Having PPI paid back doesn’t mean you’re stupid, yet there’s a growing attitude on the web of people feeling PPI payouts are rewarding stupidity. This is a damaging attitude, so I want to explain why…
This morning I saw a classic Twitter example – I’d retweeted this:
After reading Martin’s website I made 1 phone call to my credit card provider and 3 weeks later got £14,750 PPI back!"
Retweeting successes is an easy way to encourage anyone who’s had a loan or a credit card in the last 10 years to check (see PPI reclaiming) and reclaim without handing money unnecessarily to a claims handler.
But soon afterwards I was tweeted this:
I keep seeing @MartinSLewis RTing people getting £1000s back from mis-sold PPI. I wish I’d been daft enough to sign up for it myself…"
People weren’t stupid, they were stolen from
I understand where this attitude comes from. But it’s worth remembering this was systemic mis-selling of over £9 billion of policies by our banks. These supposedly (then, at least) trusted institutions did it to falsely boost their shareholders’ profits at the expense of those in debt.
They did so in the full knowledge these policies were at best outrageously over-expensive, and at worst useless to the people who got them. Yet they still motivated their staff with incentives to push these policies hard. Examples of mis-selling include:
- Being LIED to that policies were compulsory – they weren’t.
- Having the policy added without telling people. (And if you’re thinking, surely they’d have known from the cost? Can you work out how much a £5,000 loan at 7% over 5 years should be a month? Even with a calculator it’s tough. It’s easy to hide £1,500 of PPI as £20 a month extra repayment.)
- Being LIED to that it’d pay out if you couldn’t work, when you were self-employed and not covered.
- Being LIED to that it would cover your pre-existing conditions.
For me, these don’t denote stupidity. The biggest sin is believing what you’ve been officially told by the company you bought from. In retail you’ve the right that goods should be ‘as described’ – why should finance be any different?
And this attitude is dangerous, it falls into the hands of the banks being allowed to run rough-shod and then claim it’s not their problem, it’s the consumers responsibility to check. There has to be a balance of responsibility between both.
This isn’t compensation, it’s just deleting the mis-selling
People aren’t getting back more than they paid as punitive awards. The payout usually simply puts them back in the position they would’ve been had they not been sold the PPI.
So if the PPI cost is £3,000, you get £3,000 back, plus interest (and the interest is taxed).
So saying "I wish I’d been stupid enough" is a bit like saying "I wish someone had nicked £10,000 from me five years ago, so I can get it back." Maybe you do wish that. But hopefully if you’re smart enough to berate others for stupidity, I’m sure you’re clever enough to have done your financial planning back then and saved the money anyway.
Of course I’m sure someone out there is saying "but the interest given is 8%, which is a good rate", but it’s not compounded which reduces it, and it’s taxed. Plus sadly, 80% of people now go through claims handlers which take 25%+ of their win.
Even if people were stupid, ignorant or trusting should they be punished?
Of course there were cases where people wrongly fell for bank spin, got policies out of trust, or simply didn’t understand it and just said yes.
Is that a reason to berate them? Surely we want to try to protect those who are vulnerable prey from paying many £1,000s extra to banks with cynical, exploitative policies (see my blog in support of stupid people’s rights).
Of course none of that should happen. We need a majority of our citizens to be savvy, educated, responsible consumers, which is why I am so passionate about getting financial education on the basic school curriculum. Though even then that doesn’t protect those with permanent mental capacity problems or temporary mental health issues.
Please write your mis-selling stories below – so when I link to this blog post as a reply to such comments about PPI in future, it shows why it wasn’t stupid.
Related past blogs
- Should MSE be recommending the ‘best PPI claims handlers?’
- PPI Twitter clinic questions and answers
- My PPI day diary – paps, snaps, clips and facts