The FSA found failings in approximately 40 per cent of telephone sales of credit card PPI made by Egg between January 2005 and December 2007. Egg sold PPI either when receiving a customer services call, or when making a sales call to a new customer. When Egg customers said they did not want PPI on their credit cards, the firm directed its sales staff to use techniques to persuade the customer to take the insurance - called ‘objection handling'.
These techniques included over-emphasising the positive features of the PPI, or telling the customer they could take the PPI for a free period and cancel it later if they did not want it. In some cases, even when the customer did not consent, PPI was applied to their credit card anyway.
In addition, in a significant number of cases Egg failed to obtain clear consent from customers to receive only limited information about the PPI during the telephone sale. Egg will write to customers asking them to call a dedicated number if they have any concerns about the policy or the way it was sold to them and compensate them where appropriate - by way of illustration, Egg is expected to pay £1.67 million for every 10% of customers who receive a refund.
FSA Director of Enforcement Margaret Cole said: "Egg used inappropriate sales techniques to try to persuade customers to buy payment protection insurance on their credit card even when they asserted they did not want the cover. All firms must ensure that customers are treated fairly when selling PPI and if a customer does not want PPI, they should not be pressured into taking it"
"We will continue to fine firms where we find PPI failings. It is unacceptable that Egg did not identify the problems with its sales processes despite a series of high profile FSA communications on PPI, including earlier fines on other firms. Egg stopped telephone sales of credit card PPI in December 2007, and has agreed to write to customers and pay a full refund plus interest where appropriate. Egg is likely to pay substantial compensation as a result of this exercise."
The FSA has taken into account Egg's customer contact exercise and commitment to compensate customers where appropriate and has significantly reduced the level of penalty which it would otherwise have imposed on the firm. Egg also qualified for a 30 per cent discount under the FSA's executive settlement procedures by agreeing to settle at an early stage of the investigation. Without this discount the fine would have been £1.03 million.
Egg says:
Egg has worked constructively with the FSA to settle this matter as quickly as possible.
We are taking the matter very seriously and would like to apologise to any customers who have been affected. We will be contacting all customers impacted by this, giving them the opportunity to review whether the product was or is still suitable for them. A dedicated team of call centre staff will be ready to assist with customer enquiries on this issue.
Following the FSA visit in September 2007, Egg co-operated fully with the investigation and took the proactive decision to voluntarily cease all telephone sales of PPI.
Of the sales made during the period covered by the FSA's action (between the dates of 14 January 2005 and 17 December 2007) approximately 2% took place under Citi ownership. In its Final Notice the FSA acknowledges that from 1 May 2007, when Citi acquired Egg, it has taken proactive steps to improve compliance with its obligations.
