The PPI insurance scandal took another big turn this morning as it was announced that Lloyds Bank have earmarked another £1 billion for PPI repayments to defrauded customers. The total bill is now estimated to reach £18 billion.
The BBC 'Today' programme ran an interview with Cliff Darcy who used to organise the sale of PPI insurance products, and John Howard, who used to work for the FSA.
Cliff Darcy described PPI contracts as 'obscenely profitable for the sellers.
John Howard reported how the FSA were given powers in 2005 to deal with PPI cases, but it took them until 2010 to do anything about it.
John Darcy identified how PPI sales netted over £6 billion a year. The industry was described by him as 'Institutionally Corrupt', and he told how he had brought this matter to the attention of the FSA before the turn of the century and told them that PPI would become the biggest criminal insurance fraud in history, and the FSA did nothing about it.
It was made clear in the programme that throughout this whole period, no-one has ever been sent to jail for this vast episode of institutionalised fraud. Cliff Darcy identified that the industry had made in excess of £40 billion in excess profits from the sales of these hugely profitable contracts, a fact which he felt had prevented the industry from taking any notice of the pathetic fines being levied by the regulator, because the money to be made from this fraud was so huge.
Throughout the programme, the reporter, Justin Webb, kept on referring to these events as 'mis-selling', a phrase which has now become synonymous with the acts of financial institutions cheating the public by selling them financial products which were not suitable for their needs, or which did not work in the way the clients were advised by those selling them.
In my previous blog, I identified how Sections 2 and 3 of the Fraud Act 2006 were specifically drafted to cover this kind of criminal behaviour, and that such activities were frauds on a grand scale.
I rang the BBC this morning and asked them to stop using the misleading phrase 'mis-selling' and to call such behaviour by its real title of 'institutionalised organised crime'. I hope they will take heed of my request.
I pointed out that by using this deliberately deceitful phrase (coined by the Government initially to cover up the fact that the UK market was such a cess pit of crime), they were in fact undermining the very impact of their story.
I identified how when taken at face value, the phrase 'mis-selling' might be taken to mean that some minor clerical mistake had been made during the selling process, and that all that was needed was for the matter to be rectified by repaying the money spent out. Such is the nature of the phrase, that if such were the interpretation, ordinary people might be tempted to think; '...well it can't be all that bad...and after all, they are paying back the money...'
This is precisely the effect that such a phrase is meant to convey, indeed it was exactly this answer which Martin Wheatley, the new Head of the FCA gave when being interviewed by Justin Webb a few days ago, when he said that as far as the FCA was concerned, mis-selling was a long way from fraud!
Let us nail this lie, once and for all. 'Mis-selling' is nothing more than a weasel worded phrase for organised criminal fraud, and those who perpetrate it are fraudsters, and criminals, and they should be prosecuted and locked up.
It suits the Government to continue maintaining the use of these words, because they are terrified of finally admitting that the British Financial Services Industry and our High Street Banks are nothing more than a criminal gang of Mafiosi, led by a bunch of Godfathers who have been cheating and deceiving the British public for many years.
That kind of admission doesn't look good in the headlines, and sends all kinds of wrong messages to other people who might be thinking of investing in UK plc!
But how else can we respond when such activities have been carried on for years, and when even the spineless, clueless regulatory agency has known what was going on and did nothing to stop it?
What else should we call such behaviour, and what other methods should we be able to take to bring the criminals who run our High Street banking industry to account?
What is truly galling is that these banksters are getting benefits in kind from these acts of criminality. Every penny that they are required to put aside to compensate the people they have cheated, is another penny which is not going towards the computation of their profits, so they are not being included in their tax demands. They are deliberately minimising their liability to pay tax to HMG, by including all these repayments for their egregious behaviour in their tax liabilities. Such monies are being ultimately paid by their shareholders, but none of these vile men and women has ever been brought to book for this exercise in wholesale criminality.
