Sam Dunn: The FSA went trawling among loan cover sales and came up with something fishy

It's like shooting fish in a barrel. Another week brings another fine from the Financial Services Authority (FSA) for a provider of payment protection insurance. The culprit this time is Capital One, which has failed to treat its customers fairly.

PPI is intended to cover loan and credit-card repayments in the event of illness, accident or unemployment, but it has become a monstrously fat cash cow for profiteering lenders. The industry's recent referral to the Competition Commission (CC) promises to bring an end to this - even if that end is still a long way off.

The CC's investigation will probably take at least a year to conclude. In the meantime, the FSA is busy exposing all those whose practices fall foul of its rules. Since deciding that the industry suffers from serious "thematic" flaws, it has fined four companies over poor sales practice relating to PPI.

The companies in question are the brokers Regency and, the home-shopping outfit Redcats and GE Capital Bank Others, including Eastern Western Motor Group and broker Capital Mortgage Connections, have been issued with financial penalties for less serious breaches of the rules.

And, as the regulator is keen to tell us, "other PPI enforcement investigations are under way".

While all this sadly suggests that millions of consumers have bought distinctly duff financial products, the upside of the FSA's activities has been to expose grotty sales practices. The official "final notice" sent by the regulator to Capital One identified the nitty-gritty of the problem: telephone sales scripts.

Many borrowers taking out cards and loans do so over the phone, and are often easy pickings for staff selling PPI as an add-on - especially if they've never bought the cover before.

In the case of Capital One, the FSA found, the scripts for staff to follow "did not always ensure adequate disclosure of significant and unusual exclusions and limitations of the policy".

For instance, customers did not always receive accurate information about the length of time PPI would actually pay out for (a maximum of 12 months).

PPI sold like this is an accident waiting to happen, especially when the person on the other end of the line is anxious about whether they're going to qualify for a loan or credit card - as is often the case. Since 41 per cent of Capital One's PPI policy sales between January and November 2005 took place over the phone, the FSA is right to call this a "serious issue".

Even where policies do pay out, PPI is an expensive purchase that should be sold in a more competitive market and a more heavily regulated environment.

The FSA makes clear that none of Capital One's breaches stemmed from "deliberate or reckless conduct". This may well be the case but the prevalence of shoddy sales practice across the PPI industry suggests that something stinks. That bountiful profits have long accompanied such behaviour is more than fishy.

Maybe the CC will find the source of the smell.

It's all in the name

Many thanks to readers who tried to find a better name than "asset allocation" for the splendid practice of spreading your cash across many different investments. Entries are still coming in and a winner will be announced next week.

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

    Day In a Page

    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
    Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

    The Arab Spring reversed

    Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
    King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

    Academic claims King Arthur was real - and reveals where he lived

    Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
    Who is Oliver Bonas and how has he captured middle-class hearts?

    Who is Oliver Bonas?

    It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
    Earth has 'lost more than half its trees' since humans first started cutting them down

    Axe-wielding Man fells half the world’s trees – leaving us just 422 each

    However, the number of trees may be eight times higher than previously thought
    60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

    60 years of Scalextric

    Model cars are now stuffed with as much tech as real ones
    Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

    Why are we addicted to theme parks?

    Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
    Tourism in Iran: The country will soon be opening up again after years of isolation

    Iran is opening up again to tourists

    After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
    10 best PS4 games

    10 best PS4 games

    Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
    Transfer window: Ten things we learnt

    Ten things we learnt from the transfer window

    Record-breaking spending shows FFP restraint no longer applies
    Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

    ‘Can we really just turn away?’

    Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
    Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

    Nine of Syria and Iraq's 10 world heritage sites are in danger...

    ... and not just because of Isis vandalism
    Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

    Girl on a Plane

    An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent