Egg fined £721,000 over insurance mis-selling
Online bank Egg was fined £721,000 today for "serious failings" in sales of payment protection insurance (PPI) to its credit card customers.
The Financial Services Authority (FSA) said it found failings in around 40 per cent of telephone sales to Egg customers between January 2005 and last December.
Staff were told to over-emphasise the positive features of PPI and in some cases it was applied to customers' cards without consent, the FSA said.
The watchdog's director of enforcement Margaret Cole said Egg was likely to pay "substantial compensation" to customers as a result.
Derby-based Egg has pledged to write to more than 106,000 customers to ask if they have concerns over the way PPI policies were sold to them and compensate them with interest if necessary.
Egg is expected to pay out around £1.67 million for every 10 per cent of its customers who gain a refund - putting the overall potential cost of the FSA's enforcement action into the millions.
Ms Coles added: "Egg used inappropriate sales techniques to try to persuade customers to buy payment protection insurance on their credit card even when they asserted they did not want the cover.
"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."
The FSA found in some cases that Egg's telephone sales staff ploughed on with efforts to sell PPI even if customers insisted they did not need it, or wanted time to think about whether to take the cover.
A total of 19 firms have been penalised by the watchdog over poor PPI selling practices. Alliance & Leicester was hit with the biggest punishment in October after a £7 million fine.
The FSA's latest review of the PPI sector, published in September, found "disappointing" evidence of poor practice.
Very few customers were informed orally that the cost of the cover would be added to the loan as a single premium, with only half of all customers saying they were informed about key limitations and exclusions.
The bank said: "Egg has worked constructively with the FSA to settle this matter as quickly as possible. We are taking the matter very seriously and would like to apologise to any customers who have been affected."
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