The mystery shopping exercise revealed only half of customers said they were told about key limitations and exclusions of the policy and few customers were told that the cost of the plan will be added to the loan as a single premium with interest.
FSA retail markets managing director Jon Pain says: “Tackling poor PPI sales practices remains a high priority for the FSA. We will intervene to ensure consumers are protected and are considering what regulatory powers are the most appropriate to deliver fair outcomes. Firms may wish to consider stopping selling single premium PPI sold alongside unsecured personal loans, given the continuing problems in the sales of this product.”
However, the Association of British Insurers says the insurance industry has been working hard to improve the sales of PPI.
The ABI director of general insurance and health Nick Starling says: ““With increasing unemployment and over-indebtedness, it is essential that people protect themselves against losing their regular income. PPI is the only financial product that covers unemployment.
“Sales should always comply with regulation and we take the numbers of complaints seriously. We have proposed to the FSA that industry guidance should be produced in order to improve complaints handling. This should be done immediately together with the FSA, the Financial Ombudsman Service and in dialogue with consumer groups.”
The FSA is expected to publish a further update on the third phase of its work around PPI in early 2009.