this year by UK financial regulator the Financial Services
Authority (FSA) left no doubt about the steps it will take to
protect consumer interests in the payment protection insurance
(PPI) market. In the FSA’s sights was consumer finance specialist
HFC Bank (HFC), which received a fine of £1.085 million ($2.1
million) – this marks the highest fine imposed for infringements of
PPI regulations.
In a statement enumerating numerous infringements it had
identified, the FSA said that between January 2005 and May 2007, a
period during which HFC sold 163,000 PPI policies, the bank did not
require advisers in its 136 branches to gather sufficient
information about customers’ circumstances and take sufficient
information into account when considering whether PPI was suitable.
HFC also did not require advisers to explain fully why they
recommended a particular policy or identify to customers any
demands and needs that the policy would not meet. Adding to HFC’s
shortcomings was the absence of effective systems to train and
monitor its staff.
Go deeper with GlobalData
“We are determined to see much better practice in the PPI market,”
said the FSA’s director of enforcement, Margaret Cole. “We
announced in September that we would be imposing higher fines for
serious failings in the retail market including against firms who
fall short in relation to PPI.” Had HFC not agreed to settle at an
early stage, the fine would have been £1.55 million.
HFC Bank, a unit of UK bank HSBC since March 2003, joined five
other high-profile PPI product providers that have recently fallen
foul of the FSA for poor PPI selling practices. They include a unit
of US conglomerate General Electric, GE Capital Bank, which was
fined £610,000, and the UK unit of US credit card issuer Capital
One, which was fined £175,000.
The UK Post Office, which provides stand-alone PPI products, had
strong words of condemnation for market players that it believes
are not meeting required standards.
“Many customers continue to have little understanding of PPI and
some do not even realise they have this insurance in force,” said
the Post Office’s head of protection products, Duncan
Caesar-Gordon. “Others, who have been at the hands of aggressive
sales tactics, can feel they have no choice but to take the
expensive policy tied to a loan or credit card if they want their
application to be accepted.”
According to research conducted by the Post Office, PPI linked to a
loan can cost five times more than stand-alone PPI.
