FSA hands down £7m fine for A&L PPI mis-selling

by Gill Montia

Story link: FSA hands down £7m fine for A&L PPI mis-selling

The Financial Services Authority (FSA) has handed down its biggest fine to date for the mis-selling of payment protection insurance (PPI).

The regulator imposed a £7 million penalty on Alliance & Leicester (A&L), which conceded its wrongdoings early in the FSA investigation or would otherwise have been liable to pay £10 million.

Between January 2005 to December 2007 the bank sold approximately 210,000 PPI policies to customers seeking personal loans.

The average premium per policy was £1,265 but the bank’s advisers generally failed to give customers details of the cost.

Staff encouraged the sale of PPI without properly considering what customers needed and did not make it sufficiently clear that PPI was optional, when taking out a loan.

A&L actually trained its staff to put pressure on customers to buy the insurance should the inclusion of the PPI premium in a quotation be queried, or an adviser’s recommendations challenged.

The FSA’s director of enforcement, Margaret Cole, has concluded that after three years of regulation serious problems in PPI sales still exist and that the FSA must continue to step up the action it takes against firms that do not sell PPI properly.

She also warned that lenders should not rely on paperwork sent out to customers after a sale to excuse unclear or misleading statements given on the telephone.

Earlier this week articles in the press speculated that the Competition Commission would ban the sale of PPI at the time a loan is agreed.

Such a move would encourage consumers to consider a range of PPI providers.