It has been reported that Lloyds Bank is seeking repayment of some £2 million of the bonuses that were paid in the past to a handful of executives who were responsible for the mis-selling of Payment Protection Insurance (PPI). These repayments are part of the changes that were required by the Banking Industry regulators after the crash of 2008.

PPI was intended to be an insurance policy that covered the costs of your loan or interest payments if you were unable to work through redundancy or ill health. It sounded like a good idea to many people especially those who were self employed and had little financial backup or support if they were to fall ill and be unable to work. It sounded like an insurance policy that was tailored for people in their situation.

Unfortunately for them these policies were designed NOT to be for them and the small print made it clear they would not be able to claim on these policies. Perhaps not surprisingly the banks and other organizations ignored the simple fact that they were useless polices for certain groups of people and sold them to them anyway. Why would they not do that? An insurance policy that can never be required to pay out is going to be extremely profitable isn’t it.

The problem is that it is considered a bit naughty. Some would say it was rather worse than that. If you have a salesperson encouraging you to buy something that is of no use or value when they have a duty to offer you appropriate and honest advice about financial matters you have to wonder what they were thinking when they decided to do this. Maybe they were thinking about their bonuses for making lots and lots of sales?

Finally the real world has caught up with them. The Financial Services Authority (FSA) and the Financial Ombudsman Service (FOS) agreed new rules on PPI and after attempting to fight those new rules through the courts the banks caved in and accepted them. The rules set out how PPI should be sold but also require compensation to be paid for those who were mis-sold PPI in the past.

The claims are expected to amount to Billions of pounds. It is suggested that Lloyds will repay £3.5 billion in compensation to previous customers. No wonder then that the executives responsible should be expected to return some of the bonuses they recieved for the successful selling of these policies. They will not be expected to repay all of their bonuses but it will no doubt be a blow to their prestige and to their future prospects.

You can argue that losing part of your bonus is hardly the end of the world but this is significant. Previously bankers could do pretty much anything to boost their bonuses and invariably once they got their bonus they could walk away and live a life of luxury regardless of the pain and suffering caused to customers or the long term damage done to the bank. The idea that these bonuses can be clawed back at a later date is sure to send a shock wave through the banking industry.

Its been a long time coming. Customers have been badly treated by banks and other financial institutions for far too long so we should welcome this small move to redress the balance and we can hope that the banking industry might stop and think about this in the future, before, they pay out bonuses based on unfair, unreasonable and even downright bad practices in their dealings with their customers.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

I had a distinct feeling of Deja Vu this morning on hearing of plans to set up a banking service to be run from Post Offices. It seems like such an obvious move and you would think it could and should have been done years ago. So why the feeling of Deja Vu? Because it was done before and if you wonder why it does not currently exist it is, of course, because ‘they’ sold it.

According to an excellent page about the Girobank at Wikipedia the Giro Bank was,”Established by the General Post Office, it was bought by Alliance & Leicester Group, which was subsequently acquired by the Spanish banking group Banco Santander.”

“The organisation chalked up notable firsts. It was the first bank designed with computerised operations in mind; the first bank in Europe to adopt OCR (optical character recognition) technology;[1] the first UK bank to offer free accounts to individuals; and the first bank in Europe to offer telephone banking, beating the much trumpeted First Direct service by several years. It is widely credited for shaking up the UK banking market, forcing competitors to innovate and respond to the needs of the mass market.”

A shame such a good business was sold off then. We had a widely available and successful bank operating at post offices around the country back in the 1960′s which was able to provide banking facilities for ordinary people in convenient locations and by post. If it had continued it might have benefitted the Post Office enough that we could have avoided the policy that caused several thousand post offices having to close. It would seem that it’s success was to prove it’s downfall and our elected scoundrels decided to sell it off in 1989.

We are well aware that we cannot trust any government with our assets. We saw the sell off of British Gas, British Airways, British Rail, Girobank and just about anything else that might have made a profit and benefited us all back in the 1980′s. We saw our unelected Prime Minister selling off our gold reserves some years ago and he certainly never asked me or any other voter if he should. Interestingly this bold move was at a point when the gold market was at something of a low and that same gold would be worth four times as much now and if we were consulted and considered selling it something we should do now it would be worth four times as much now. Apparently it would now be worth an extra 6 or 7 BILLION pounds. I remember the good old days when talking of Millions was pretty hard to grasp. Now we talk about a few billion here and a few billion there as though it is mere pocket money.

Our leader likes to suggest he is a man with his finger on the pulse in financial matters. Hmmm. I have seen some bad financial decisions in my time, and made quite a few myself, but that was a huge financial error that cost every man woman and child in the country £100 each.

Why is it that no government seems able to see that something that makes a profit would benefit the public for year after year, instead of one simple windfall benefit from selling off our assets. The other question is, of course, if they are our assets shouldn’t we be consulted about a possible sale of any of them?

