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Banks should pay up the PPI compensation

The reaction of the major banks to the High Court ruling before Easter that they must pay-up for their part in the widespread mis-selling of payment protection insurance says much for their current collective state of mind. It reinforces the common public perception that "the banks just don't get it", by which people generally mean just how low in public esteem these once highly respected institutions have fallen and how their every action seems to determined to lower it further. They appear to be in a very deep hole and relentlessly keep digging regardless of the consequences.

The British Bankers Association has said that it might launch an appeal against the ruling that the Financial Services Authority's enforced review of all PPI sales is valid. It shouldn't.

Complaints that elements of the FSA's review are retrospective simply won't wash. Nor will bandying around figures of £3bn to £4bn in potential compensation. The public simply does not care. Many will ask why banks claim not to be able to afford to pay compensation without turning to customers and shareholders when they have already re-commenced paying substantial bonuses. This is the hole the banks are digging for themselves.

The PPI mis-selling issue could be an opportunity for the major banks to start restoring some public faith in them. Saying sorry and accepting that they made huge mistakes with the sales of PPI would be a positive move. It is time for them to stop fighting their customers.

Much has been written in official reports and elsewhere about the banks' failures over PPI. One viewpoint that hasn't been widely reported, however, but which made a significant impression on me is that of the staff, at least as represented by their trade unions. Three or four years ago, as the PPI storm clouds were beginning to gather, the All Party Parliamentary Group on Insurance & Financial Services held a joint dinner with Alliance for Finance, a federation of trade unions with members in the financial services sector. One of the issues raised by the trade unions was how the counter staff in banks were being set unrealistic targets for sales of PPI, targets that they were adamant could be reached only by mis-selling the product. This shocked the MPs at the dinner and probably, at least partially, explains why very few political voices are raised in support of the banks on this issue.

The banks got this one badly wrong. They should own up, pay up and move on - and stop digging.

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