Content area
Full Text
European Business Organization Law Review 13: 247-270 247
2012 T.M.C.ASSER PRESS doi:10.1017/S1566752912000171
Regulatory Lessons from the Payment Protection Insurance Mis-selling Scandal in the UK
Eils Ferran
1. Financial product mis-selling an intractable problem........................... 248
2. PPI: the market background and the role of the competitionauthorities ................................................................................................ 250
2.1 What is PPI? ............................................................................................ 250 2.2 The development of the PPI market in the UK........................................ 251 2.3 Scrutiny of the PPI market by the competition authorities and implications for the FCA ......................................................................... 253
3. PPI and the FSA....................................................................................... 255 3.1 The FSAs approach to PPI ..................................................................... 256 3.2 Rebalancing the rulebook ........................................................................ 257 3.3 The use of formal enforcement PPI as a manifestation of credible deterrence................................................................................................. 260
3.4 Redress exposure of firms unwillingness to treat customers fairly ..... 262
4. Looking ahead ......................................................................................... 264 4.1 From after-the-fact reaction to proactive intervention ............................. 264 4.2 The regulated retail finance world of the future what it mightlook like ................................................................................................... 267
Abstract
Why has the cycle of product mis-selling, widespread consumer detriment, complaints and (eventually) the imposition of penalties and the securing of redress from the finance industry proved to be so hard to break? This paper examines the payment protection insurance (PPI) mis-selling scandal in the UK with a view to identifying whether the Financial Services Authoritys experience in that matter is bringing the UK any closer to finding regulatory solutions that are likely to produce a meaningful advance in curbing mis-selling problems. The FSA has said that its actions taken in the PPI market illustrate the type of intervention that its successor, the Financial Conduct Authority, can be expected to make.
Eils Ferran, Law Faculty & JM Keynes Fellow, University of Cambridge; ECGI Research Associate. I am very grateful to Riccardo Brogi, Peter Edmonds, Niamh Moloney and other participants in the Retail Financial Services Symposium at the House of Finance, Frankfurt, for comments on a draft version of this paper. The usual disclaimers apply.
248 Eils Ferran EBOR 13 (2012)
Keywords: consumer protection, financial products, mis-selling, redress, enforcement.
1. FINANCIAL PRODUCT MIS-SELLING AN INTRACTABLE PROBLEM
By its own admission, the UK Financial Services Authority (FSA) took its eye off the ball in prudential regulation because of a pre-occupation with consumer protection matters.1 The FSAs priority focus on...