Financial Conduct Authority
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FSA update on its review of the sale of PPI

In an update on its thematic review of sale of Payment Protection Insurance (PPI) the Financial Services Authority (FSA) has set out that, due to the poor findings from its recent work, it is escalating its regulatory intervention.

The FSA will consider the action it will take to deal with ongoing non-compliant sales practices and consider actions to identify and remedy non-compliant past sales, using a range of regulatory powers at its disposal.

Jon Pain, Managing Director of the FSA’s Retail Markets, said:

"Tackling poor PPI sales practices remains a high priority for the FSA.  We will intervene to ensure consumers are protected and are considering what regulatory powers are the most appropriate to deliver fair outcomes.  Firms may wish to consider stopping selling single premium PPI sold alongside unsecured personal loans, given the continuing problems in the sales of this product."  

The FSA’s work on PPI included a mystery shopping programme that captured customer experiences of face-to-face branch sales of single premium PPI when sold alongside an unsecured personal loan.  The results showed: 

  • very few customers were told that the cost of the payment protection would be added to the loan as a single premium and that interest would be charged on this amount;
  • only half of customers said that they were told about the key limitations and exclusions of the policy - this is fundamental to establishing a customer's need and eligibility; and
  • many customers were not told of both the monthly cost and total cost of their PPI - at the worst performing firms very few customers were given adequate information on the cost of their policy.

The FSA will publish a further update on the third phase of its thematic work in early 2009.  The FSA is considering the Financial Ombudsman Service's (FOS) concerns, raised in its wider implications letter, about PPI complaints and will be working with the FOS on the appropriate response to this serious matter, in the context of FSA’s broader strategy.

Notes for editors

  1. The full text of the FSA’s update of its third phase of thematic work reviewing the sale of PPI will be available on the FSA website.
  2. 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. FSA’s general range of powers may include the following, although this is by no means an exhaustive list: rule changes; public censures; variation of permissions to sell (OIVOPs); financial penalties; past business reviews of a firm’s back book of sales; and action against individuals. 
  4. Wider Implications are those issues which affect a large number of consumers or firms.  The process allows the FSA to consider whether a regulatory solution may be more appropriate than the FOS deciding individual cases.  The FOS wrote to the FSA on 1 July 2008 raising the issue of PPI complaints as a wider implications issue.
  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.

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