If these were Bulgarian organised criminals running prostitution or people trafficking rackets, or Romanian credit card or pick-pocket gangs, they would be the target of every law-enforcement agency in the country. Their phones would be listened to, their movements placed under surveillance, their houses bugged with listening devices drilled through the walls, and pin hole cameras would watch them and record their every move.
So why can we deploy such resources against these foreign criminals but our home-grown fraudsters are allowed to continue to operate unmolested? Is it because the Government has found itself completely enslaved by the British banking industry, and is entirely dependent upon their goodwill, that they prefer to remain silent and churn out meaningless phrases to describe dishonest conduct that would shame any normal person?
The banks have become part of an on-going culture of dishonesty and fraud. They inhabit an anomic environment, in which ordinary rules of human behaviour and settled norms of civilized conduct have been allowed to become distorted to such a degree that no-one dare say any more what is honest and what is criminal.
Ordinary men and women who would otherwise have behaved fairly, have found themselves corralled into a world of criminogenic behaviour, where they are expected to cheat and steal at every turn, to gouge their clients, to be part of a culture of excessive greed, in return for commission payments and financial incentives which override any sense of common decency and honesty.
Cliff Darcy called it right this morning when he described the culture of PPI fraud as one of 'institutional corruption'' because the financial environment made the sale of these products 'obscenely profitable for the sellers'.
Let us not forget it was ordinary men and women who sold these contracts, young people recruited into an industry that pressured them to sell, sell, sell, to reach targets, or face the consequences. Sell more worthless fraudulent contracts, and get a bonus, or find another job! Push more useless insurance products to hapless customers who don't need them and don't want them and in many cases, can't afford them, and get rewarded. Don't push them, then don't come back to work next week!
The problem is that when you start rewarding a person for parking his or her conscience to sell PPI products, how much easier it becomes when you start rewarding them for making bigger profits which can only have come from far bigger criminal actions, like manipulating LIBOR.What happens when they start insider dealing to drive the profits of their team, or manipulating derivative contracts to earn even bigger bonuses?
Once you hook a person on the bonus culture, you leave them, like the hapless heroin junkie, wanting more and more and more. Then the anomie of affluence kicks in, because no matter how much you pay them the more they think they deserve, and this begins to define a whole new dimension of pure greed and dishonesty!
We have been cynically let down by the FSA through its own failure to manage its own responsibilities. The level of negligence that they have shown in failing to regulate the financial market, is defined by this series of PPI cases. £18 billion worth of fraud isn't just negligence on the part of a regulator, it is shameless recklessness which borders on the edge of conduct which could be described as criminally reckless.
We have been deceived and misled by the FSA who have relinquished their responsibilities to protect the investing public, a responsibility imposed on them by Parliament, through the use of weasel-worded press reports, carefully-spun public statements of how effective they have been, when in reality, they have presided over a retreat from reality, a race to the bottom, while those whose feet they should have been holding to the fire, have continued to commit wholesale fraud on an organised criminal basis.
This reckless conduct was the leitmotif of the former financial regulator, the Department of Trade and Industry, and eventually they had to be shamed into a recognition of their wholesale ineptitude and their inability to protect the investing public. Their actions became the subject of investigations by the Parliamentary Commissioner for Administration (the Ombudsman) in 2 very important cases, and they were shamed and exposed to widespread public ridicule.
The Financial Services Act 1986 was supposed to put an end to that era of incompetence and wholesale disregard for the interests of the investing public. The new regulatory function was intended to provide a regime of effective oversight. How quickly we have returned to the same era of incompetence, ineffectiveness and ineptitude. I am not interested in hearing how much better the new FCA is going to be. They still have all the same people working for them who are working for the FSA, but it's not the people that need to change, it is the culture that permeates the agency from top to bottom.
We are now having to get used to a figure of £18 billion worth of PPI fraud. How much bigger does this sum have to get before the Government finally wakes up to the fact that they can no longer rely on calling this mis-selling and needs to start calling it what it is, organised criminal fraud, so that people can finally get the message that the financial sector is a criminal conspiracy designed to part them from their money as quickly as possible?