The FSA has fined Alliance & Leicester £7m for serious failings in its telephone sales of payment protection insurance (PPI). FSA Director of Enforcement, Margaret Cole, commented that “The failings of Alliance & Leicester are the most serious we have found”. Ms Cole has made it quite clear to firms that the regulator will step up its enforcement actions in relation to poor PPI sales practices.

Alliance & Leicester sold approximately 210,000 PPI policies to customers seeking a personal loan between January 2005 and December 2007. However, the FSA has found that sales advisors failed to give customers details of the cost of PPI and sold products without considering what customers needed. Sales staff did not make it sufficiently clear to customers that PPI was an optional product on top of the personal loan and trained its staff to put pressure on customers when they queried the inclusion of PPI in quotations or recommendations.

As Alliance & Leicester have agreed to put in place a customer contact programme and agreed to settle early, a reduction to the fine which would have otherwise been imposed was granted.

Only last week the FSA announced that following poor findings from its third phase of thematic work to review the sale of PPI products it would escalate its regulatory intervention to prevent further non-complaint sales.

The FSA has stated that tackling poor PPI sales remains a high priority and that it is willing to intervene to ensure that customers are adequately protected.

The third phase of thematic work has included a mystery shopping exercise which has provided the FSA with examples of customer experience of face-to-face branch sales of PPI sold alongside an unsecured personal loan. The FSA has found that the results of this exercise have been worse than had been expected. Firms were found to have relied upon documentation to explain costs and exclusions and little oral information was given to customers at the point of sale.

Firms should ensure that all the FSA’s recommendations for the sale of PPI products are followed and that all sales staff are fully aware of their obligations. After so much work over the past few years to highlight current regulatory failings, the FSA is unlikely to be lenient with non-complaint firms.

For further information:

Alliance & Leicester to pay £7 million fine for PPI failings

Payment Protection Insurance - a thematic update