Another day, another massive fine for bank mis-selling . Yesterday it was a £28 million spanking for Lloyds for inappropriate incentives to staff for pushing financial products. Lloyds has already set aside £8bn for mis-selling loan insurance and £400m for mis-selling interest rate swaps. And in 2003 it was fined £1.9m and handed a £100m compensation bill by the Financial Services Authority for mis-selling so-called "precipice bonds".
It can only be time before Watchdog begins an investigation into Lloyds deeply worrying pushing of pet dental insurance which scandalously only pays out for one filling not a full set of dentures.
Few have a good word to say about banks these days but I’m starting to worry that the current climate of bank-fining, customer moaning and blame attribution may have gone too far.
Earlier this year I received a long letter from my mortgage lender warning me that part of our house mortgage – around 30% – was on an interest only basis. It spelled out in very simple terms what this meant and advised me that I should be thinking carefully about what I’m going to do in 15 years time when the mortgage comes to an end and that hundred grand is still sitting there unpaid.
This was an uneasy attempt to keep itself covered. What it’s worried about is that in fifteen years time, or sooner, I’m going to panic, realise there’s no way to pay that money off and then go bleating to "You And Yours," the banking ombudsman and the FCA and anybody who will listen about why I deserve compensation for this cynical fraud.
But I knew very well what I was doing by taking an interest only element to my mortgage. Everyone was doing it.
Many still are. How else can you get your foot onto the ladder? Some punters borrowed the whole bang shoot on Interest Only. I was living on what my grandfather – god rest his soul – would have called the Never Never.
I was being a bit greedy - getting a bigger house without having to worry about the increased costs of paying off the capital of the loan as well as the interest. Now what with inflation and the increase in London house prices this deadly gamble has worked out quite well so far.
In 15 years time one hundred grand will be diddly squit and won’t buy you half an outside dunny in Peckham. But generally speaking buying a large chunk of your house on Interest Only is not a good idea and should not be the way to do it.
Home ownership, like pet dental insurance, is not a right. Nobody has a right to own a home although we’ve managed to convince ourselves in the UK that it is. I’m sure the nauseating Foxtons plus Kirsty and Phil believe it is – their grim careers depend on it.
Some would have the crime of young people not being able to buy a home up there with the wrongs of apartheid.
It isn’t. Just ask the Germans who are happy to rent. The current government is getting itself tied in knots trying to meddle with the property market and might well make things worse with this interference. The problem isn’t demand, it’s supply. But that’s another story.
The point is that finance, like life generally, isn’t simple and it’s got a lot more complex over the last few decades at both ends of the game – retail stuff and the kind of weird shit that Goldman Sachs peddles.
If we want mortgages, life insurance, health insurance, annuities, pet insurance and yes, even interest rate swaps and the advantages they bring to our lives and businesses then we must engage with them. This means learning about money and how it works.
And where has the principle of caveat emptor gone? It was fascinating to observe the FCA pronounce in its condemnation of the selling of Interest Rate Hedging Products that such devices should never be sold to "unsophisticated customers."
How on earth do you define that? How do you tell the boss of a fast-growing, confident SME that’s she’s "unsophisticated?" And what about Walkers selling BOGOFs on Jumbo packs of crisps to unsophisticated Tesco customers with low IQs who don’t realise it will make their kids obese and ill?
We want others to take all the responsibility for our decisions. Being a customer means you have to shoulder some responsibility for your choices and your fate if you get things wrong. Customers are not perennially mindless victims of those who provide goods and services, chickens on a conveyor belt waiting for stunning, dunking in boiling water, de-feathering and then decapitation.
But there are those who will always see the free market as consisting of exploiters and victims. Those who pull a fast one and the dupes, the chickens who vote for Christmas.
What Wonga offers is glaringly simple. Nightmarish, yes, but very, very clear to those who buy their products. And, make no mistake, Wonga getting whacked by legislation will mean that some kids will go without toys next Christmas because their parents cannot get ready access to quick credit. HSBC and Lloyds don’t lend for Xboxes or Lego.
Finally as Tracey McDermott of the FCA was censoriously pronouncing that "Lloyds staff are not supposed to be salespeople," Robert Peston made a good point. He noted that most of the Lloyds customers now baying for blood and taking unsolicited calls from ambulance-chasing claims firms are actually better off than they would have been with their money earning zilch in a current or deposit account. "
On the whole, they were flogged share ISAs and equity-linked structured products, or financial products whose value depends on the performance of the stock market.
And since the stock market has risen since these sales were made, between 1 January 2010 and 31 March 2012, very few of these customers are out of pocket."
So what do you know. They shared a bit in the recovery and one of the upsides of free-market capitalism.