The Financial Services Authority has fined Egg Banking £721,000 after finding "serious failings" in its sales process of credit card payment protection insurance.
Egg sells PPI either when it receives a customer service call or when making a sales call to a new customer; when customers declined to buy PPI to protect their credit card
payments, Egg's sales team were instructed to use techniques known as 'objection handling', whereby the member of staff would try and persuade the customers to take out the insurance.
The techniques used by sales staff included over-emphasising the benefits of payment protection insurance
, or telling the customer that they could have a free period of PPI and cancel if later on if they decided not to continue. In some instances, the insurance was applied to a customer's account even if they had said explicitly that they did not want it.
The FSA found that Egg
had failings in approximately 40 per cent of its PPI telephone sales between January 2005 and December 2007.
Telephone sales staff are supposed to get consent from the customer to provide only limited information over the phone, but Egg was also failing to do this in a significant number of cases.
"All firms must ensure that customers are treated fairly when selling PPI and if a customer does not want PPI, they should not be pressured into taking it." said FSA director of enforcement Margaret Cole.
"We will continue to fine firms where we find PPI failings. It is unacceptable that Egg did not identify the problems with its sales processes despite a series of high profile FSA
communications on PPI, including earlier fines on other firms. Egg stopped telephone sales of credit card PPI in December 2007, and has agreed to write to customers and pay a full refund plus interest where appropriate. Egg is likely to pay substantial compensation as a result of this exercise."
Egg would have incurred an even larger penalty for its instances of mis-sold payment protection insurance
– as much as £1.03million – but the FSA has reduced the amount it has to pay in light of the company's commitment to compensate those customers which were affected, and the firm qualified for the FSA's 30 per cent discount for agreeing to settle at an early stage of the investigation.
In response to the penalty, Egg has said that it "has worked constructively with the FSA to settle this matter as quickly as possible." It said that it is "taking the matter very seriously and would like to apologise to any customers who have been affected."
It will be contacting its PPI customers and has made a dedicated team of call centre staff available to assist customers which have any concerns about their payment protection insurance.
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