A credit broker has been hit with a fine of almost half a million pounds because it failed to treat thousands of its customers fairly when it sold payment protection insurance (PPI).
PPI is sold by many banks and credit card companies when you take out a new loan or card. It’s designed to cover your repayments if you become unable to work due to certain illnesses or injuries, or if you lose your job.
The FSA said that Loans.co.uk customers were sold policies over the phone alongside their loans, so they couldn’t be sure whether the Loans.co.uk recommendation was the right policy for them.
The watchdog said the website’s failings exposed about 14,400 customers to the risk of being sold PPI which was unsuitable for their needs.
FSA Director of Enforcement Margaret Cole said: ‘Loans.co.uk failed to make sure adequate processes were in place to ensure the suitability of its PPI recommendations and treat its customers fairly.
‘PPI can provide valuable protection against changes in personal circumstances but customers should come away from the sale having been given the best possible information to understand that the PPI is optional, what the policy will and will not cover and how much it costs.’
As well as issuing Loans.co.uk with a fine of £455,000, the FSA agreed an action plan with the company to tighten its procedures.
Stephen Hayes, Chief Executive of Loans.co.uk, said: ‘We co-operated fully with the FSA and undertook an internal audit review to ensure effective and timely resolution of the issues identified. New practices have been in place for the past six months.’
Around 7 million PPI policies are taken out each year. The £5.5 billion PPI market is facing a full investigation after an initial (OFT) probe found it was failing consumers.
Which?’s PPI tips
Which?’s tips for anyone thinking of buying PPI are:
- if you work part-time or are self-employed, or if you have a pre-existing medical condition and have to give up work, you will almost certainly be unable to make a claim. Unfortunately, it is these groups of people who need the most protection
- shop around. An income protection policy from an independent provider is likely to be a better bet as it will provide a regular monthly income if you are unable to work for any reason
- alternatively, calculate how much you would save a month by not buying PPI and put that money into a savings account to be used to meet loan repayments if you fall ill or lose your job.