In 1928, Mrs Donoghue visited a cafe in Paisley with a friend. She drank some ginger beer paid for by her friend and the bottle was found to contain a decomposed snail. She sued Mr Stevenson, the manufacturer, for the princely sum of £500 and four years later she won her case in the House of Lords, thus establishing the principle of product liability.
We take it for granted that consumer goods are all now fit for purpose, are guaranteed and comply with appropriate regulatory standards. Electrical appliances, computers and motor cars are all highly complex but they work. The Food Standard Regulations ensure that the food that we eat is all safe and we take clean drinking water for granted.
Tobacco is of course the one consumer product which has been the subject of more litigation than any other, leading to the famous Master Settlement Agreement in 1998 with an eye watering settlement of $206 Billion despite which tobacco claims continue to this day.
However, when it comes to financial services products, we appear to have new scandals visited upon us almost on an annual basis:-
- Equitable Life;
- Endowment mis-selling;
- Pensions mis-selling;
- PPI (Payment Protection Insurance) mis-selling;
- Split capital trusts;
- Ninja (No Income No Job no Asset) mortgages;
- Hedging instrument mis-selling; and
- LIBOR rigging.
It is no wonder that press commentators are saying we have all had enough. This must be the “tobacco moment” for the financial services industry, the watershed which will finally force it to design and sell only products which are fit for purpose.
It has been said that the only useful financial innovations in the last fifty years are the ATM, the credit card and online banking. It is about time that the financial engineers stopped dreaming of new ways to pump up their bonuses and started to think about what might benefit their customers.
At the same time let us spare a thought for the many thousands of decent honourable people working in the financial services sector who have lost their life savings and in many cases their jobs because of the greed and corruption of a few rotten apples at the core.
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