Lenders have been too slow to stop mis-selling Payment Protection Insurance (PPI), says the Financial Services Authority (FSA).
According to FSA chief executive Hector Sants, "progress made by firms in sorting out the issue has been disappointing."
Mr Sants was answering questions from the Parliamentary treasury committee yesterday when he claimed that efforts to sort out the issue of mis-sold payment protection insurance
had not been up to scratch.
He said that although 20 firms have been fined around £12million as part of the FSA's crackdown on mis-selling, progress had not been quick enough; "firms altering their behaviour have been slow," he said.
Mr Sants told MPs that the FSA will be stepping up its intervention to defend customers against unfair PPI practices, and force companies to treat complaints about mis-selling fairly.
“There’s no question that effective deterrence requires swift and effective action and higher levels of fines and deterrents,” he said.
Last week, the watchdog fined Egg £721,000 after finding “serious failings” in around 40 per cent of telephone sales of credit card PPI between January 2005 and December 2007.
The FSA said that when receiving a customer services call or when making a sales call to a new customer, Egg tried to sell PPI, and when the customer said they did not want PPI on their credit cards
, sales staff were directed to "over-emphasise the positive features of the PPI or tell the customer they could take the PPI for a free period and cancel it later if they did not want it."
The FSA also found that in some cases, even when the customer did not consent, PPI was applied to their credit card anyway.
Back in September, the FSA released its report into mis-sold PPI; at the time, Jon Pain, Managing Director of the FSA’s Retail Markets, said "Tackling poor PPI sales practices remains a high priority for the FSA. We will intervene to ensure consumers are protected and are considering what regulatory powers are the most appropriate to deliver fair outcomes."
The watchdog is due to publish a further update on the third phase of its investigations into the issue in early 2009. A main part of its considerations will be a letter from the Financial Ombudsman Service (FOS) that advises that individual consumer complaints are not the most appropriate way to deal with "what appears to be a systemic problem" and suggests "wider regulatory action on PPI". Mis-sold PPI? Make a Loan Insurance Complaint »
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