A tale of two duplicities
Two stories of wrongly taking money off people lead Paul Lewis to ask which is worse.
What do you call a company which sells small plots of agricultural land to investors for up to 30 times their true value on the hope – never realised – that one day they might get planning permission for housing?
UK Land Investments Limited ran one of these so-called landbanking schemes for six years. In that time it took £69 million off more than 4500 people selling them bits of fields for around £15,000 each. Some plots have now been valued at just a few hundred pounds.
A few days ago the scheme was declared illegal by the Financial Services Authority and it has asked the High Court to put UKLI into administration. The company has little money left after commission to sales staff and loans to people the auditors could not identify. Its administrators Deloitte say investors will get back a few pence in the pound. Or they can keep their corner of a British field that is forever grassland. Either way they have lost almost all their money.
The Financial Services Authority says 70 landbanking schemes have sprung up since 2005 and it hopes its action will "serve as a warning to other companies that might be breaking the law" as UKLI was.
A fool and his money and all that. But what would you call the people who run an illegal scheme that takes £69 million off thousands of people? Hold that thought while you consider this.
The day after the FSA went to court over ULKI another bit of the financial services industry was accused of overcharging millions of customers £1.4 billion every year. And it wasn’t a here today gone tomorrow company in the frame. But the reputable High Street banks and lenders we all know so well.
Payment protection insurance is sold alongside loans, often doubling the cost of borrowing the money. It claims to protect people who take out a loan by meeting the some of the cost of repayments if they can’t do so because they have lost their job or fallen ill.
But PPI often does not pay out when people claim. The Finance and Leasing Association which represents many lenders admits that more than one in five claims is rejected. The Financial Services Authority has said many of the companies selling PPI mislead their customers. Some make it appear compulsory to take the insurance. Others do not check on existing medical conditions. A big proportion fails to explain the restrictions. A smaller group sells it to people who are simply too old to claim. Citizen’s Advice says one in three PPI policies is mis-sold. Consumer organisation Which? calls it a protection racket.
The Competition Commission estimates that customers of this widely mis-sold product are also overcharged by 67%. In other words, for every £10 they pay the honest cost would be just £6 – hence the £1.4 billon a year it has overcharged us.
Compared with that perhaps the best term for landbankers UKLI is simply ‘beginners’.
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