The Analysis Comment
Doing the right thing
Sometimes, not cutting corners in the short-term can avoid problems in the future
Dave Pickering Independent risk professional
Dave.Pickering2020@outlook.com
At a time when our country appears to be in chaos, with MPs swapping allegiances, resigning from cabinet, or being removed from their party, and with no-one really knowing what is going to happen next with regard to our exit from the EU, to the prime minister, to the government and, crucially, to the economy, one question really springs to mind: what has happened to that notion of doing the right thing? It is a simple question and provides some
very helpful guidance to any issue you might be wondering how to deal with if answered honestly. I was reminded about it again this week when reading about the significant influx of ‘race to the line’ PPI claims, and in conversations about ‘corner cutting’ in relation to the many new entrants in the market and the issues the motor-finance industry is facing.
PPI scenario If you take the PPI scenario, that highlights cases where banks have either sold a product to some customers without explaining the product properly to them, or sold a product the customer did not want. Counter to this is the claims culture that is
now part and parcel of the UK landscape which has meant many claims, encouraged by opportunistic claims-management firms, have been groundless.
The temptation, either wilfully or through
lack of knowledge and experience, to cut regulatory corners must be high and, at some point, organisations adopting this approach will find themselves in a place they do not want to be. It is likely to prove very costly and could
undermine public confidence in banking or placing their savings with these firms.
In the PPI scenario, we have already seen eye- watering amounts of money being paid to customers by way of redress; the motor-finance industry is now well and truly in the regulator’s sights and can expect close scrutiny as it addresses highlighted
the issues
Corner cutting The ‘corner cutting’ dilemma is an interesting one. There is currently a desire to encourage disruptors in the financial-services marketplace, but at what price? Any new entrant into the banking world will find it a tough place
to compete against the established players, even more so when the regulatory hurdle is so high.
October 2019
Motor finance The motor-finance industry has been under scrutiny from the Financial Conduct Authority (FCA) with issues highlighted including commission structures, and whether these are driving the right behaviours, and transparency of pre-contract disclosures. The above are just three examples
where asking yourself the question of what would be the right thing to do in these situations – that is to say, puting yourself in the customer’s shoes and asking what a good customer outcome would look like – would avoid the pain of getting it wrong. In the PPI scenario, we have already seen eye-watering amounts of money being
paid to customers by way of redress; the motor-finance industry is now well and truly in the regulator’s sights and can expect close scrutiny as it addresses the issues highlighted.
The ‘corner cutting’ scenario is the interesting one. What is going
to happen first? A major incidence of customer harm that attracts full FCA attention or a realisation that good governance, meeting regulatory obligations and high standards of conduct are the best long-term solution? As our politicians wrestle with ‘doing the right thing’, the complex
world of financial services should always heed the warnings of the past, as they often point to pitfalls in the future! CCR
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