FSA chief disappointed at lenders’ reactions to PPI mis-selling

by Gill Montia

Story link: FSA chief disappointed at lenders’ reactions to PPI mis-selling

The chief executive of the Financial Services Authority (FSA), Hector Sants, has told the members of a Treasury Select Committee that progress made so far by firms selling payment protection insurance (PPI) to rectify mis-selling, has been disappointing.

The insurance is intended to provide cover for repayments on personal loans and credit cards, should the debtor become too ill to work or lose their job.

Large numbers of claims been rejected by insurers because policies, which have generated huge profits for banks and other lenders, have been mis-sold.

The FSA have so far fined 20 firms around £12 million for regulatory failings regarding PPI sales, however, Mr Sants has confirmed that firms have been slow to alter their behaviour.

Last week, Egg was fined £721,000 and ordered to compensate customers who had been mis-sold PPI.

Alliance & Leicester remains the record holder, having been fined £7 million for a catalogue of PPI offences, in October.

The bank did not make it clear that the insurance was optional and trained its staff to pressurise customers into buying PPI when they queried its inclusion in their quotations.

In January, the Financial Ombudsman Service (FOS) warned that changing economic circumstances could result in an increase in claims for PPI because a rise in redundancies would almost certainly reveal further instances of mis-selling.

This week the FOS reported that it has received over 25,000 complaints relating to the sale of PPI since the beginning of the year.

By comparison, during the 12 months to April 2008 the service recorded 10,652 complaints regarding the insurance.