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Wheatley: FSA’s PPI failure allowed CMCs to become ‘new industry cancer’

Martin Wheatley

Financial Conduct Authority chief executive designate Martin Wheatley admits the regulator’s failure to levy substantial fines on firms for misselling payment protection insurance has contributed to claims management firms becoming the “new industry cancer”.

Speaking at an Association of British Insurers conference on conduct regulation in London this morning, Wheatley (pictured) said he analysed how the FSA responded to the escalating problem of PPI misselling while it was happening, and said although the FSA spotted the problem early on it met a lot of resistance from the industry in trying to address it.

He said a lot of detailed work and file reviews were carried out before the FSA got to the point where it could start levying fines for PPI misselling.

Wheatley said: “Where we failed is we did not realise the proportionality of the fines we were implementing against the profitability of the product. We did not look through to the business model of the firm. One or two directors have said subsequently to me and those at the FSA at the time, the FSA should have known firms would not respond to £100,000 fines, as they were making billions from this market. It was a huge revenue driver.”

He added PPI accounted for more than 30 per cent of some banks’ total retail profits.

Wheatley said: “The industry is now unpicking that at huge cost, a cost of billions to the industry and a cost to all of us who are bombarded every day with claims management companies saying ‘you too may have been missold’.

“We have created this problem for the industry, that because it was not dealt with earlier, because the industry did not respond to our signals, it has become a huge problem. We have created this new cancer on the industry which is the claims management companies who are driving lots of claims which are not necessarily valid.”


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There are 25 comments at the moment, we would love to hear your opinion too.

  1. ” ….and said although the FSA spotted the problem early on it met a lot of resistance from the industry in trying to address it.”

    There’s a lot of resistance from the industry about RDR, but that won’t stop them rolling it out. Oh right – I get it – the resistance came from the Banks. Gotcha!

  2. I find it frightening that the FSA did not realise the banks were making huge profits from PPI, and that paltry fines were going to stop the practice. and these are the people over seeing the future regulatory framework

  3. and teh scandal is………yes………just like endowments before PPI……..compensation and recompense is being paid, in may cases unjustly and fraudulently, not by “the banks” or “misellers” but by the consumers ultimately! The misellers who made a fortune from this excercise, retain all the bonuses they received for so doing whilst “fines” and “compensation” is paid from…..yes again……….consumer funds, lower profits and lower dividends, with claims companies taking approximately 25% of that total payout – another scandal in itself!

  4. “We have created this new cancer on the industry which is the claims management companies who are driving lots of claims which are not necessarily valid.”
    And you are doing what exactly to address this?

  5. Do the BMA say that private doctors are a ‘cancer on the NHS?’ – no – why not because at the end of the day if someone is curing the disease the disease will go away!

    The FSA imposed silly little fines against the mis-sellers of PPI and the FOS for many many years has been saying that the PPI issue will go away, and yet it hasn’t. In 2007 at a meeting of the FOS the FOS confidently said that the number of PPI claims would drop within 12 months and every year since they have continued to say that the issue of PPI has peaked – and yet the figures continue to go up.

    If CMC’s had not spent so much money on advertising the endowment mis-selling issues would this have come to light? If CMC’s hadn’t spent so much money on highlighting the PPI mis-selling issue would this have come to light? If the FSA/FCA/FOS want to cure the cancer look at the route course, don’t blame the doctor!

    Is this is the future of the FCA – we will shoot first and ask questions later – what they haven’t said is that they will be using water pistols to attack a forest fire and will then be blaming the water for not being cold enough!

  6. Do you own/work for a CMC Matthew?

  7. It would be interesting to know what % of PPI has actually been missold. I am not defending the banks but not all of these plans have been forced upon customers. The fact that the banks are not defending the claims is probably down to the fact it will cost them more to defend a claim than pay out which in itself distorts the issues when £billions are being talked about. I have had several phone calls from PPI firms trying to dredge fictous claims from me, god knows how many of the claims are not genuine. In the long run we will all pay the price!

    Also interesting to see how another scandal got under the FSA’s net! Give me strength!

  8. Wheatly is and his predecessors have been paid humungus amounts of our dosh. These people should be in a position to identify where future problem areas may occur and act on these to stop them happening. They are absolutely useless, these arrogant posh boys are in these positions through where they were educated.
    Up the revolution.

  9. ‘the FSA spotted the problem early on it met a lot of resistance from the industry in trying to address it’ – wheatley

    If you mean resistance from tha banks, building societies, dodgy insurers and loan companies – say so. Dont tarnish the me with this mess as never touched it or recommend it.

    In fact I have avoided most mis-selling messes over this regulators reign which means either I am a genius or the problems were obvious. Suspect its the latter!

    Which leads me to conclude that this economic mess was not caused by the banks in isolation but was a toxic combination of poor legislation, poor quality regulators, bad politics & foolish economics on a european & US scale.

