Have you ever had one of those moments when you are watching a programme on the telly or reading a book, and a random comment takes you back to a real-life experience from many years earlier?
It happened to me recently, as I read my fellow columnist Alan Lakey’s latest tirade against the Financial Ombudsman Service, in which he accused the FOS of “waywardness and irrationality” in its decision-making.
Alan is well-known for his dislike of the FOS, which he repeats at regular intervals. Usually there is an underlying rationale for it: a report perhaps, or a court case featuring an FOS decision that he happens to disagree with.
Indeed, I well remember a case a few years ago in which an IFA took on the FOS and was lionised by Alan for doing so, only for the firm in question to be found by the Appeal Court to have engaged in some of the most appalling behaviour towards a consumer that I have ever come across.
But anyone reading Alan’s latest outburst would have found him or herself puzzled by absence of any coherent reason for it beyond the need for a dig at the so-called “mindless drift towards ‘consumer enfranchisement’ [which] continues unabated and is campaigned for relentlessly at Westminster, in the popular press and in a deluge of unbalanced television and radio programmes.”
Perhaps it was simply a case of “Grumpy Old Alan” deciding he wanted to have a pop at someone and the FOS was a convenient target for his ire.
Still, I thought as I worked my way through his column, everyone has the right to voice an opinion, no matter how bizarre.
Until I came to the bit about the payment protection insurance misselling scandal, on which Alan offered up the following opinion: “The PPI affair is a prime example, where consumers have been led to believe the institutions are so inherently venal they are fair game for misclaiming.
“How many billions of unwarranted compensation have been paid out to consumers who knew what they were buying and may even have claimed on the plans?”
As I read his comments, suddenly I was taken back to an article I wrote for the Sunday Telegraph some 12 or 13 years ago, when PPI was on almost no-one’s agenda.
What I did was to carry out an experiment where I called more than a dozen banks and building societies and asked them for a loan of £5,000 over three years. Every monthly repayment quote I was given bar one simply included the cost of the PPI cover.
In effect, consumers were being led to believe the only way to obtain the loan they were after was to take out PPI at the same time. As I wrote at the time, in some cases, the cost of cover was greater when taken out from a bank than the interest paid on the loan itself.
Not only that, but the products themselves were appalling: most lenders were adding the full three-year cost of the cover to the loan at the outset, leaving customers to pay interest on the cover as well the sum borrowed.
Now, let’s say you are a punter who calls a bank and asks how much it will cost to borrow some money. You reckon yourself to be fairly canny, so you don’t immediately fall for the first quote you receive. In fact you call several lenders and compare numbers from all of them.
If all the figures you get involve a sum for PPI how will you be able to tell the difference between lenders? The answer is, of course, that you cannot.
And that is exactly how millions of consumers taking out loans in those years found themselves paying through the nose for cover they did not know they had bought and which, as a later survey by Citizens Advice found, failed to offer any protection when they needed to claim on it.
At this point you may well ask: why am I dragging up this old story all over again? Well, quite apart from the need to slap down Alan’s revisionist denial of misselling history, there is also the underlying issue of the FOS itself.
Alan sees the huge spike in claims over PPI over the last few years as a sign of consumerism gone mad. He blames it all on the FOS.
I see it totally differently: yes, undeniably, there were many people who claimed when they shouldn’t have. But the vast majority were helped by the FOS to receive the compensation they were entitled to, a task which it carries out to this day.
No organisation is perfect and I don’t for a second believe the FOS is either. Indeed, I have written critically about the service myself.
But in a straight choice between occasional misjudgments and errors from the FOS, in the context of an overwhelming success in delivering redress to millions and Alan’s attempts to rewrite the history of a shameful episode of misselling by the banks, I know which side I’m on.
Nic Cicutti can be contacted at firstname.lastname@example.org