FSA steps up inquiry into mis-sale of PPI

FSA steps up inquiry into mis-sale of PPI

The city regulator said today that it would be stepping up its investigation into the possible mis-selling of payment protection insurance (PPI).

The Financial Services Authority (FSA) said it would make undercover visits to firms that have already been identified as deficient, as part of an ongoing probe into the controversial £5.5bn PPI market.

Over the next few months it will also call on companies not previously visited in a bid to improve standards across the board.

There are an estimated 20-25m PPI policies in force in the UK, usually bought on the back of personal loans and mortgages to provide cover for policyholders unable to pay their bills due to ill health or redundancy.

But critics claim they are vastly overpriced, difficult to claim on and in many cases sold to the wrong people.

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The FSA has spent the past two years investigating the market and in the past few months has fined a number of firms found to have inadequate systems in place.

Some of the fines levied by the FSA have been substantial - in October Loans.co.uk was fined £455,000, while in December home shopping firm Redcats was asked to pay a £270,000 penalty.

Improving standards

Clive Briault, the FSA's managing director of retail markets, said: "Improving sales standards in the PPI market remains a key priority for us, and we see it as an indicator of whether firms are treating their customers fairly.

"Customers should come away from the sale having been given the best possible chance of understanding that PPI is almost always optional, what the policy will and will not cover, and how much it costs.

"The next phrase of our programme will tell us what progress has been made and what further action is necessary."

As part of the investigation the FSA will seek to find out if customers are receiving clear information about PPI and being told the product is optional.

The regulator said that firms who failed to meet appropriate standards would face disciplinary action.

The consumer group Which? said the PPI market was not delivering adequate protection for consumers, and that it hoped the FSA would work with the Office of Fair Trading to make long-term improvements.

Pula Houghton, personal finance campaigner at Which?, said: "Industry measures to give consumers more information will be too little too late for many and are no substitute for treating them fairly in the first instance.

"Which? is pleased to see that the FSA is finally stepping up its efforts and that it has been publishing enforcement cases, but we would reiterate the need for them to name and shame firms breaching the rules."

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