WIREDGOV

The Financial Services Authority (FSA) has today announced a package of tough measures to protect consumers in the Payment Protection Insurance (PPI) market and ensure they are better treated when buying PPI or complaining about it.

Firms representing more than 40% of face-to-face sales in the Single Premium Unsecured Personal Loan PPI market have agreed to review these sales and redress those consumers identified as mis-sold.  Ongoing supervisory action continues with the remainder of this market place.

These measures build on the agreement the FSA obtained from the industry earlier in 2009 to stop selling Single Premium PPI on unsecured loans.

For complaints about all PPI products, new measures will tackle the key issue that too many complaints are rejected by firms and then overturned by the Financial Ombudsman Service (FOS) in favour of the consumer:

• new guidance (due to take effect by the end of the year) will ensure PPI complaints are handled properly, and redressed fairly where appropriate - the FOS has indicated support for the FSA’s proposed approach; and
• a new rule will require firms to reopen some 185,000 previously rejected PPI complaints and reassess them against the guidance.

In addition, the FSA is launching targeted assessment of sales practices for PPI on secured loans and credit cards; if the potential for mis-selling is identified, pro-active reviews by firms may be extended to these areas too.

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

"Consumers should not be pressured or deceived into buying PPI and they are entitled to have a policy properly explained to them.  It is unacceptable that despite previous warnings about poor sales practices, backed by 22 enforcement cases and significant fines, the PPI sector still needs the FSA to intervene on this. 

"And the outcome of a complaint about a PPI sale should not depend on whether or not the complainant persists past the firm on to the FOS.

"This is the last chance for the industry to show that it can act fairly, consistently and in the best interest of consumers on PPI.  All firms operating in this sector should take note and where necessary get their house in order.  Where we find questionable practices in sales or complaint handling, firms can expect that we will take action."

Notes for editors

1. The firms reviewing face-to-face Single Premium Unsecured Personal Loan PPI sales represent more than 40% of gross written premiums in that sector.  They have agreed to review past sales of these made since 1 July 2007.  If material detriment is found, firms will review all such sales made since January 2005.  The FSA has agreed the format and key messages of the communication to be sent to customers in this exercise, namely:
   
   
   • the FSA has identified specific market problems with the selling of PPI;
   • on reviewing these problems as described in the letter, if the customer thinks they may be affected they should contact the firm;
   • depending on what is found, the customer may be entitled to redress; and
   • responding to the letter will not have a negative impact on the customers’ loan or their ability to obtain a loan in the future.
2. The FSA’s work focused on the sale of Single Premium Unsecured Personal Loan PPI as this was identified by the FSA and FOS as the highest risk sector for causing detriment to consumers.  It is also the largest PPI product area, with the highest penetration rates.
3. The FSA has taken action against 22 firms over poor PPI sales practices.  This includes the FSA’s largest fine in the retail sector on Alliance & Leicester which was fined £7m in October 2008 for serious failings in its telephone PPI sales.
4. On average, firms have rejected around 60% of the PPI complaints they have received, but some firms have rejected nearly all.  Of the 16% of complaints which go on to the FOS, over 80% are overturned in the consumer’s favour.  
5. In February, the FSA sent a Dear CEO Letter to the chief executives of firms selling single premium PPI with unsecured personal loans, requesting they stop selling the products by 29 May 2009.  To the FSA’s knowledge, this product is no longer being sold.
6. 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.
7. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.