14th November 2012
Are we expecting too much from the high street banks by way of compensation? Indeed is it time to draw a line under scandals past? The director general of the Confederation of British Industry John Cridland has written to the Times this week suggesting we may need to set a time limit on compensation.
Although Cridland says it is right that people who have been missold payment protection insurance should be compensated, he also believes that the banks could benefit the UK more if they could use the money for lending again. He even refers the PPI compensation as ‘helicopter money' a term used by economists for money pretty much placed straight into the public's pockets in a time of recession rather than through the complicated asset purchases known as quantitative easing.
Here is the key excerpt – "This is money that can only be spent once and I can't help thinking that the time has come for it to be put to work more productively through lending into the economy. Banks are hamstrung enough, rebuilding their capital buffers to inject much-needed stability in the banking sector, without this continued millstone around their necks."
"I firmly believe we now need to draw a line under PPI and I am urging the Government to consider the introduction of a statute of limitations for all PPI claims, capping the time during which legal proceedings can be initiated. Such a move could be reinforced by the Financial Services Authority declaring that the point at which consumer awareness of PPI misselling is widely known has now legally been reached."
In response Which? chief executive Peter Vicary-Smith has pointed out that time limits already apply to PPI complaints. He said: "Rather than trying to stop people claiming back what is rightly theirs, the banks should be doing everything possible to make it easier for consumers to claim back their money, without any hassle."
For example, if you plan to claim to the Financial Ombudsman Service you must complain within three years of knowing you had grounds for complaints. Cridland's view is controversial of course and any reduction of the time limit or official statement that the clock is ticking on further claims would be resisted by consumer groups. The issue is also clouded in the public mind by the mass texting and phone calls deployed by claim chasing companies.
Many millions of people have received a call or a text or indeed persistent calls and texts, whether they have had a bank loan or associated PPI or not. Some chasers have actually broken the law with their hard sell tactics.
Mindful Money has also talked to specialist advisers which sell other types insurance such as income protection and critical illness who say they have received PPI claims completely in error. The banks are quite clearly facing a lot of bogus claims which is also causing an admin nightmare but there isn't a great deal of public sympathy for them.
Cridland was probably well aware that he would draw fire on the issue. The Guardian's finance commentator Nils Pratley was probably most stinging in his criticisms suggesting that the CBI, unlike other employers' organisations such as the Institute of Directors, was in the pocket of the banks. Yet Mindful Money suspects the public will probably divide into those who are still seeking compensation and who are convinced they deserve it, and those who have failed to get a loan for a business or a home and believe that in more benign circumstances they might have done so.