David Prosser: Will no one rid us of these villains?
Saturday 10 February 2007
Have you ever watched the hour-hand of a clock and tried to spot it moving? After a while, you know that it must have done because it's no longer in quite the same place, but the movement was so slow that you never saw it happen.
Trying to follow the snail-like progress that watchdogs are making in cracking down on the great payment protection insurance scam is a similar exercise, but the other way round. Every few months, you do see a movement - such as this week's decision by the Office of Fair Trading to refer the PPI sector to the Competition Commission - but the whole thing nevertheless remains stuck in the same place.
Just to recap; it was September 2005 when Citizens Advice first made an official complaint to the OFT about the PPI industry. (Consumer groups had been warning of problems with PPI for years prior to this, but the watchdogs never saw fit to investigate of their own accord.)
There are two basic problems with PPI, which banks and credit-card providers have used for years to rack up huge profits. First, when borrowers buy the cover alongside their loan or credit card - lenders often sell it almost automatically - they pay hugely over the odds for it. Such policies are 10 or more times more expensive than identical cover that is available from independent insurers.
That's bad enough, but the second flaw is even more fundamental - the insurance is just not very useful. The policies are supposed to cover your debt repayments if you can't work due to ill health or unemployment, but they are riddled with exclusions. For most people, other types of cover would be more suitable.
Lifesearch, one of the few independent financial advisers that specialise in helping people to buy protection policies, thinks that this second issue may be missed amid all the debate about the rip-off nature of PPI. As the firm puts it: "Cheap rubbish would still be rubbish."
Still, at least the OFT had to investigate after Citizens Advice made its complaint. The regulator took more than a year to work out what everybody else already knew, but last October it finally announced it had found major flaws in the way consumers were sold PPI.
Unfortunately, the watchdog then had to give everybody a chance to respond to its findings - hence the delay of another three-and-a-half months before this week's referral.
So are we now in a position to stop consumers being ripped off? Of course not. The Competition Commission must now conduct its own inquiry - and that could stretch out for a further two years.
Other regulators are taking their time, too. The Financial Services Authority, which is supposed to police sales of PPI, somewhat belatedly announced last year that it was looking closely at the industry. So far, however, it has fined just one large provider.
It is difficult not to despair at this sorry state of affairs. In one corner, you have the hugely powerful banks and credit-card companies systematically selling a product that is overpriced and often unsuitable. In the other sits a team of regulators for whom wading through treacle would feel like a breathtaking sprint.
* Given the PPI debacle, I was particularly amused this week to see that the FSA has requested a 10 per cent increase in its budget for next year. It now wants more than £300m a year to pay for all that good work it does protecting us from financial villains.
A closer look at its budget proposal reveals that the FSA intends to spend much of the extra cash on consumer education, one of the priority tasks in its brief from the Treasury.
It's a worthy cause, I suppose. If we can't trust regulators to put a stop to scandals such as PPI, they'll at least be putting some money towards teaching us all how to protect ourselves. It's an odd day when a watchdog tries to pass on its guard duties to its masters, but there you are.
As Voltaire once said, “Ice cream is exquisite. What a pity it isn’t illegal”
How to protect your assets if the stock markets begin to head south again
Child Maintenance Service to replace Child Support Agency - but is it better?
A student's guide to financial survival: You don't have to drown in debt at university
Bargain Hunter: Kit yourself out in sports gear - at a healthy discount of up to 75%
Energy firms found guilty of bad practice could have licences revoked under Labour government
- 1 Mother fed her daughter tapeworms to make her skinny for beauty pageant
- 2 Crystal Palace next manager latest: Palace consider Ally McCoist - EXCLUSIVE
- 3 Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
- 4 ALS ice bucket challenge co-founder Corey Griffin drowns, aged 27
- 5 Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'
Richard Dawkins on babies with Down Syndrome: 'Abort it and try again – it would be immoral to bring it into the world'
Scottish independence: English people overwhelmingly want Scotland to stay in the UK
Isis threat: Cameron wants an alliance with Iran
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
Disgusting, frustrating, but intriguing: how the country really feels about its politicians
Bin bag full of cats' heads discovered near Manchester's Curry Mile
iJobs Money & Business
£50000 - £60000 per annum: Harrington Starr: Network Engineer - CCNP, Hedge Fu...
£60000 - £70000 per annum: Harrington Starr: Senior Network Engineer-CCIE, Mul...
£30000 - £50000 per annum: Harrington Starr: Network Infrastructure Engineer (...
£35000 - £45000 per annum: Harrington Starr: Network Engineer (CCNP, BGP, Mult...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony