FSA probe into PPI finds ‘serious
failures’

 

The Financial
Services Authority (FSA) has published its latest findings from
its ongoing probe into the selling of payment protection insurance
(PPI), with bleak news for finance companies.

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Although two of the five areas investigated by the FSA – namely
ensuring customers know that PPI is optional, and offering
cancellation refunds on single premium PPI policies – have shown
“welcome” improvement, the other three areas under the magnifying
glass – the availability of clear product and cost information,
informing customers of their eligibility for PPI cover, and
advising them of how PPI meets their needs – have shown “little or
no improvement”, the FSA said.

It added: “The latest review looked at 150 firms, including
mystery shopping of personal loan providers. The mystery shopping
identified serious failures in the sales processes of a number of
firms selling single-premium PPI alongside unsecured personal
loans.

“As a result four firms will be subject to further investigation
and a further 20 cases may also be investigated.”

Clive Briault, FSA managing director of retail markets said: “We
have, on a number of occasions, set out clearly our requirements
for the selling of PPI. While some progress has been made by the
industry, we are extremely disappointed that some firms have still
made little progress in improving their sales practices.

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“The right PPI can provide valuable protection for consumers,
but they are entitled to expect that they will be treated fairly by
firms when they buy it. They must be told how this product works,
what it covers, and how much it costs. At the moment, too many
firms are not meeting these requirements.

“We will now strengthen our action against firms who fail to
treat customers fairly when selling PPI.”

Responding to the FSA’s findings, Finance
& Leasing Association director-general Stephen
Sklaroff commented: “The FSA report shows that good
progress has been made in a number of key areas in the PPI markets.
While more needs to be done in other areas, the FSA has also
correctly recognised that PPI provides valuable protection for
consumers.

“Now more than ever, it is important that customers continue to
have access to this important protection. The industry will
continue to work with the FSA and others to improve the information
received by customers, including via our new consumer guide to
PPI.”

Motor retailer Cathedral Motor Company was censured by the FSA
over its PPI sales techniques back in February of this year,
with the FSA citing “limited or no monitoring of [Cathedral’s] staff”, a failure to “apportion compliance responsibilities among
its senior management”, and a lack of “appropriate training” as
reasons for the punishment (click
here for more details).

In December 2006, Scottish retailer Eastern
Western was similarly criticised by the FSA over its PPI sales
techniques (click
here for more details).