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May 03, 2013

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Paul Peters

The road to hell is paved with good intentions.. surely banks are trying to help, but there are many unforeseen consequences from the enforced choices banks have to make in which customers they are trying to help.

Steve

Thanks for picking up on my original comment.

To expand further, what we have seen from the PPI & Derivative mis-selling reviews, is not that the 'products' were lemons, but the distribution [banks] & acceptance [customer] model was flawed.

Looking at PPI for example, the 'sale' of loans wasn't rewarded at branch level, yet a sale including PPI was. The PPI policy was effective & I knew many clients that were thankful of the policy following sickness/redundancy. But there was no central check that the policy sold was actually applicable to the client...

As to derivatives, the client just saw [was told about] the up side, and didn't bother to understand the full costs of the product on cancellation. At the time of taking a loan with rates at 5, 6, 7% & memories of 10, 11, 12% base rate, no one was really bothered about what happened if interest rates went below 3%, let alone down to 1/2%.

In addition, I could never understand why the regulators/bank policy [I never knew which] prohibited the banks from reducing the loan interest rate for a 'protected' (either by PPI of Derivative) client - surely the bank's risk on not getting repaid was less?

Was the sale of these products profit lead? Of course; were the products from hell or overtly malicious? No, but certainly a double-edged sword.

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