A significant number of consumers with payment protection insurance (PPI) were not treated fairly when purchasing the product, according to the City watchdog.
In a speech on the state of the PPI market, Stuart King, head of market intelligence and retail themes at the Financial Services Authority (FSA), said evidence reveals that the controversial insurance has not been sold correctly over a “prolonged period” in a number of cases.
He said it will remain a top priority and the regulator would be relentless in the pursuit of improving standards for the millions of consumers sold PPI.
The product – which provides financial cover for people who find themselves unable to work through injury or ill health – is often sold on the back of loans, credit cards and mortgages.
There are an estimated 20 million policies active in the UK.
But critics – including Which? – claim that PPI is vastly overpriced, often sold to people who do not need it and difficult to claim on.
The FSA has been involved in an ongoing crackdown on firms guilty of not protecting customers against the risks of being mis-sold the product.
So far it has handed out fines worth £1.6 million on companies found to be treating customers unfairly, with more penalties expected to come.
Speaking at the Westminster and City Annual Conference on Creditor Insurance, Mr King said the issue of PPI was important because it affects millions of consumers.
‘Consumers treated unfairly’
He added that work the FSA had done suggested that “a significant number” of consumers have not been treated fairly when purchasing PPI.
Work by the regulator had uncovered “too many” cases of individuals who have been mistreated, Mr King added.
It found instances where a five-year policy with an age limit of 65 was sold to a 68-year-old retiree and where consumers were advised to purchase single premium cover despite telling the lender that they expected to re-finance the debt in the near future.
Firms selling PPI were routinely exposed to have kept little or no records concerning sales, with some selling policies with no obvious process for explaining significant details to the customer.
Mr King said the FSA had seen evidence of improving standards but that shortcoming in the PPI market continued.
“PPI is and will remain a top priority for us and is one of the largest regulatory investigations we have ever mounted,” Mr King concluded.
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