Julian Knight: The NHFA scandal shows why financial firms need much harder regulation

In an industry notorious for mis-selling scandals the case of HSBC's subsidiary NHFA has plumbed new depths. The contemptible practice of routinely mis-selling to people in their seventies, eighties and nineties has shocked the nation.

It's evil and, if it had taken place in the US, executives would be in handcuffs right now. Sadly, we don't do it that way here. HSBC has committed to refund monies even for the period before it acquired NHFA in 2005. That's the least they can do.

But having said all that, some good could come from this terrible episode. I think we have heard enough about how regulation damages competitiveness. Regulation of financial services and pre-emptive action is good for the industry. The reputation of banks, insurers and even building societies – after debacles such as Norwich & Peterborough and the Derbyshire – is so utterly trashed that the only way for people to regain any trust will be if they know these firms are regulated to the hilt. Of course, the industry will say this will harm so-called product innovation, but death bonds and most structured products are innovations we could do without.

The reaction to the NHFA scandal among my friends and family has been to shake their heads and say that they aren't surprised: they are used to being ripped off and, frankly, lied to by the financial services industry. In the past year or so, the Financial Services Authority (FSA) has partly woken up to this reality and been more aggressive in its approach (it could hardly have been less aggressive).

The banning of commissions at the end of next year is very welcome – NHFA has given the lie to those such as the Treasury Select Committee who called for a delay to this step. But the FSA is still an organisation of bean counters rather than enforcers. It suffers from the fact that, historically, its consumer panel was a backwater. If the FSA sees something it is unsure of, it should act immediately, using a version of the Office of Fair Trading's "stop now" powers. I'd also like to see criminal sanctions introduced for the heads of firms that err – there are some moves to make directors of banks more responsible for their institutions but these don't go far enough. It's only through tougher and earlier intervention that faith can be restored. No wonder we have a massive pensions and savings black hole.

But whatever the FSA does in future – and whatever it's called – the question still remains: who can you trust? The answer at the moment as far as the financial services industry is concerned is no one: not the staffer in the bank pushing a credit card on you nor the sharp-suited adviser. If you know a local independent financial adviser who comes through good word of mouth they may be worth seeing, but ultimately the only sensible option is to acquire the knowledge yourself. The costs of not being financially savvy can be massive – just look at the shocking case of NHFA.

Loopholes remain

As predicted in The Independent on Sunday a few weeks ago, HM Revenue & Customs has moved to close down a range of stamp duty tax-avoidance loopholes. This will hopefully stop some dodgy estate agents selling schemes with massive fees attached, promising to negate stamp duty. However, some of the biggest loopholes, involving foreign-based companies and trusts, still seem to be present. You and I have to pay stamp duty when buying property, so why doesn't a major international fund or company?

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Reach Volunteering: Trustee – PR& Marketing, Social Care, Commercial skills

    Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...

    Reach Volunteering: Charity Treasurer

    Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...

    SThree: Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...

    Ampersand Consulting LLP: Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Day In a Page

    In a world of Saudi bullying, right-wing Israeli ministers and the twilight of Obama, Iran is looking like a possible policeman of the Gulf

    Iran is shifting from pariah to possible future policeman of the Gulf

    Robert Fisk on our crisis with Iran
    The young are the new poor: A third of young people pushed into poverty

    The young are the new poor

    Sharp increase in the number of under-25s living in poverty
    Greens on the march: ‘We could be on the edge of something very big’

    Greens on the march

    ‘We could be on the edge of something very big’
    Revealed: the case against Bill Cosby - through the stories of his accusers

    Revealed: the case against Bill Cosby

    Through the stories of his accusers
    Why are words like 'mongol' and 'mongoloid' still bandied about as insults?

    The Meaning of Mongol

    Why are the words 'mongol' and 'mongoloid' still bandied about as insults?
    Mau Mau uprising: Kenyans still waiting for justice join class action over Britain's role in the emergency

    Kenyans still waiting for justice over Mau Mau uprising

    Thousands join class action over Britain's role in the emergency
    Isis in Iraq: The trauma of the last six months has overwhelmed the remaining Christians in the country

    The last Christians in Iraq

    After 2,000 years, a community will try anything – including pretending to convert to Islam – to avoid losing everything, says Patrick Cockburn
    Black Friday: Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

    Helpful discounts for Christmas shoppers, or cynical marketing by desperate retailers?

    Britain braced for Black Friday
    Bill Cosby's persona goes from America's dad to date-rape drugs

    From America's dad to date-rape drugs

    Stories of Bill Cosby's alleged sexual assaults may have circulated widely in Hollywood, but they came as a shock to fans, says Rupert Cornwell
    Clare Balding: 'Women's sport is kicking off at last'

    Clare Balding: 'Women's sport is kicking off at last'

    As fans flock to see England women's Wembley debut against Germany, the TV presenter on an exciting 'sea change'
    Oh come, all ye multi-faithful: The Christmas jumper is in fashion, but should you wear your religion on your sleeve?

    Oh come, all ye multi-faithful

    The Christmas jumper is in fashion, but should you wear your religion on your sleeve?
    Dr Charles Heatley: The GP off to do battle in the war against Ebola

    The GP off to do battle in the war against Ebola

    Dr Charles Heatley on joining the NHS volunteers' team bound for Sierra Leone
    Flogging vlogging: First video bloggers conquered YouTube. Now they want us to buy their books

    Flogging vlogging

    First video bloggers conquered YouTube. Now they want us to buy their books
    Saturday Night Live vs The Daily Show: US channels wage comedy star wars

    Saturday Night Live vs The Daily Show

    US channels wage comedy star wars
    When is a wine made in Piedmont not a Piemonte wine? When EU rules make Italian vineyards invisible

    When is a wine made in Piedmont not a Piemonte wine?

    When EU rules make Italian vineyards invisible