Capital One Bank was fined £175,000 today for failing to adequately protect consumers against the risk of being mis-sold unsuitable insurance policies.
Between January 2005 and April 2006, the credit card firm neglected to ensure that 50,000 customers received important information about Payment Protection Insurance, the Financial Services Authority (FSA) ruled.
As a result, consumers were unable to check what they were covered for or if the policy was right for them.
The fine follows an investigation by the City regulator into the Payment Protection Insurance (PPI) market.
It found that Capital One had inadequate systems and controls for selling PPI insurance and as such failed to treat its customers fairly.
PPI provides financial cover for policyholders who are unable to pay bills due to ill health or redundancy.
But critics claim that the product is vastly overpriced, difficult to claim on and in many cases sold to the wrong people.
During 2005, Capital One sold approximately 335,000 PPI policies on UK credit cards.
But as a result of inadequacies in its selling practices, the firm failed to provide sufficient information to more than 50,000 customers, the FSA found.
Demand for better practice
Margaret Cole, director of enforcement at the FSA, said: ‘We are determined to see much better practice in PPI. This fine, and other recent PPI-related enforcement cases, show we will crack down when firms fail to treat customers fairly in this area.
‘It is unacceptable for people to be put at risk of buying unsuitable protection insurance through not being given the right information at the right time.
‘And consumers should also remember that PPI on credit cards and loans is almost always optional and consider whether they need it before signing up.’
Last month the regulator handed a fine of £610,000 to store card provider GE Capital Bank as part of its crackdown on PPI failings – its largest penalty relating to the issue to date.
Today’s fine against Capital One could have been higher, but the firm qualified for a 30 per cent discount by agreeing to settle early.
A statement from Capital One said that prior to the FSA investigation it had already started a project to ‘significantly improve’ its sales and administrative processes concerning PPI.
Sanjiv Yajnik, chief executive officer of Capital One Bank Europe, said: ‘Capital One values its relationship with its four million customers.
‘We consistently review our policies and practices and had made a number of significant improvements prior to the FSA’s investigation.
‘The FSA has recognised that Capital One cooperated fully throughout the investigation.’
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