One of the current targets for a potential sale is the Post Office and the reason given is that it is a loss making drain on resources. So why would anyone want to buy it? If some company would decide to buy the Post Office it would surely be done on the basis that they would be able to make a profit in the future.

Why is it that any government would consider themselves incapable of successfully running a business like the Post Office yet they maintain they are capable of running the country? Clearly the intention of selling the Post Office is proof enough that they are incapable of successfully running the coutry. This is not a party issue as the Tories are as eager to admit they are just as incapable of successfully running the Post Office and the country as Labour.

The other suggested sale has been the Dartford Crossing. How anyone could consider selling such a rip-off goldmine like the Dartford crossing is astonishing. It is money for nothing. It was always supposed to become a free crossing once the first tunnel was paid for from the cost of the tolls. It never did become free. They decided to open a second tunnel and delayed the free use because of the cost. Next they added a bridge which again delayed the free use and last year charges were increased. You only have to see the queues of traffic, caused by the toll booths, to see how much money is being made. Astonishing amounts of money being collected from motorists even though we were promised it would be free eventually and this ignores the cost to the country of the people wasting time in queues that are entirely caused by the toll booths.

Incidentally, there was a No10 online petition about the Dartford Crossing asking that the toll booths be removed to ease traffic congestion. The reply from the Prime Ministers office to that petition argued that it was necessary to have the toll booths to smooth traffic flow so there is no need for toll charges at all. Perhaps we can expect to see toll booths for pedestrians in Oxford Street at Xmas time to ease the flow of people during busy periods! It also contained lies about the number of lanes available to traffic, saying that there were fewer lanes available than elsewhere on the M25. (The crossing has 4 lanes heading North and Six lanes heading South) The M25 has mostly 3 lanes which is less than there are at the Dartford Crossing. Presumably they already had plans to sell off the crossing and a profitable company is likely to sell for more money. Incidentally, is it a mere coincidence that there was a 50% increase in the cost of using the tunnel/bridge a year or so ago? 50%? These people expect us to vote for them when they deceive and lie to us?

Anyway, I seem to have rather got off the point there. The idea of a post office based bank is a good one and is something to be applauded. Such a shame it has taken 13 years of government for them to decide to do this and the chances are that either a) Labour are not re-elected so it goes no further or, b) they are re-elected and then conveniently forget all about it.

There is also talk about encouraging children to save at the Post Office. More deja vu there. It used to be that children were encouraged to save and the post office savings account was the first place to start bing able to put a few pennies into a savings account. These days it seems that nobody wants small savers because there is not enough profit in them. Even the Governments own Premium Bonds require you to purchase a minimum of £100 worth.(It’s actually National Savings, did they sell that off too?)

So, yes. This is a very positive step in the right direction. We should all be encouraged to save for the future and if that means your child wants to deposit just £1.00 then they should be able and encouraged to do so. The Post Office would also, apparently, be able to offer 90% mortgages so you may in the future be, visiting your local Post Office and asking, “Can I have ten first class stamps and a £250,000 mortgage please.”

My worry is that if it takes place and proves to be successful greed will overcome commonsense and it will be sold off. Actually, it just occured to me that this will make the Post Office much easier to privatise with a successful banking operation. The cynic in me wonders if that was the sole purpose of this idea and any benefits to customers are mere coincidence. I wish I were able to have more confidence in the honesty of politicians but it is hard to have any when all they do is spin the truth, mislead the electorate and attempt to damage their opposite numbers. Let us hope that a Post Office Bank has a long and successful future that benefits the taxpayer forever.

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)

In my travels across the web today a couple of articles attracted my attention. The first, from the BBC website which is reporting how Lorn Myners reacted to the board of RBS reporting that they might all resign en mass if the government, as the largest shareholder, insists they should not pay out £1.5 billion in bonus payments to their investment banking staff.

RBS are claiming it is their legal duty to act in the best interests of their shareholders and failing to pay out all these bonus payments might cause some of their staff to leave for better paid jobs. Vince Cable, the Liberal Democrat treasury spokesman was typically on the button when he said we should call their bluff.

It’s a shame the government didn’t let RBS go bust and simply buy the remnants for a penny. New contracts could have been put in place and all these bankers who expect to get million pound bonuses should have been grateful to keep a job at a minimum wage.

If the bank staff want to go then good, clear off. We will be better off without you. There are plenty of more than capable people who would be happy to do as good, if not better, a job at half the salary these people are on and not expect to get bonuses for doing the job they are paid for.

Let’s be honest. If we had dragged anyone off the street to run the banks over recent years they could not have done a worse job than these so called, masters of the universe.

