The UK Financial Services Authority has fined Alliance & Leicester GBP7 million for failings in its telephone sales of payment protection insurance.
For three years from January 2005 to December 2007, Alliance & Leicester (A&L) sold approximately 210,000 payment protection insurance (PPI) policies to customers seeking a personal loan at an average price of GBP1,265, 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.
It is reported that 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.
A&L has agreed to implement a substantial and comprehensive customer contact program, overseen by third party accountants. It will write to all customers who took out policies by telephone in conjunction with an unsecured loan between January 14, 2005 and December 31, 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 Financial Services Authority (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 GBP10 million.
Margaret Cole, FSA’s director of enforcement, said: 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.