The FSA has unveiled new measures for combating bad practice in the selling and complaints process of the payment protection insurance industry.
What the Financial Services Authority deems the 'tough' new rules, are intended to offer consumers better protection in the loan insurance market, to reduce or prevent instances of mis-selling and to ensure they have their complaints taken seriously by the loan provider.
Payment protection insurance, or PPI, offers insurance against repayments on loans, credit cards and other forms of borrowing should the borrower find themselves unable to keep up with repayments due to redundancy, accident, or illness. Thousand of consumers have claimed their money back after being mis-sold payment protection insurance.
The FSA will be examining selling practices to ensure that consumers are not misled, uninformed or coerced into taking out expensive insurance which is not appropriate for them.
Commenting on the new rules, Jon Pain, FSA managing director of retail markets, said: "Consumers should not be pressured or deceived into buying PPI and they are entitled to have a policy properly explained to them. It is unacceptable that despite previous warnings about poor sales practices, backed by 22 enforcement cases and significant fines, the PPI sector still needs the FSA to intervene on this."
The new rules reinforce those already agreed upon by the PPI industry earlier this year, which include no longer selling PPI at the same time as the credit product, and agreeing to stop selling single premium PPI unsecured loan insurance, which is added to the cost of the loan and accrues interest accordingly, pushing up the cost of the debt.
The FSA is also tackling the fact that too many customers have their complaints rejected by firms but then overturned in their favour when they appeal to the Financial Ombudsman Service, suggesting bad practice on the part of the firm.
The FOS has indicated that it will support the FSA's new rules, and they will mean that firms have to reopen and reassess some 185,000 complaints that were previously rejected.
On complaints procedure, Mr Pain said that "the outcome of a complaint about a PPI sale should not depend on whether or not the complainant persists past the firm on to the FOS."
Mr Pain concluded: "This is the last chance for the industry to show that it can act fairly, consistently and in the best interest of consumers on PPI. All firms operating in this sector should take note and where necessary get their house in order. Where we find questionable practices in sales or complaint handling, firms can expect that we will take action."
© Fair Investment Company Ltd