The Financial Services Authority has recently fined Alliance and Leicester Plc a record £7m for “serious failings” in the sale of their Payment Protection Insurance, or PPI as it is commonly known.
Between January 2005 and December 2007 A&L sold approximately 211,000 PPI policies to customers at an average price of £1,265. They were intended to cover the customer’s loan repayments in the event of sickness or unemployment. However, investigations by the FSA discovered that PPI policies sold by A&L advisors over the telephone during the three year period were often unsuitable for the customer. Advisors were criticised for their failure to consider each customer’s individual requirements regarding to their loan and personal status. Key points such as existing PPI or the customer’s age, employment and medical condition were frequently overlooked.
The FSA investigation also revealed that customers enquiring about unsecured loans were not clearly informed that obtaining PPI was not compulsory, nor were they provided with adequate disclosure of the policy’s limitations, details of the additional cost of PPI and the availability of cheaper PPI policies. The risk of an unsuitable sale was further increased by the bonus structure A&L operated for advisors, which gave considerable rewards for PPI sales.
Margaret Cole, FSA Director of Enforcement commented, “The failings at A&L are the most serious we have found,” adding this was, “reflected in the record PPI fine.” The FSA has previously taken action against 18 other firms over poor PPI selling techniques, including Capital One and Loans.co.uk.
A&L has since agreed to contact all customers who took out PPI policies by telephone over the three year period prompting them to review their operating policy. Which? Chief Executive, Peter Vicary-Smith, has advised, “Anyone who has a personal loan or credit card should check whether they have a PPI policy and, if they think it was mis-sold to them, should consider making a complaint.”