Payment protection insurance was, in most cases, a terrible product. It was over-sold by banks to many people who didn’t need insurance, or at least not at the obscene rates being charged. The banks exploited their customers’ ignorance for more than a decade and then spent years in the courts trying to defend the indefensible. By now, the facts of the scandal should not require repetition. Unfortunately, a refresher is in order when one reads the views of John Cridland.
The director general of the CBI writes in the Times that a line needs to be drawn under the PPI scandal. He wants to see a statute of limitations, to be backed by the Financial Services Authority (FSA), to cap the time during which legal claims can be initiated.
That’s a terrible idea. Yes, we can all agree that ambulance-chasing claims-management firms are behaving disgracefully in firing off text messages at random, making bogus claims and hoping the banks cough up to minimise administrative hassle. But it’s another step altogether to say, in effect, that time should be called on legitimate claims for compensation.
The FSA, which Cridland is calling upon to act alongside government, would be mad to get involved. The job of facing down the ambulance-chasing lawyers, when they overstep the mark, lies with the banks themselves. If the banks are not up for that fight, that’s their lookout.
Cridland has another bank-related beef. “Am I alone in my concern about the recent high court ruling on the Guardian Care Homes case?” he asks.
The reference is to a care homes company (no relation to this newspaper) that says it was wrongly mis-sold interest-rate swaps by Barclays. The ruling in question merely allows the case to be heard, Lord Justice Flaux having decided that Barclays’ attempts to dismiss the Libor-rigging aspects were “wholly without merit”.
Cridland thinks that “government needs to be prepared to step in to head off judge-led law if necessary”, on the grounds that it would be “a dangerous precedent” if banks were held responsible for products sold that related to Libor.
What? The only truly dangerous precedent here will be set if the government interferes in the judicial process and says customers are not allowed to seek redress. Yes, the outcome of Libor-related cases could be costly for the banks. But let’s have the courts decide cases on merit.
No doubt Cridland holds his views sincerely. But he’s doing nothing to alter the perception that the CBI is in the pocket of the big banks. That analysis was well articulated by Tory MP Jesse Norman last year when he argued that the CBI “seems to prefer the interests of a few big companies and banks to those of the hundreds of thousands of ordinary businesses that make up its membership”.
Companies pay subscriptions to the CBI based on their number of employees. Arguably, that gives the banks â€“ still very big employers â€“ too loud a voice within the organisation. Certainly, it’s a different funding model from that of the Institute of Directors, where individual directors, mostly drawn from the ranks of small and medium-sized companies, pay individual subscriptions.
Simon Walker, director general of the IoD, says he doesn’t agree with Cridland’s stance on PPI and Libor; he thinks it’s important that bank customers are able to seek civil redress. Funny that.