The FSA is to investigate four payment protection insurance firms and a further 20 may also be investigated as a result of its probe into payment protection insurance sales standards.
The review looked at 150 firms, including mystery shopping of personal loan providers. It identified serious failures in sales processes at several firms selling single-premium PPI alongside unsecured personal loans. The regulator has already taken action against some companies as a result of its visits. Eleven companies have stopped selling PPI either permanently or temporarily until they get their sales processes in order and/or retrain staff.
A further three firms have had their FSA authorisation to sell PPI cancelled and four big firms are reviewing past PPI sales to ensure they were appropriate.
FSA managing director of retail markets Clive Briault says: “We have, on a number of occasions, set out clearly our requirements for selling PPI. Some progress has been made by the industry but we are extremely disappointed that some firms have still made little progress in improving their sales practices.
“The right PPI can provide valuable protection for consumers but they are entitled to expect that they will be treated fairly by firms when they buy it. They must be told how this product works, what it covers, and how much it costs. At the moment, too many firms are not meeting these requirements.
“We will now strengthen our action against firms who fail to treat customers fairly when selling PPI.”
Improvements were found in two areas, with the vast majority of firms making it clear to customers that PPI is optional and offering cancellation refunds on virtually all single-premium policies.
But the regulator says little or no progress has been made in the other three areas. Many firms are still not giving customers clear information about the product and what it will cost. Firms are not telling customers the extent to which they are eligible for PPI cover and what they are covered for and not telling them why, where advice is given, the recommended PPI policy meets their demands and needs.
Association of Mortgage Intermediaries director general Chris Cummings says this research underlines his view that firms selling regular-premium prime mortgage PPI are most likely to meet the expected sales standards.
He says: “Mortgage PPI should now be officially recognised as an entirely different product category to other payment protection insurances and, as such, should be removed from the Competition Commission’s investigation and benefit from a lower FSA risk rating.
“We recognise that there are issues to be resolved in the overall PPI market. The AMI has recently attended a commission hearing to offer our views on the PPI market and will continue to work with the commission and the FSA to ensure that the consumer receives good and fair advice at all times.”