Just when it seemed that the depths of banks’ chicanery might finally have been plumbed, yet another mis-selling scandal comes to light.
First came revelations of more than a decade of mis-sold payment protection insurance. Then came the exposure of sharp practice over interest-rate swaps offered to small businesses. This time, it is card-protection insurance.
An estimated 23 million policies were sold, some to indemnify against fraudulent transactions on lost or stolen cards (which was wholly unnecessary, given banks’ liability for such losses) and some to protect against identity theft (the risks of which were grossly exaggerated).
CPP, the company selling the schemes, has already been slapped with a £10.5m fine. Now a group of 13 banks and credit card companies are to stump up £1.3bn in compensation at the behest of the City watchdog, the Financial Conduct Authority. Quite right. Financial institutions were at least as much to blame as CPP. But responsibility for the debacle does not stop there, either. Given the blatant worthlessness of the insurance, how did the Financial Services Authority (the FCA’s predecessor) fail to spot the scam?
Given the already long list of FSA blunders, from its failure to rein in the exuberance that led to the financial crisis, to its blindness to PPI mis-selling, the revelations about CPP are just more of the same. But we can comfort ourselves with the knowledge that the FSA has been abolished, its functions distributed elsewhere.
But what of those who oversaw such inadequacy? Sir Hector Sants – chief executive of the FSA for five crucial years from 2007 – walked away from the devastation with a knighthood, bestowed only this year, for his “services to financial services and regulation”.
Sir Hector’s ennoblement never made much sense, given that he OK’d the hubristic Royal Bank of Scotland merger for which RBS boss Fred Goodwin was subsequently stripped of his gong. Now, as evidence of FSA incompetence piles higher, it is more inappropriate than ever.
In April, Sir James Crosby – formerly of HBOS – apologised for bringing the bank to the brink of ruin and pledged to hand back his knighthood. It is an example Sir Hector should follow.