Mis-Selling Culture Still Exists In Banks

Even after the PPI scandal A report by Which? showed again the fact that employees are under the pressure of banks to meet sales target leads to the mis-selling of products.

Among the interviewed were more than 500 sales staff from the UK’s leading five banks – HSBC, Royal Bank of Scotland, Lloyds Banking Group, Barclays and Santander.

The results say that two thirds of the respondents claim the pressure is too much for them.

About half of them said that they knew a colleague who had mis-sold a financial product. Four in ten admitted they sometimes know products are not appropriate for certain customers  and feel under pressure trying to sell them.

The chief executive of Which?  Peter Vicary-Smith said: “This proves the need for big change across the industry and for bankers to put customers first, not sales. We’re calling on the banks to be much more transparent about their sales targets and incentives.”

The total cost for the banks due to the PPI mis-selling scandal is expected to rise above £15bn.

Yet in September banks were told to do away with the bonuses schemes used for encouraging sales of their products, and the result that 41% percent of those quizzed by Which? was a drop in available incentives. On the other hand, more than 81% said that they do not see difference in the pressure meeting sales targets.

A spokesman for the British Bankers’ Association said: “Selling people products they do not need is not putting the customer’s interests first and therefore is ultimately bad for the bank.

“The banks will be looking at the findings of this small survey – along with their own internal research – to understand why any staff might feel otherwise.”

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Barclay`s CEO Fears Interest Only Mortgages Scandal

The new Barclay`s chief executive – Antony Jenkins has expressed some concerns that the mis-sold interest-only mortgages , not paid when they reach maturity, could be the reason for a huge financial scandal.

“We spend a lot of time trying to look over the horizon to what might be complaints in the future such as interest-only mortgages”. he also explain that there is a small number of Barclays borrowers, who were in a position to lack enough resources to fund their loan.

The interest-only mortgages are a type of a home loan, where the borrowers are required to pay off only the interest until the maturity date, when they are will be asked to pay off the full sum borrowed. During the period when the house prices were high the banks used to lend higher amounts for the interest-only loans, than they would with a regular repayment scheme.

However, at this stage it could be seen by regulators as an irresponsible action which has placed borrowers in an unfavourable situation now house prices have dropped.

The Financial Services Authority declared that they would be “monitoring the issues” surrounding interest-only mortgages which mature without the borrower having the means to pay off the full amount.

Barclay`s CEO has promised that they will act fairly to the borrowers, who are unable to repay their loans when they mature. “We are trying to communicate frequently as these loans reach maturity and to help if a source of repayment for the loan hasn’t happened”, he stated. He added: “We will be monitoring the issues that arise when interest-only borrowers reach maturity without the means of repayment and will examine the strategies in place across firms and their compatibility with the fair treatment of customers.”

In the recent years banks faced a wide range of mis-seling scandals, so now they fear the interest-only mortgages will be the next bank fiasco.

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Loan Agreement