The Financial Services Authority of UK has fined furniture retailer Land of Leather GBP210,000 for allowing its sales force to sell payment protection insurance on loans without effective monitoring or training in place to ensure that the insurance was being sold fairly.
Additionally the Financial Services Authority (FSA) has fined Land of Leather’s CEO Paul Briant GBP14,000 for failing to properly oversee the sale of payment protection insurance (PPI) by the firm.
The firm became authorized to sell PPI in May 2006, but it did not ensure that all of its sales force were fully trained to sell PPI until November 2006 and it continued to sell PPI in its 90 stores without any effective check on its sales force until February 2007.
The fine against the firm reflects the announcement made in September 2007 that the FSA would be imposing higher fines for serious failings in the retail market including against firms who fall short in relation to PPI.
The fine against the firm would have been higher had Land of Leather not taken a number of positive steps to improve its systems and controls during the period under review, for example conducting re-training and working to implement mystery-shopping and an after-sale customer contact exercise.
As a result of its failings the firm exposed around 58,000 customers to an unacceptable increased risk of buying unsuitable PPI. Of those customers, around 8,200 will in practice end up paying for PPI – most customers settle their borrowing in full during an initial 12 month payment free period and therefore avoid any charge.
Once the FSA identified concerns, the firm voluntarily suspended its PPI sales until it received appropriate advice from external accountants regarding its PPI sales systems and procedures and had implemented their recommendations. It has also recently made changes to its senior management arrangements in respect of PPI.
By agreeing to settle at an early stage the firm qualified for a 30% discount under the FSA’s executive settlement procedures – without the discount the fine would have been GBP300,000. Likewise Mr Briant qualified for a 30% discount – without the discount his fine would have been GBP20,000.