PPI Controversy v MP Expenses Controversy

For those of you who may not have noticed, a large proportion of the UK population are in the process of reclaiming the Payment Protection Insurance (PPI) premiums that they have paid out, often in advance, often for worthless policies that wouldn't even have allowed them to make a successful loss of earnings claim if they had tried.

Let's be clear about this, PPI mis-selling is a huge scandal running into many billions of pounds, that makes the MPs expenses scandal seem like Mickey Mouse (so now they're well matched I hear you think?). Yet whilst MPs expenses were scandalous enough, and a further erosion of whatever trust may remain between public and parliament, the PPI mis-selling scandal has hit millions of people directly, costing them hundreds or thousands of pounds for EACH POLICY.

These PPI policies have been sold in large part by the banks (as well as other financial institutions), and mostly in the days before last autumn's "meltdown" revealed the banks to be financially unstable and poorly controlled. PPI was a hard sell, using unfair and even untruthful techniques to put the customer on the spot in order to make a decision that they would usually later regret, wonder about the wisdom of, or perhaps just try not to think about at all if they could possibly help it (a bit like the idea of going to vote).

Maybe PPI policies were a consolation prize for the banks, or maybe they were the wallpaper that covered the cracks, because the astoundingly large profit margins that PPI generated could cover up quite a few foolish fundamental financial failings.

Or, taking a step back, possibly PPI policies fuelled one of the fundamental problems, i.e. why so few bank staff nowadays actually possess formal banking qualifications - after all, bank employees are given targets for selling policies and opening new customer accounts. This means that the selling of PPI and other financial products and services is much more likely to take place in a pressurised way. This in turn is bound to make fewer people want to go into banking - they would be better off as a sales rep. In fact, perversely, it is not uncommon for people with sales experience but NO banking knowledge to be recruited by the banks.

As was the case with politicians, being a banker used to be a respected profession, and the idea of having to sell themselves would have been anathema to most bankers only a decade or so ago. Let's remember that politicians have always had to sell (only they don't have to do it continuously, as do poor beleaguered bank employees nowadays - and in the politicians' case it is called canvassing). Indeed innumerable politicians have been guilty of mis-selling, but the cost to innocent members of the public of that "mis-electing" can neither be calculated nor redressed.

The interesting and unavoidably depressing parallel is that many in politics and many in the banking industry are prepared to up the ante (even at a cost to others) when either their livelihood is at stake, or they think they can get away with it, or both. So the most consoling conclusion we can possible draw is that human nature is something which will never change. Enough of the philosophy. Here are two more parallels, each with vastly differing levels of publicity.

Firstly, having now been subject to scrutiny, and a whole load of publicity, and being found lacking, the Houses of Parliament are now devising a system to improve the way in which expense claims are made. The PPI industry has now been reviewed and banks (or other loan providers) now have to wait 14 days before selling PPI, to give customers a chance to shop around.

Secondly, in the once seemingly make-believe world of MPs expenses claims, David Cameron has said he will make his MPs pay back their expenses. In the real world of "PPI reclaim" it is the case that within a few weeks of applying to reclaim their premiums, innocent customers who were mis-sold their PPI policies having their premiums refunded. Better late than never for each of the above.

Yet there is a risk that many policyholders will experience "never" rather than "late". Often through their own pride. Many people do not realise that they were as good as robbed by their own banks, yet rail against the MPs expenses scandal, because of the publicity it has received.

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