Is it right for the Financial Services Authority to impose harsher fines on firms not complying with its Treating Customers Fairly initiative when selling payment protection insurance?
Peter Chadborn, CBK
It is a fair argument that, unless the Financial Services Authority (FSA) imposes fines for non-compliance then the Treating Customers Fairly (TCF) principle will never be taken seriously. So why not make an example of one of the worst-offending product areas?
If you ask consumers what aspects of the financial services industry do not treat them fairly, I would suspect that one of the most common answers would be when they have been sold a product that does not deliver when they had been led to believe it would. The limitations of payment protection insurance (PPI) compared to income protection (IP) should make one question why PPI sales outweigh IP by such a margin. Clearly, the simple sales and application process for PPI is the reason. However, the principal of TCF should warrant that sighting the inconvenience of a more time-consuming sales and application process is no justification for ignoring a potentially superior product when making any recommendations to customers.
Nationwide's temporary withdrawal of the society's PPI could perhaps indicate that the message is getting through and the potential financial implication of FSA intervention is prompting preventative action.
If the application of TCF is enforced via fines for the worst offenders and this subsequently ensures that future mis-selling scandals are avoided or diluted then there should be little objec-tion from those that have the industry's best interests at heart.
Simon Burgess, Britishinsurance.com
It is not only right for the Financial Services Authority (FSA) to be charging firms stiffer penalties for their Treating Customers Fairly failings in regard to selling payment protection insurance (PPI), but also long overdue. Many providers and distributors have been making vast amounts of money from these products and have done so through flawed product design and sales strategies. It is high time the FSA came down heavily on those firms refusing to put their clients' best interests at the heart of their commercial considerations.
The regulator has already sent a warning shot over the bows of senior management teams in the industry that they will be held personally liable for the failings of their businesses. By handing down a personal fine of £49,000 to the chief executive of Hadenglen Home Finance, alongside the corporate fine of £133,000, others can be in no doubt that should their own enterprises be found wanting, it will cost them personally.
Given that the liability insurance carried by directors does not cover regulatory fines, the money will have to be found from executives' own pockets and this will hit many of them hard. The PPI market has had more than enough time to get its house in order and those who refuse to comply should be sanctioned severely. How else can the regulator ensure the best interests of consumers are protected?
Teresa Fritz, Which?
Which? has been calling on the FSA to crack down on companies that mis-sell PPI since 1998, and it is high time that the industry regulator put its foot down, not just with regard to PPI but with the mis-selling of any financial products. The FSA's latest round of mystery shopping shows that the mis-selling of PPI is still rife and yet it still seems reluctant to impose adequately harsh penalties on the culprits.
Harsher fines are just one of the meas-ures that Which? thinks the FSA should introduce to deal with companies that continue to flout the rules when selling PPI. Any firms that are found to be mis-selling should also be named and shamed. Not only would this act as an extra deterrent, but it would warn consumers which companies to avoid when buying financial products. Which? would also like to see companies suspend the bonuses of directors if their firm is fined.
Finally, the FSA should also ensure that any company that is found guilty of mis-selling PPI is forced to stop selling the product until its sales force has been retrained. This would prove extremely costly to firms and would be another strong deterrent to future mis-selling scandals. If firms continue to flout the rules then withdrawing their licence to sell the product is another option to discourage poor practice.Peter Hinchliffe, Financial Ombudsman Service
There are a few things that have changed in the complaints that we get about PPI such as the rate and type of complaint and the uphold rate. For the first time last month, we received more cases about PPI than any other insurance product. If complaints continue at the current rate we will receive more than double the number of PPI cases this financial year than we did in the last.
PPI complaints used to be predominantly about unpaid claims, now they are mainly about mis-sales and refunds on cancellation.
In most areas of insurance we uphold around a third of complaints in favour of the consumer. In PPI, this figure has been steadily increasing and is now over 50% and much higher for sales issues.
It is becoming clearer that certain types of PPI give rise to more complaints, such as single premium policies sold at the same time as a loan and paid for by an increase in the loan. We have also noticed many firms with experience of insurance operate a different approach to PPI sales than for others policies, while those who have little experience of insurance adopt an approach that appears closer to that required to sell loans and credit than insurance products. If this continues, I am concerned that we will see more complaints, more reputational damage for the protection industry and more consumer detriment.
