The FSA has fined Redcats (Brands) Limited £270,000 for failing to treat its customers fairly (TCF) when selling Payment Protection Insurance (PPI) in connection with home shopping products. The regulator found that Redcats did not have adequate systems and controls in place to minimise the risk of unsuitable sales.
There were also weaknesses in the way that Redcats operated and maintained its compliance systems, training and competence arrangements and sales processes.
Redcats’ breaches were particularly serious because they meant that over an 18-month period approximately 160,100 customers were sold PPI which might not have been suitable for their individual needs.
Redcats specialises in home shopping with PPI sold to cover instalment payments for the merchandise bought through catalogues by phone, post or via the Internet.
The FSA investigation found that a significant number of customers were provided with insufficient information about the PPI policy features, terms, exclusions and limitations through its telephone sales channel.
Despite stating that its sales were made on an advised basis, Redcats failed to comply with regulatory requirements for advised sales. As a result a significant number of customers were sold PPI without being provided with personal recommendations or advice, either verbally or in writing, as to why the PPI policy met their demands and needs.
Margaret Cole, director for enforcement Margaret at the FSA, said: “We have highlighted PPI as an FSA priority due to the potential risks to consumers. As a result of its systems and control failures Redcats exposed its customers to an unacceptable level of risk. Firms offering PPI must operate in a way that treats their customers fairly and meets regulatory requirements.”
In determining the level of the financial penalty, the FSA took into account a number of measures taken by Redcats which mitigate the seriousness of its failings including engaging an independent consultant to assist in implementing changes to its compliance arrangements, committing to a remedial action plan and voluntarily suspending new PPI sales while the plan was put in place.
By agreeing to settle at an early stage of the FSA investigation Redcats qualified for a 30% discount under the FSA's executive settlement procedures, without the discount the fine would have been £386,000.
The FSA has already fined two firms over poor PPI selling practices, Regency (PN/88/2006) and Loans.co.uk (PN/105/2006). Two other cases have recently been concluded where problems relating to PPI also featured, Capital Mortgage Connections (PN/119/2006) and Home and County Mortgages (PN/132/2006). Other PPI enforcement cases are pending.
