WIREDGOV

The Financial Services Authority (FSA) yesterday welcomed the move by Alliance & Leicester, Barclays, The Co-Operative Bank, Lloyds Banking Group (including Lloyds TSB, Halifax, and Bank of Scotland), and RBS/Natwest to stop selling single premium Payment Protection Insurance (PPI) with unsecured personal loans by the end of January 2009.

Some of these firms, along with other market players, now offer or plan to offer regular premium PPI instead of a single premium product. The FSA expects other firms still selling single premium PPI to take note of these developments.

The FSA recognises the importance of appropriate protection insurance in the current economic climate, but remains concerned over the standard of sales of single premium PPI. Customers being sold this type of product should be told how the product works, what it covers and how much it costs – especially as the cost of the PPI is added to the loan and interest charged on this amount.

Jon Pain, FSA’s managing director of retail markets, said:

“We are pleased these firms have stopped selling single premium policies and would expect other firms to notice these developments and review their own positions. A PPI product can be helpful for customers wanting protection on a specific credit agreement, as long as the policy is sold appropriately. Consumers can visit our website, Moneymadeclear, to get information on their protection choices and use our tables to compare PPI policies.”

Notes for editors

1. To help consumers make informed decisions, the FSA's consumer pages - Moneymadeclear - include questions that people should ask themselves before taking out PPI along with PPI comparative tables to help them shop around. http://www.fsa.gov.uk/tables/bespoke/PPI.
2. Tackling poor Payment Protection Insurance (PPI) sales practices is a priority for the FSA. The aim of the FSA's work into the sale of PPI is to secure better outcomes for consumers through firms improving their sales standards and consumers making well-informed purchasing decisions.  The FSA expects firms to meet the Principle of treating customers fairly and to comply with Insurance Conduct of Business (ICOBS) rules.
3. The FSA published an update on its work on the sale of PPI in September 2008 where it announced it would escalate its regulatory intervention. The FSA has taken action against 20 firms over poor PPI sales practices. This includes FSA’s largest fine in the retail sector (Alliance & Leicester were fined £7m in October 2008 for serious failings in its telephone PPI sales).
4. The Competition Commission’s (CC) is undertaking an inquiry into the PPI market. The FSA awaits the CC’s final report and has submitted a response to the CC’s Provisional Decision on Remedies. We welcome the CC's proposed remedies and think that together our actions and the CC's proposed remedies will drive changes in the market and deliver better consumer outcomes.
5. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
6. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.