    End of grump back to work as some of us who actually produce something of value have to keep the economy going.

  10. What utter rubbish Martin Wheatley is talking.

    Surely its the FSA that allowed PPI to be sold in the way it was, for so long that is the cancer.

    The claims management companies are just cashing in on the FSAs incompetence. And why not I might ask. These companies will survive and prosper because they are relying on the FSA to allow other scandals – interest only mortgages and LIBOR to name but 2.

    Look in the mirror Mr Wheatley.

  11. Sorry Matthew 3.19pm they are a cancer in our society

  12. Dear Mr Wheatley

    I really do take offense at you use of the word cancer and find it wrong that you have used it in this context, please concider those of us who have had loved ones, friends and family who have been struck down with this disease, I think you will find not one person has died from the miss sale of PPI or its like.

  13. To answer any doubts, yes I do run a CMC.

    Cancer is produced by outside influences, it is not created unto itself. The banks created the mess CMC’s are merely highlighting the issue and as far as i can see doing a much better job than the FSA or the FOS.

    Yes there are some poorly run CMC’s and some extremely dodgy CMC’s equally there are a very small amount of poorly run and extremely dodgy IFA’s – however a VAST MAJORITY of IFA’s did not sell PPI policies because they knew how rubbish these policies were and how poorly they performed. IFA’s as a rule put their clients interest first and if the product doesn’t fit, wont sell it. The banks however ONLY worry about profit and the customer comes fourth – after pre-tax profit, post-tax profit and their bonuses.

    I am all for getting rid of the cold calling dodgy CMC’s, but the fact is all the while the FSA sit back and do nothing people will use CMC’s. If the FSA wanted to get rid of CMC’s then put in a SIB review style review of PPI policies – they wont because the banks wont allow it. It’s not the fault of CMC’s that PPI was mis-sold and it’s not the fault of IFA’s, but someone has to highlight this issue.

  14. RegulatorSaurusRex 18th September 2012 at 4:41 pm

    In 1993 I told the then regulator (different name but same company full of the same people) that payment protection was a busted flush, what did they do? Nuffin innit…the banks kept on filling their boots coz the gummint wanted insurance to pay for mortgages not the taxpayer.

    Same old organ, just a new monkey on megabucks, and like his predecessors he will pay no price for being wrong.

  15. I have suffered from cancer and don’t find the use of the word in this context remotely offensive! It is often used in this context and does not purely exist to descibe the human condition.

    I had to laugh when I heard a client call asking about whether they had PPI, when they were told that we have never recommended a sinlge PPI sale to any client they seemed disappointed. It seemed odd they should have been given that they confirmed they weren’t ill. The same client had of course not gone for Income Protection due to cost.

  16. Actually missing a need to look at PPI sales by banks when 1/3 of their profits were from them doesn’t sound plausible at all. Exactly why were PPI sales by banks not properly regulated?

  17. The next misselling scandal will be self cert….you think £4,000 claims are big, wait for the £150,000 mortgage claims to be made. Tick tock.

  18. Mr Wheatley is talking total crap and just trying to make a name for himself in his new executive chair !

    See The Times article 15/8. After all banks bitching about CMCs, and how they are going to put the consumer right, nearly 25% of all claims sent to the FOS rejected by banks for allegedly not having PPI actually “DO” have PPI.

    If it wasn’t for CMC’s the banks would have brushed this one away like all the other scandals, and only paid out a small fraction of what they owe the public.

    Point your finger somewhere else Mr Wheatley.

  19. “industry did not respond to our signals”. How about STOP DOING THIS? That might have worked – oh but we’d have had to upset our good friends the banks.

  20. Have you been harrassed by claims management companies?
    Had a loan 10 years ago with PPI on it, that the CMC is sure you had, yet you don’t remember and have no paperwork to back up?
    Starting to worry that every bit of post and newspaper you open will try to get you to make a fraudulent misselling claim?
    Call the misclaim advice service now….you could earn £££s

  21. Not to overlook the fact that a number of CMC appear to migrate from PPI claims to to Pensions Liberation another appalling consequence of regulatory failure.

  22. WTF has CMC to do with PPI ?
    FSA, LAUTRO. IMRO, SIB et al, did FA really.
    PMSL & ROFLMFAO at this.

  23. If only the FSA in 2004 had handed down a personal fine of a few hundred thousand and struck off the FD of one of the major banks, the PPI debacle would have come to a grinding halt 6 years earlier than it did, and we wouldn’t have the situation of today where everyone is tarred with the same brush.

  24. Dont worry they’ve found a new cash cow – right to buy!

    PS PPI isnt a bad product per se – it just might not be suitable.

  25. PPI should be attached to every loan and should be appropriately matched to each individual so that it does what is says on the tin.

    Had the FSA regulated the products and the sales process before the products were launched to the general public there would have been no mis-selling and confidence would have remained in the product.

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