HSBC-owned HFC Bank may have to pay out over £11m after FSA action on misselling payment protection insurance.
The regulator fined HFC £1.5m last week for misselling PPI and industry experts suggest it will have to pay around £10m in compensation to missold customers. HFC got a 30 per cent discount by settling at an early stage, bringing the fine down to £1,085,000.
But Britishinsurance.com managing director Simon Burgess says: “The remedial action that the FSA has forced on the firm will cost 10 times more than the fine. The regulator should be praised for making a stand against such a large firm.”
HFC head of communications Patrick Long says: “The £10m figure is wild speculation that cannot be relied upon, he is simply plucking figures out of the air. We are implementing steps to ensure customers are not disadvantaged and where they were we would be looking at giving them money back. We expect that number to be very small, however.”
The regulator says the bank failed to ensure that advice it gave customers to buy PPI was suitable and failed to have adequate systems and controls in place for the sale of PPI. It says HFC put its customers at an unacceptable risk of being sold PPI when it was not suitable.
Between January 2005 and May 2007, HFC sold PPI on 75 per cent of the loans it provided. This amounted to a total of 163,000 policies, with around 124,000 being single-premium policies sold with unsecured loans.
FSA director of enforcement Margaret Cole says: “We are determined to see much better practice in the PPI market. We said in September we would be imposing higher fines for serious failings in the retail market, including against firms who fall short in relation to PPI. The fine against HFC – the biggest PPI fine to date and the first since our September announcement – is evidence of our determination in this area. HFC’s failings put its customers at risk of buying unsuitable protection insurance and the financial impact on them of unsuitable advice was likely to be significant.”
Paymentcare.co.uk managing director Shane Craig says until the point of sale of unsecured loans and PPI are separated, consumers will continue to spend huge sums on protection that is inappropriate and overpriced.
He says: “The fact that 76 per cent of the policies sold by HFC Bank over the period scrutinised by the FSA were single-premium policies for unsecured loans makes it blindingly obvious that this is where the problem lies.”