Financial Conduct Authority
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FSA publishes latest findings on PPI

The Financial Services Authority (FSA) yesterday published the findings of its latest review of Payment Protection Insurance (PPI) selling standards. They show improvements in some areas, but also that many firms are still failing to treat their customers fairly.

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.

"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."

The FSA's latest review assessed whether firms had made improvements in five key areas. Welcome improvements were found in two of these: the vast majority of firms are now making it clear to customers that PPI is optional; and firms are now offering cancellation refunds on virtually all single premium PPI policies.

However, little or no progress has been made in the other three areas: many firms are still not giving customers clear information about the product and what it will cost; not telling them the extent to which they are eligible for PPI cover and what they are covered for; and not telling them why, where advice is given, the recommended PPI policy meets their demands and needs.

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.

In addition, the following action has already been taken as a result of the FSA visits:

  • Eleven firms have stopped selling PPI either permanently or temporarily until such time as they get their sales processes in order and/or retrain staff;
  • Three firms have cancelled their FSA authorisation to sell PPI; and
  • Four large firms are reviewing past PPI sales to ensure they were appropriate.

In line with its general approach, the FSA is seeking to increase the level of fines where this is warranted by the nature, seriousness and impact of the breach in question, and by the likely impact on deterrence. Firms have been given due warning of their obligations to treat their customers fairly, both generally and on PPI in particular. Consequently, the FSA will now seek to impose higher fines for firms in the PPI market where standards fall below the required level.

Work will continue with further firm visits and mystery shopping and focussed work on issues that cut across the PPI market. Our rules are also currently under review.

Advice to consumers

To help consumers, the FSA's consumer website – Money made clear – includes questions that people should ask before taking out PPI.

Notes for editors

  1. See the Phase 3 Report: The Sale of Payment Protection Insurance – results of thematic work.
  2. See the PPI Mystery Shopping Report: The sale of payment protection insurance – phase III mystery shopping results.
  3. The FSA has also published today specific communications for small firms.
  4. The FSA is planning to introduce in spring 2008 a new comparative information table for PPI on its Consumer Website.
  5. The FSA is consulting on introducing additional rules in its Insurance Conduct of Business Rulebook designed to improve PPI selling practices including the provision of more information in face-to-face meetings between firms’ staff and customers and extending the PPI cancellation period.
  6. The FSA announced in May 2007 a deadline of December 2008 for firms to complete their work on TCF and to demonstrate they are consistently treating their customers fairly in all aspects of their business, including PPI.
    See Treating Customers Fairly initiative: progress report.
  7. The FSA has previously fined five firms over poor PPI selling practices – Regency Mortgage Corporation Limited £56,000, Loans.co.uk £455,000, Redcats (Brands) Limited £270,000, GE Capital Bank £610,000 and Capital One Bank (Europe) Plc £175,000 and has imposed a public censure on Eastern Western Motor Group and Cathedral Motor Company Limited. Three other cases have been concluded where problems relating to PPI also featured - Capital Mortgage Connections Limited Ltd £17,500, Home and County Mortgages Limited £52,500 and Hadenglen.
  8. More information about the FSA's earlier thematic work on PPI can be found in PN 104/2006 and PN 115/2005.
  9. The Office of Fair Trading announced on 7 February 2007 that it had referred the UK PPI market to the Competition Commission for further investigation. The Competition Commission published an issues statement as part of its PPI investigation on 12 April 2007.
  10. The FSA regulates the financial services industry and has four objectives under FSMA: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
  11. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.

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