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Record fine for store card insurance breaches

GE Capital Bank says it will honour claims

The provider of store cards to some of the UK’s biggest retailers has been handed a record fine for failing adequately to protect customers from being sold insurance products they might not need.

GE Capital Bank (GECB), which provides card services for Debenhams, Arcadia and Asda among others, received the £610,000 penalty after it was found to have insufficient safeguards against mis-selling payment protection insurance (PPI).

It was the largest fine the Financial Services Authority has imposed in relation to PPI. Fines against more firms are expected to be announced in the coming weeks.

GECB has now said that it will honour any PPI claims made by customers from 2005 onwards, even if they go against contract exclusion clauses.

PPI claims

The product 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.

GECB’s main business is providing credit finance through branded store cards, credit cards and sales finance. Its clients include big-name retailers such as Laura Ashley, Mothercare, BHS and Halfords.

It offers PPI to customers applying for a store card while still at the till. If they do not buy in the shop, customers are contacted at a later date by GECB’s sales staff.

In 2005 alone, more than 850,000 insurance policies, included PPI, were sold on its behalf to British consumers.

Selling insurance

This is despite a finding by the FSA that GECB failed to review and amend procedures for selling insurance despite its own evidence of widespread non-compliant selling practices.

The City watchdog found that the firm failed to ensure that customers received adequate information about PPI policies and failed to contact people who had been the victim of non-compliant sales.

Deficiencies in GECB’s training and monitoring processes were also identified.

Margaret Cole, Director of Enforcement at the FSA, said: ‘Millions of people take out store cards every year. They need to know that PPI is almost always optional and should consider whether they need it before signing up.

‘Our focus on payment-protection insurance will remain very high this year. We are determined to see significantly better practice in PPI sales, and will crack down where firms fail to treat their customers.’

Correct sales procedures

GECB is the seventh firm to be hit following the discovery of poor PPI sales practices.

The largest previous fine – £455,000 – was levied against Loans.co.uk late last year.

The fine against GECB could have been as high as £870,000, but the firm qualified for a 30 per cent discount by agreeing to settle early.

A statement from GE Capital Bank said: ‘The main finding of the FSA relates to GECB policies sold in stores by sales staff.

‘GECB designed the sales procedure but failed, in light of emerging evidence, to fully review, amend and then effectively operate it.

‘As a result, relevant information about the insurance product was not provided to some customers at the time of sale.

‘In certain cases, the FSA found that staff had not followed the correct sales procedure by drawing customers’ attention to the importance of reading the policy’s summary of cover. GECB fully accepts responsibility for how the policies are sold.

It added: ‘GECB is continuing to take steps to ensure that no customer has lost out financially, and is honouring claims that would otherwise be rejected because of an exclusion.’

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