The banks should apologise for their fancy legal footwork over PPI
Even as it capitulated in its legal fight on payment protection insurance (PPI), the British Bankers' Association could not resist a grumble. "We continue to believe that there are matters of important principle which we will be taking forward in other ways with the authorities," it said.
In translation, the BBA means that it is submitting to retrospective compensation on this occasion for the sake of "certainty" but it will fight tooth and nail against any broader application of the principle.
Well, OK, we might agree that retrospectively changing rules is, generally speaking, a bad idea. It creates confusion and can, in this context, make financial products more expensive. And, yes, it is perfectly true that the banks, as they were coining billions by pushing PPI policies on unsuspecting customers, were not breaching any specific clause of the Financial Services Authority's guidelines.
But, come on, the banks and the BBA cannot seriously expect to live by the code "anything goes unless the FSA has outlawed it". That's just a recipe for more bad behaviour and more rip-offs.
The point about PPI policies is that they were appropriate only for a small number of people. A scandal was created when banks turned PPI into a mass-market product, sold policies in devious ways and failed to tell customers about the pricing of the product (a 15% payout of premiums was outrageous). Of course it would have been better if the FSA and other regulatory bodies had acted earlier to curb the aggressive selling. But their failure to do so should not have been a cue for the BBA to seek to limit claims for compensation via fancy legal footwork.
The moral of the tale is: don't rip off your customers. That too is a timeless principle ? as the BBA ought to have accepted with good grace by making a proper apology for its mean-minded legal action.
Source: http://www.guardian.co.uk/business/2011/may/09/ppi-moral-do-not-rip-off-customers
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