JEFF PRESTRIDGE: Banks must end the PPI debacle to win our trust

By JEFF PRESTRIDGE, MAIL ON SUNDAY PERSONAL FINANCE EDITOR Updated: 17:07 EST, 7 May 2011

Payment protection insurance has been a blot on the financial services landscape for far too long. It has angered those who bought it only to discover it wasn't worth the paper its terms and conditions were written on.

It has nearly brought the Financial Ombudsman Service to its knees dealing with a deluge of complaints.

Good news: Lloyds, led by António Horta-Osório, has decided to repay customers over PPI mis-selling scandal

And it has done untold damage to the already tarnished reputation of the banks that sold it by the shovelful.

So it was great to hear last week that Lloyds Banking Group, the largest perpetrator of PPI mis-selling, has decided to repay £3.2 billion to customers. This follows a failed legal challenge by the big banks, orchestrated by the British Bankers' Association, to try to stop the Financial Services Authority from forcing them to repay wronged customers.

Lloyds is the first bank to capitulate. Barclays, HSBC and Royal Bank of Scotland should now fall into line. The PPI problem needs to be dealt with as quickly as possible. Until this happens and consumers are righted for the wrongs committed against them, the banks will remain distrusted by all bar those who sit in their boardrooms counting their bonuses.

Building societies remain a key part of the financial landscape, providing consumers with a much-needed alternative to the banks, especially in the savings and stricken mortgage markets.

Although the credit crunch has not left the industry untouched, resulting in a bout of consolidation (that will continue for a while), there are signs that some bigger societies are emerging from the financial crisis stronger than ever.

Yorkshire and Coventry are leading the way. Both have managed to absorb smaller stressed societies into their fold over the past three years – Barnsley, Chelsea and probably Norwich & Peterborough by the end of the year in the case of Yorkshire, while Coventry has snapped up Stroud & Swindon.

Crucially, they have managed to do this without compromising either customer service or the competitiveness of their products.

The strength of these two organisations is such that both have declared an interest in acquiring Northern Rock – complete with 75 branches – from the taxpayer.

Given that the building society industry has survived the crunch with its reputation intact and without falling back on taxpayers for support (the demise of Dunfermline was its only blemish), it would be a great fillip for the sector and great news for consumers if Northern Rock (once a building society) were to be remutualised.

As David Webster, outgoing chairman of the Building Societies Association, said last week at its conference in Birmingham, building societies are primarily customer- focused businesses – which sets them apart from most banks (Metro excepted).

I want to see more focus on the needs of financial consumers. 

NFU Mutual is one of this country's best-run mutual insurers. It is profitable (£159 million last year) and puts members at the heart of everything it does. It is renowned for its excellent customer service and last year paid out £194 million in mutual bonuses to customers in recognition of their loyalty.

Maybe all this success explains why the insurer has suddenly decided to hand out bonuses to its executives like confetti.

A review of its 2010 annual report and accounts shows that incentive payments totalling just over £943,000 were given to its executive directors last year, taking their collective overall remuneration (excluding any pension benefits) to £2,167,047 compared with £1,435,868 in 2009.

The biggest beneficiary was chief executive Lindsay Sinclair, who saw his remuneration swell from £459,649 to £1,171,854 – a 155 per cent increase.

No one can deny that Sinclair is doing an excellent job in ensuring that NFU Mutual remains popular, especially with those who live in the countryside (it provides everything from thatched cottage cover to farm insurance and pensions).

But when the country and the farming community in particular are facing difficult times, such boardroom generosity seems excessive.

Members sufficiently roused to vote against the directors' remuneration should complete the 2011 annual general meeting voting form they have just received or are about to, and post it back.

Don't opt for the quick vote online because you will end up rubber-stamping the remuneration report (rather than voting against it).

If you think it is all too much bother, bear in mind that for every vote cast by post, NFU Mutual promises to donate 25p to the children's charity Make-A-Wish Foundation UK.