption has been made that the policies were mis-sold unless it can be proven otherwise. So in effect the issue, particularly with Lloyds as I understand it, is one of incomplete, or not fully verifiable, records rather than mis-selling per se.
Not that there weren't some cases of mis-selling, far from it!
Eric Mc said:
As I was saying on the discussion about the Catholic Church in Ireland - pinning blame/responsibility on the heads of large institutions is virtually impossible, Indeed, they are more likely to reward themselves with a promotion or bonus for getting away with whatever wrongdoing they were doing.
I really do think that some day in the next decade or so there will be some sort of violent revolution in the "developed" West.
Not that it will achieve much - but the institutions of church, state, finance and the law seem to be above all out to further their own ends and protect themselves, rather than to serve or protect their "customers".
[b]Customers are for exploitation only.[/]b
Others of the big banks did similar borderline if not illegal things - buy our insurance if you want our loan style - and, as you say, there are examples in utilities and other barely-comeptitive industries.I really do think that some day in the next decade or so there will be some sort of violent revolution in the "developed" West.
Not that it will achieve much - but the institutions of church, state, finance and the law seem to be above all out to further their own ends and protect themselves, rather than to serve or protect their "customers".
[b]Customers are for exploitation only.[/]b
My opinion is it's deliberate. It wasn't a mistake. A mistake is my phone ringing and me accidentally picking up a banana. Screwing people systemically is premeditated.
The biggest part of the "PPI scandal", and which hasn't really been touched on by the media, is IMO not so much the mis-selling of the policies themselves but the usurous premium rates applied by the banks. If the premiums had borne at least some assimilation to the risks and liabilities then the outcome would not have been so bad for them.
They were charging around 25%pa of the outstanding balance, way way beyond what would have been deemed reasonable by any underwriter. Further, the premiums were collected by the banks who then passed a tiny fraction to the actual insurers to pay for the cover. I am told by a friend in the industry a fair premium would be about 4%pa, and they'd have made a healthy profit on that. Then, on a typical credit card for instance, the "premiums were added to the balance outstanding and interest was charged on the debt at, say, a further 25%pa. Unbelievable that they ever thought this was acceptable practice.
The banks trousered an absolutlely massive profit margin. If they hadn't been so fabulously greedy in the first place then the provisions they're now having to make wouldn't even register.
Even ignoring the utterly appalling sales tactics they employed, I have little sympathy with the extent of their current liabilities.
They were charging around 25%pa of the outstanding balance, way way beyond what would have been deemed reasonable by any underwriter. Further, the premiums were collected by the banks who then passed a tiny fraction to the actual insurers to pay for the cover. I am told by a friend in the industry a fair premium would be about 4%pa, and they'd have made a healthy profit on that. Then, on a typical credit card for instance, the "premiums were added to the balance outstanding and interest was charged on the debt at, say, a further 25%pa. Unbelievable that they ever thought this was acceptable practice.
The banks trousered an absolutlely massive profit margin. If they hadn't been so fabulously greedy in the first place then the provisions they're now having to make wouldn't even register.
Even ignoring the utterly appalling sales tactics they employed, I have little sympathy with the extent of their current liabilities.
Edited by Andy Zarse on Thursday 4th August 12:06
Adrian W said:
On the TV the other night they were showing the ten most wanted con artists in the UK, not one of them was a bank, if an individual does it, it is a crime, If a bank or insurance company do it, it is called something else
You put forward and emotive argument but saying they are just 'conmen' is not particularly relevant to the cases (see http://www.fsa.gov.uk/pubs/other/ppi_thematic_repo... Most of the firms involved were not pressurising customers into buying these products - inappropriate sales, yes - TBH but i can't think of a company that hasn't sold me something i didn't really need. But as Tonker says, f8ckwits need to be protected from this sort of behaviour.Its is interesting to note that the collapse and public refunding of the majority of established banks (excluding the esoteric ones) has produced very little prosecution or censure at all in the UK. Very very little
Taking Northern Rock as an example there were meetings between the FSA at Board level and the Directors of Northern Rock every month prior to the collapse. No minutes were kept. Just unbelievable, sadly. Not one prosecution.
I think the reason is that the establishment in the UK primary concern is the establishment in the UK. The boys club looks after the boys club.
The interweaving of individuals currently apparent in the News International scandal exists in every form of life in the UK. Notably in the Banking and regulation of Banking.
There have been and are prosecutions in the US, less establishment protection
Just the way it is in the UK. Another reason our economy is failing.
Taking Northern Rock as an example there were meetings between the FSA at Board level and the Directors of Northern Rock every month prior to the collapse. No minutes were kept. Just unbelievable, sadly. Not one prosecution.
I think the reason is that the establishment in the UK primary concern is the establishment in the UK. The boys club looks after the boys club.
The interweaving of individuals currently apparent in the News International scandal exists in every form of life in the UK. Notably in the Banking and regulation of Banking.
There have been and are prosecutions in the US, less establishment protection
Just the way it is in the UK. Another reason our economy is failing.
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