Services (LVBS), a unit of UK life insurer LV=, has learnt a costly
lesson for what UK regulatory body the Financial Services Authority
(FSA) termed “serious failings in the sale of single premium
payment protection insurance (PPI)”.
Joining a growing list of errant PPI product suppliers LVBS has
been fined £840,000 ($1.68 million) by the FSA for contraventions
that occurred between 14 January 2005 and 8 August 2007.
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The FSA explained that when customers phoned LVBS to apply for a
personal loan, LVBS added the cost of PPI to the quotation without
the customer asking for it. If customers realised they did not have
to buy the cover and objected to it, LVBS put pressure on them to
take the PPI.
Other poor selling practices uncovered by the FSA included LVBS’s
failure to inform customers that the cost of the single premium PPI
was added to the loan and that as a result customers paid
additional interest on the PPI premium for the life of the
loan.
Overall, of 97 sales calls reviewed by the FSA over 60 percent were
found to be non-compliant with regulations.
During the period under review LVBS sold about 14,500 PPI policies
on a non-advised basis at an estimated average cost of £1,600
including interest, according to the FSA.
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By GlobalDataThe FSA noted LVBS has stopped sales of PPI products and has agreed
to undertake a comprehensive remedial programme. As part of the
programme the interest paid on PPI premiums will be refunded
automatically, without the customers having to write to LVBS and
make a claim. In addition LVBS will be writing to its PPI customers
asking them to review the terms of their PPI policy and offering to
pay full redress where appropriate.
LVBS also agreed to extend the scope of its redress proposals to
include a review of all PPI offered via telephone, the internet or
post between 14 January 2005 and 31 January 2008.
The FSA has previously fined seven companies for poor PPI selling
practices. The largest fine, £1.085 million, was handed down to HFC
Bank, a unit of HSBC, in January 2008.
The fine handed down to LVBS is the second largest and, noted the
FSA was “significantly reduced” in recognition of the remedial
action being taken by LVBS.