The bonus culture in banking was a very significant cause, if not the main reason, the bankers nearly bankrupted the country. They still don’t get it. They still do not understand that they are lucky to have any job let alone a well paid one. They appear to think they are better than everyone else and should be given massive amounts of money because they are so superior. They are not.

You can argue that top rated footballers merit their massive rewards because they are the exception. They have skills that others could never match. There may be some bankers who have talents that are very rare but the majority of their work could be done by any number of bright people. The laws of supply and demand, the very laws of the market that these investment bankers rely on to make all their money, suggest that these people are seriously overvaluing themselves so they should resign and see what life is really like in the real world.

The Cruel And Heartless World Of Debt Collections

The second article I would draw your attention to was in the Independent and it was all about the debt industry, an industry only slightly removed from these same bankers who expect to get millions of pounds a year for doing a job.

The debt industry is booming as other industries and ordinary people struggle with the financial mess we find ourselves in. Most of the banks spent the last ten years trying to encourage everyone to take on more debt and now people are struggling those bankers, who earned so many bonuses for getting us into debt, are now crying because people are struggling to repay the money owed.

We all have a responsibility to repay our debts. We may well want to do everything we can to repay those debts but there are limits to anyones ability to do so and the people who encouraged us to use our credit cards, take out additional loans and remortgage our homes have a responsibility too.

Some would argue that what the banks did was akin to a publican encouraging an alcoholic to have a drink. It is not so far from the truth. The banks were eager to suggest we should visit them for a financial advice meeting and many people did. Many of those people were then treated to a sales pitch and ended up walking out of the bank having taken on a credit card they didn’t want or a loan they felt they hadn’t needed all thanks to the pressure selling of banks and bonuses paid to sales staff for signing customers up for loans and credit cards.

The banks behaved in a totally irresponsible way towards their customers and, as it turns out, to their shareholders and to the taxpayers. We all have to pay the price of their stupidity and greed and yet they still expect to receive million pound bonuses. They should be thankful they are not hanging from lamp posts after their treasonous behaviour. Fortunately we live in a moderate and fair society but they are taking advantage of our fairness and show no sign of losing their greedy self interested approach to life.

So we are now in a situation where there are many thousands, perhaps millions, of people who are seriously struggling with debts. The banks did the selling but we took on the loans and the credit cards and having enjoyed a spending spree lasting perhaps ten years we now have to find a way to pay our debts.

If you have the extra money to pay back the debts there is no problem. Pay them off and move on having, hopefully, learned some financial lessons. But, what about all the others who want to pay their debts but simply can’t afford to repay them at the present time.

The whole debt industry depends on making people who cannot afford to repay what they owe pay even more than the debt they already have. Banks, credit card companies, telephone companies and all types of other businesses sell on outstanding debts to debt collecting companies for pennies in the pound.

How can it be in the best interests of shareholders to sell a debt of perhaps £100 to another company for £30 when the customer wants to repay the full amount of the debt but needs time to spread the cost?

Once the debt has been sold on the debt collections company will demand the full outstanding debt from the original customer and will almost certainly add on additional charges and costs making the situation even more difficult for the customer to resolve.

Problems with one debt lead to difficulties with another and before long the situation is spiralling out of control and it then becomes a fight between different debt collection companies to get their money before anyone else does and before the customer goes bankrupt.

How can this scenario be good for anyone? It doesn’t help anyone except the debt collection agency who manage to successfully collect money for nothing. It isn’t money they were owed for goods or services they provided and it isn’t money they earned. They are the vultures circling the dying man in the desert.

The whole financial industry has become overgrown and sickly. It needs serious pruning right back to it’s roots and then careful training and guidance so it takes shape that is beneficial to society, to customers and to shareholders. It needs to show some appreciation for the taxpayers who have, unwillingly, become the host this parasitic industry required to enable them to survive.

In the meantime it would be in everyone’s interests if there was more support for individuals who are struggling with debt. Whatever the reasons behind the debt, it helps no-one, except the debt collection agencies, for them to be thrown out of their homes and become dependent on the state for housing and goodness knows what else. What they need is support in a way that allows them time to pay and a way of renegotiating ther debt burden.

Most people who are struggling with their debts do want to repay them in full. Honesty isn’t the problem here. The problem is the practical one of finding a way to pay and when the collections company adds an additional charge of maybe £200 on top of an outstanding debt and then demanding immediate payment, it is not going to help someone, who is already struggling to feed their family, pay their bills.

The financial industry would make more profit from helping struggling customers by renegotiating debts rather then selling debts on to debt collection agensices for pennies in the pound. It makes no sense, it is bad for shareholders.

If the government can bail out banks with billions of pounds because they were selfish, greedy and stupid, how come the struggling taxpayer is offered no support, no help and no assistance when that could be done for a few million pounds and save the country hundreds of millions in benefits and support in the future?

Money Magic: Seven Simple Steps to True Financial Freedom (Quick Reads)