WIREDGOV

The Financial Services Authority (FSA) has fined Alliance & Leicester Plc (A&L) £7 million for serious failings in its telephone sales of payment protection insurance (PPI).

For three years from January 2005 to December 2007 A&L sold approximately 210,000 PPI policies to customers seeking a personal loan at an average price of £1,265, but there was a general failure by advisers to give customers details of the cost of PPI.  In addition A&L sought to find reasons to sell PPI without properly considering what customers needed.  

A&L did not make it sufficiently clear that PPI was optional and it trained its staff to put pressure on customers where they queried the inclusion of PPI in their quotation or challenged advisers’ recommendations.

These failings resulted in unacceptable levels of non-compliant sales and a high risk of unsuitable sales over the three year period.

Margaret Cole, FSA Director of Enforcement, said:

“The failings at A&L are the most serious we have found.  This is reflected in the record PPI fine.  It is very disappointing that after three years of regulation we are still finding serious problems in PPI sales.

“This case shows that we will continue to step up the action we take when firms do not sell PPI properly.  Customers should be able to rely on impartial advice based on their individual needs and demands.  It is particularly unacceptable for a firm to train its advisers to put pressure on customers when recommending insurance cover which they have not asked for and may not need.  Firms cannot rely on paperwork sent out later as an excuse for unclear or misleading statements given on the telephone.

“As we said in our recent update on our PPI work, firms must ensure their PPI sales processes are up to the required standards.  They must change their behaviour where necessary and if they are either unwilling or unable to sell this product in a compliant way, making sure that customers are treated fairly, they should not be selling it at all.”

A&L has agreed to implement a substantial and comprehensive customer contact programme, overseen by third party accountants.  It will write to all customers who took out policies by telephone in conjunction with an unsecured loan between 14 January 2005 and 31 December 2007 prompting them to review their policy against product information sent to them.  It will also review any relevant rejected complaints and claims and has committed to pay redress where appropriate.

This remedial action has been taken into account by the FSA and has reduced the level of penalty which would otherwise have been imposed on the firm.

In addition, A&L qualified for a 30% reduction in penalty by settling at an early stage of the FSA's investigation.  Were it not for this discount, the FSA would have imposed a financial penalty of £10 million.

Notes for editors

1. The full text of the Final Notice includes the background to the case, the regulatory requirements contravened and the factors taken into account when settling the level of the fine.

2. Any A&L customers with questions concerning their PPI policy can contact A&L  as follows:

   • Call into any branch

   • Telephone 0844 5619790 (24 hours a day, 7 days a week)

   • Write to Let’s Work it Out, Alliance & Leicester plc, Carlton Park, Narborough, Leicestershire, LE19 0AL

   • Email letsworkitout@alliance-leicester.co.uk (for security reasons it may not be able to respond via email, therefore please provide a contact telephone number).

3. A&L is a public limited company which has been authorised by the FSA to perform a number of regulated activities since 1 December 2001.  In addition, it has been authorised to arrange, assist in the administration of, and deal as agent in, non-investment insurance contracts since 14 January 2005.

4. Between 14 January 2005 and 31 December 2007, A&L sold approximately 211,000 PPI policies (on an advised basis) at an estimated average cost of £1,265 including interest.

5. The FSA has previously taken action against 18 firms over poor PPI selling practices: we have fined Liverpool Victoria Banking Services £840,000, HFC Bank £1.085 million, Regency Mortgage Corporation Limited £56,000, Loans.co.uk £455,000, Redcats (Brands) Limited £270,000, GE Capital Bank £610,000, Capital One Bank (Europe) Plc £175,000 and Land of Leather £210,000, GK Group Limited £51,100, George White Motors Limited £28,000, Park’s of Hamilton (Holdings) Limited £61,600 and £35,000 together for Ringways Garages (Leeds) Limited & Ringways Garages (Doncaster) Limited – and have imposed a public censure on Eastern Western Motor Group Limited and Cathedral Motor Company Limited.  Other cases where problems relating to PPI also featured are - Capital Mortgage Connections Limited £17,500, Home and County Mortgages Limited £52,500 and Hadenglen Home Finance Plc (£133,000 for the firm and £49,000 for its chief executive).

6. The FSA's thematic work on the sale of PPI published in September 2007 found improvements in some areas, but also that many firms selling this insurance were still failing to treat their customers fairly.  The FSA introduced additional rules in its Insurance Conduct of Business Rulebook in January 2008 designed to improve PPI selling practices.  The FSA has conducted further follow-up thematic work on PPI this year and the findings of this are due to be published in the autumn.

7. To help consumers make informed decisions, the FSA's consumer pages – Moneymadeclear - includes questions that people should ask themselves before taking out PPI and a new comparative information table for PPI.

8. 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.

9. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.