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Last Updated: Wednesday, 26 September 2007, 11:10 GMT 12:10 UK
New attack on payment insurance
FSA headquarters
The FSA has promised tougher action on PPI mis-selling
Many firms that sell payment protection insurance (PPI) are still failing to deal with customers fairly, says the Financial Services Authority (FSA).

The regulator's latest survey shows that firms are still not giving customers enough information to judge if they need the insurance.

The FSA examined the way 150 firms were selling PPI and carried out "mystery shopping" exercises among some of them.

It will now take more enforcement action and impose bigger fines.

"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," said Clive Briault of the FSA.

It is shocking that, despite lenders assurances that they will clean up their act, PPI is still being mis-sold to such an extent
Teresa Fritz, Which?

"They (customers) 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," he added.

Protection racket?

The FSA says that most firms are now making it clear to their customers that buying PPI is optional, and that refunds are now being offered where customers cancel a policy that has been paid for with a single up-front payment.

But the regulator has discovered that there has been little or no progress on telling customers what the insurance will cost, what it will actually cover or exclude, and why the customer needs it in the first place.

The consumers' association Which? demanded high-profile action.

"It is shocking that, despite lenders assurances that they will clean up their act, PPI is still being mis-sold to such an extent," said Teresa Fritz of Which?

The FSA will now seek to impose higher fines for firms in the PPI market where standards fall below the required level
FSA statement

"We want the FSA to name and shame offending lenders so that people are aware of which companies are breaching the rules."

PPI policies are designed, in theory, to pay out if someone is unable to meet the repayments on their hire purchase agreements, credit cards, personal loans or mortgages, perhaps if they fall sick of lose their jobs.

However, critics have argued that, while PPI brings in an income of about 5bn a year for banks that provide the insurance, very few people are actually able to claim on the policies.

Last year, the Office of Fair Trading (OFT) concluded that many PPI policies gave customers a poor deal as they offered less protection than they thought.

This has been followed by a full enquiry by the Competition Commission, which is continuing.

Warning

The FSA has spent the past two years trying to enforce its rules about selling the policies fairly.

But despite numerous visits to companies and the imposition of several very large fines, progress has been very slow.

So far five firms have been fined a total of 1,566,000, and two others have been censured. Some firms have now decided to stop selling the insurance.

But the FSA says it has now decided to get tougher.

It is investigating the sales practices of four firms and may investigate another 20.

Serious beaches of the rules will now lead to higher fines than before.

"Firms have been given due warning of their obligations to treat their customers fairly," warned the regulator.

"Consequently, the FSA will now seek to impose higher fines for firms in the PPI market where standards fall below the required level."




SEE ALSO
Warning over loan insurance costs
01 May 07 |  Business
Better deal for payment insurance
29 Mar 07 |  Business
Capital One fined over PPI sales
15 Feb 07 |  Business
Inquiry into debt insurance sales
07 Feb 07 |  Business
GE bank fined for sales breaches
30 Jan 07 |  Business
Big fines loom on debt insurance
22 Jan 07 |  Business

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