FSA gets tough on PPI mis-selling

The Financial Services Authority has 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.

A new rule will require firms to reopen around 185,000 previously rejected PPI complaints and reassess them against new guidance, which is due by the end of the year. The guidance aims to ensure PPI complaints are handled properly, and redressed fairly. The Financial Ombudsman Service has indicated support for the FSA’s proposed approach.

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.

The FSA requested that firms stop selling Single Premium PPI on unsecured loans by 29 May 2009 and as far as it knows, this product is no longer being sold.

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.

Of the 22 firms the FSA took action against over poor PPI sales practices, the largest fine in the retail sector was on Alliance & Leicester which was fined £7m in October 2008 for serious failings in its telephone PPI sales.

Pain continued: "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."