The FSA has fined GE Capital Bank £610,000 for failing to have adequate systems and controls in place for selling payment protection insurance.
This is the first firm that has been fined this year for PPI and a further four or five firms are expected to be fined in the next few months following the FSA’s recent announcements of further crackdowns on PPI firms.
GECB’s main business is providing credit finance through store cards, credit cards and sales finance.
In 2005 alone, the FSA says that over 850,000 policies which included PPI were sold on behalf of GECB but that the firm failed to provide adequate information to customers before they bought the product.
FSA director of enforcement Margaret Cole says: “Millions of people take out store cards every year. They need to know that PPI is almost always optional and should consider whether they need it before signing up.
“Our focus on payment protection insurance will remain very high this year. We are determined to see significantly better practice in PPI sales and will crack down where firms fail to treat their customers fairly.”
The FSA found that GECB failed to review and amend its procedures for selling insurance in light of its own evidence, emerging from Q2 2005, of widespread non-compliant selling practices.
The breaches arose in sales, training, monitoring and management information, compliance and customers.
GECB is continuing to carry out a remedial action programme to review and improve its systems and controls.
To reduce the risk that customers may have lost out GECB is carrying out a comprehensive customer contact exercise and will pay compensation where appropriate.
In this particular case, the FSA says the financial impact on most customers was likely to have been modest. It took these factors into account in determining the level of the financial penalty.
By agreeing to settle at an early stage of the FSA investigation GECB was given a 30 per cent discount under the FSA’s executive settlement procedures – without the discount the fine would have been £870,000.
Without the commitment to remedial action and appropriate redress the financial penalty would have been substantially higher.