FSA introduces latest measures to protect PPI consumers

The Financial Services Authority (FSA) has revealed a package of measures to protect consumers in the Payment Protection Insurance (PPI) market and ensure they are better treated when buying PPI or complaining about it.

Single premium PPI products have long been controversial, particularly with consumer watchdogs who claim that the policies are misleadingly front-loaded, accrue outrageous interest, and have strict pay-out terms and conditions. In early 2009, the FSA announced measures to abolish single premium PPI products for unsecured loans among willing firms in the industry.

Firms representing more than 40% of face-to-face sales in the ‘Single Premium Unsecured Personal Loan PPI’ market have agreed to review these sales and redress those consumers identified as mis-sold. The FSA has also confirmed that ongoing supervisory action will continue with the remainder of this market place.

For complaints about all PPI products, new measures will tackle the key issue that too many complaints are rejected by firms and then overturned by the Financial Ombudsman Service (FOS) in favour of the consumer:

• new guidance (due to take effect by the end of the year) will ensure PPI complaints are handled properly, and redressed fairly where appropriate – the FOS has indicated support for the FSA’s proposed approach; and

• a new rule will require firms to reopen some 185,000 previously rejected PPI complaints and reassess them against the guidance.

In addition to these measures tackling PPI in relation to unsecured loand, the FSA is launching targeted assessment of sales practices for PPI on secured loans and credit cards. The FSA states that if the potential for mis-selling is identified, pro-active reviews by firms may be extended to these areas too.

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.”

“And 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.”

“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.”

Louise Hanson, head of campaigns at Which?, said:

“While it’s good to see the FSA make firms review cases they’ve wrongly dismissed, we’re concerned about loopholes. Consumers could still be left paying over the odds or with too little compensation, so the FSA needs to monitor the review process closely.”

“The FSA must also take stronger enforcement action against firms with bad complaints handling. It’s not enough to tell them to go back and do better the second time round. Unless big fines are levied, businesses will keep on unfairly dismissing complaints, safe in the knowledge that if they get caught, all they’ll have to do is go back and look at them again.”

“PPI isn’t the only area where FSA action is needed – the Ombudsman’s complaint statistics show too many firms selling a range of different products, which have had a higher-than-average number of complaints upheld against them. The FSA must take swift action to get these firms to review their cases, to improve the industry’s attitude to complaints handling.”