Inside Smaug's Lair

If you want to appreciate why the global financial meltdown occurred, go spend some time working for a bank. Then just observe. You'll soon see the how and the why of it.

That was me. I'd temped and done contract work for years, mainly in the public sector. That kind of work dried up since the recession, so I moved house and went to process Payment Protection Insurance (PPI) claims for a bank. One of the big ones. One of the ones that needed bailing out. Don't judge me too harshly.

It will be remembered that the financial sector was in court, arguing for years against having to repay mis-sold  PPI policies. Once defeat had been accepted, they were faced with an increasing backlog. Each complaint had to be dealt with in a statutory amount of time and most banks agreed to pay out on every legitimate claim they had already received up to that point, just to get them processed and out the door.

What's curious is what happened next. After the backlog, the bank started to retrain staff to review each claim received and rejected around 80% of new complaints. They achieved this extraordinary turnaround by looking at the original loan agreement or credit card application filled in by the customer at the time of sale. If PPI was included on that form, and that form was signed by the customer, that's a legally binding contract and the applicant was and is legally bound to whatever terms were included.

If no form can be found, the bank just decide that the customer would have filled in a standard application form (one of Plato's perfect forms) and then goes ahead and rejects the complaint on the same grounds. Even the ghost of a signature is as good as consent and the banks can and do reject applications on these grounds alone.

How so different to when I first went to work there. My team, in the space of six months, were trained and retrained for half a dozen separate roles, at least one of which we never actually did. Yet I began and ended my banking career reviewing complaints and so I got to witness what a difference a year made.

In the beginning, PPI claims were being reviewed and at that time around 80% of complaints were upheld. The reason for this is that when examined objectively, it's easy to find evidence of mis-selling on the majority of PPI policies sold in the last couple of decades.

The most obvious sign of guilt is a cross next to the box indicating PPI is to be included, indicating the customer was told PPI payments were compulsory. Most customers would simply follow what the adviser told them and tick and sign the box. You'll also see applications where the yes box has been pre-populated before the form was even printed, another sign of mis-selling.

All these sorts of complaints were at one time upheld and customers were refunded the premiums they'd paid, interest added. It wouldn't matter if a copy of the application form could not be located. So long as the complainant had raised the appropriate complaint points, the bank would pay out. There is a mantra within the bank that the customer must never be disadvantaged by the complaints process. And in the beginning, that was certainly the case.

As I understand it, the Financial Services Authority (FSA) then asked the bank why it was upholding so many complaints and offered guidance on what types of cases it could reject, and on what grounds.

The FSA, supposedly the regulator of the financial sector, will be abolished in April 2013, to be replaced by two new regulators. One, The Prudential Regulation Authority, will be part of the Bank of England. The other, the Financial Services Authority, will be headed by the former chairman of Hong Kong's Securities and Futures Commission. That's what they mean when they talk about independent regulation.

Indeed, working in the financial sector has given me a fresh perspective on the term, 'political organisation'. Banks, like any large corporation, have an image to maintain and are more often concerned with being seen to do right than actually doing right. Any actual good that comes about from their actions is usually incidental to the main aim, that of being seen to be doing good. Being fair to customers became, being seen to be fair to customers.

So it was a very different experience to review a case the second time around. Under these new rules, a signed application form, with PPI included under 'Financial Information', was enough to reject the complaint.

Nevertheless, a farce had to be performed. Reasonable efforts had to be made to contact the customer and ask what they remembered about the sale. Often they remembered nothing. That was fatal. Frequently a customer said they were told they had to have the PPI to get the loan/credit card. What the customer did recall for the most part did not matter. Everything else was secondary to that signature on the application form.

Yet most everyone working on the project knew that this was nonsense. Time and again I heard former branch staff recalling how they were trained to tell customers that PPI was compulsory. There is no consideration of these historic practices at the bank, merely an exercise in creative accounting. It's not about what happened, but what can be reasonably defended under law. Not once did a phone call made to a customer change my original decision. It only had to be done to be seen to be done.

Observe and you'll see. Procedures written on the hoof and then discarded the following day, u-turn upon u-turn. Unit times slashed, with the number of tasks need to process each case increasing.

Or witness two different agencies working the project simultaneously so the bank can always threaten to cancel one or other contract at the first murmur of descent.

