The regulator found that LCUK did not have appropriate systems and controls to minimise the risk of unsuitable sales.
At LCUK, PPI was sold on an advised basis over the telephone. The FSA investigation found that the firm failed to gather and record information to show that the policy recommendations it made were suitable. The FSA discovered that customers did not receive enough information at the point of recommendation to make an informed decision about the PPI policy being offered. Therefore, customers could not be sure if LCUK's recommendation was the right option for them.
LCUK's breaches were particularly serious as the failings exposed approximately 14,400 customers to the risk of the sale of PPI which was unsuitable for their needs.
Margaret Cole, FSA director of enforcement, said: "We have highlighted PPI as an FSA priority due to the potential level of risk to consumers. Loans.co.uk Limited failed to make sure adequate processes were in place to ensure the suitability of its PPI recommendations and treat its customers fairly. The principle of Treating Customers Fairly (TCF) should be embedded in firms' business models to help prevent such failings and it is important that all firms review their systems and controls to reach this standard.
"PPI can provide valuable protection against changes in personal circumstances But customers should come away from the sale having been given the best possible information to understand that the PPI is optional, what the policy will and will not cover and how much it costs. We encourage consumers to ask straightforward questions of sales staff when PPI is mentioned to help them to identify whether the product is right for them.”
The FSA also found that LCUK failed to have appropriate compliance monitoring procedures in place to identify failings in the sales process. LCUK did not provide guidance to staff on how to identify a complaint or adequately communicate its complaints handling procedure to them.
Following discussions with the FSA a remedial action plan for consumers has been implemented which involves a customer contact exercise and redress where appropriate.
This PPI enforcement action follows the publication of the FSA's latest work into the PPI market last week which found that sellers are still not treating customers fairly. The key findings included:
- Firms are not giving customers clear information during the sales conversation;
- Customers are still not being made fully aware that there may be parts of the policy under which they cannot claim; and
- Where customers are sold single premium policies, this is not always done with the best interests of the customer in mind.
By agreeing to settle at an early stage of the FSA investigation, LCUK qualified for a 30 per cent discount under the FSA’s Executive Settlement Scheme – without the discount the financial penalty imposed would have been £650,000.
