Member Article

FSA boss calls for end to bank misselling

Financial Services Authority (FSA) managing director, Martin Wheatley, has criticised bank tactics of overselling products that customers do not need.

Incentive schemes that sell unnecessary products such as Payment Protection Insurance (PPI) were condemned by Mr Wheatley, also the chief executive of the Financial Conduct Authority (FCA), who said his organizations intend to reform the current system which sees customers as targets.

He asked: ““Why is it that everytime I walk into the bank to do something simple, like pay my credit card bill, the person behind the counter asks me if I would like to extend my credit, take out more insurance or look at their competitive mortgage rates?

“When did this happen? Banks for me used to be a service…Some time ago, this changed – financial institutions have changed their view of consumers from someone to serve to someone to sell to.”

Badly designed incentive programmes were blamed as the root of the problem which results in customers paying for schemes which they do not require, and CEO’s were accused of setting practices that encouraged a culture of selling in banks.

Martin Wheatley continued: ““This bonus-based approach has played a role in many scandals we have seen over the years. Incentive schemes on PPI were rotten to the core and made a bad problem worse.”

Advice and regulation will be provided by the FSA and FCA to help firms and banks using incentive schemes to reform their practices to give the customer the fairest deal, and new rules are being considered to ensure businesses do not fall into a similar trap in the future.

Business leaders were appealed to to support the initiative which will be carried forward by the FSA and FCA.

Mr Wheatley said: “Making such a change is going to take time and it’s going to need your full support - ultimately we need you to help us. By making these changes your customers will be happier and ultimately your businesses will do better.”

The creator of moneysavingexpert.com, Martin Lewis, also spoke at the meeting in London on Wednesday morning.

He commented: ““The problem isn’t that people no longer trust banks and other big financial institutions, it’s they’re right not to. While bank staff may be called ‘advisers’, that should read ‘salesperson’. “

“For too long we’ve had speed-bump financial services, with a product launched, sold heavily, then the brakes put-on with reclaiming campaigns. That’s bad for consumers and the industry. The bosses of the big banks and insurers need to get behind this, lead by example and prove they’re not just there to make a fast buck.”

A review of 22 firms showed the failings of incentives schemes, and demonstrated how they encourage a culture of overselling, while one company was revealed to offer a £10,000 “super-bonus” to the first 21 employees who reached a certain target.

Impartiality has been compromised in other firms, with certain products earning staff more commission than others, and in one case staff were able to claim 100% of their basic salary in bonuses if they sold loans and PPI to half of their customers.

Martin Wheatley concluded: ““We, as the regulator, intend to change this culture of viewing consumers simply as sales targets and I am going to be personally involved in getting this right. This will be part of the ongoing improvements we make to regulation as we seek to make markets work well and give people a fair deal.”

This was posted in Bdaily's Members' News section by Miranda Dobson .