Indeed, insinuations of one sort or another would bubble up through management at least once a week. They might decide to slash unit times, when there wasn't enough time as it was, or decide the evening shift is no longer to be a short shift, but has to work the same hours as everyone else, otherwise it's unfair to people who get to go home at a reasonable hour.

Any objection raised and the message came back, 'They don't care. They'll do what they like, they don't care whether you like it or not'. That's the central message I took away from my brief career in banking.

And they don't care either. Which is to say, they are careless. One of my many roles was inputting statements to calculate how much PPI had been paid on an upheld complaint. One day, a new version of the software used to calculate the interest we owed the customer was released. Some customers were suddenly getting five or six times as much as they were receiving before, running into tens of thousands of pounds. When anyone tried to raise this, we were told to just use the calculator until we heard different. By the time anyone senior twigged that something might be up, I'd already moved back to review.

Yet it's not about what you do or do not do, but what is and isn't your responsibility. As long as no blame can be attached to you , it's fine, that's the game that's played. It's all about risk. The general rule is that if you notice someone has done something wrong and that person is not part of your team, ignore it, it's not your problem. The only question team leaders tend to ask is: "Can it be traced back to us? Then forget about it."

The industry talks about being fair to customers, but my impression is that the financial sector doesn't feel like its succeeding unless its actively engaged in disenfranchising someone, whether they be its customers or staff. This leads to the same corrosive behaviour in those contracted to the bank. I've seen expense forms that would make a politician blush. Weekends and evening shifts are best. Then you see people log in early and go do their shopping. Or leave early and get their mate to log out later. Banking positively draws this behaviour out of people.

I couldn't thrive in that world. Too pushy, too intransient, too little staying the same for very long, making maintaining a flow all but impossible. Also, a job in which you are required to ring customers merely to actively disrespect what they tell you can't be good for the soul.

The public sector can be a little dusty, but there's a good system of support and every decision is checked before it leaves building. Finance is more caviller than that, more wild west, little or no support provided, instead concentrating on spreading the blame around. Everything then comes down to a series of Quality Checked cases, reds and greens, like some kind of playground game.

I called this article 'Inside Smaug's Lair' because like the dragon in 'The Hobbit', the banks appear to me to be lying on a bed of gold and precious stones, routinely venturing out in the night to unleash punitive justice upon the villagers. It was the financial sector that mismanaged its affairs concerning sub-prime lending, borrowed billions from the public purse, set off a global meltdown from which western countries will take years to recover, if they ever do. Yet the banks seem barely to be affected. There was a new batch of contractors being trained at least once a month for so long as I worked there. Few other sectors are recruiting in such numbers. The banks have externalised and offloaded their mistakes on to the rest of the country and retreated into their lair to admire their hoard. A billion pounds put aside to payout PPI mis-selling is the cost of but one shiny gem.

All in all, it's the kind of atmosphere that leads to people taking risks and making mistakes. What's more, there's nothing at all to prevent what happened in 2008 happening all over again. It's only a matter of time.

I went home one Friday and never went back. I miss the friends I made there, but I guess the whole experience has left me somewhat bitter. But then, I was bitter before I even started. I live in this country too and I see the damage that has been done.

We shouldn't despair, there are always things that can be done. If you've had a PPI complaint rejected by a bank, make sure you refer your case to the Financial Ombudsman's Service (FOS). Every time a case is referred to the FOS, it costs the bank hundreds of pounds. The more cases that go to the FOS, the more inclined they might be to revert to upholding cases.

If you have a complaint in progress or are thinking of making a complaint, make sure you tell the bank that you were told that you had to take PPI on this type of loan/credit card. The bank will probably ignore this and reject your complaint on the basis of a signed application form, but it will be recorded on your file when your case progresses to the FOS.

If the PPI was sold to you after 2005, you might also tell the bank that at the time of the sale, you were in full time employment and were entitled to 6 months sickness benefit and 6 months redundancy benefit from your employer. That might not be strictly true, but in the financial sector it's all about what you can get away with. Do unto others as they would do to you.

Further than that though, if you're a customer of one of the big banks, one of the ones involved in sub-prime mortgages, bailouts, PPI mis-selling and Libor fixing, find a smaller bank with which to invest your money. Retaining the services of the usual financial suspects is like remaining with an abusive partner who has demonstrated no propensity for change. Get over it and go out with someone else and help create a wider base on which to support the economy.

After all, why should the financial sector be the only one to miss out on this lovely recession we're all having?