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 Loans.co.uk, 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
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    SThree: Talent Acquisition Consultant

    £22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

    Day In a Page

    John Palmer: 'Goldfinger' of British crime was murdered, say police

    Murder of the Brink’s-MAT mastermind

    'Goldfinger' of British crime's life ended in a blaze of bullets, say police
    Forget little green men - aliens will look like humans, says Cambridge University evolution expert

    Forget little green men

    Leading evolutionary biologist says aliens will look like humans
    The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

    The Real Stories of Migrant Britain

    An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
    Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

    Dying dream of Doctor Death

    Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
    UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

    39.8 degrees recorded on Tube

    There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
    Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

    Computerised cooking is coming

    From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
    Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

    Jessie Cave's feminist cartoons

    The Harry Potter star tells Alice Jones how a one-night stand changed her life
    Football Beyond Borders: Even the most distruptive pupils score at homework club

    Education: Football Beyond Borders

    Add football to an after-school homework club, and even the naughtiest boys can score
    10 best barbecue books

    Fire up the barbie: 10 best barbecue books

    We've got Bibles to get you grilling and smoking like a true south American pro
    Wimbledon 2015: Nick Bollettieri - Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power

    Nick Bollettieri's Wimbledon Files

    Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power
    Ron Dennis exclusive: ‘This is one of the best McLaren teams ever – we are going to do it’

    ‘This is one of the best McLaren teams ever – we are going to do it’

    Ron Dennis shrugs off a poor start to the season in an exclusive interview, and says the glory days will come back
    Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

    Making of a killer

    What motivated a shy student to kill 38 holidaymakers in Tunisia?
    UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

    Just when you thought your commute couldn't get any worse...

    Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
    Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

    The Real Stories of Migrant Britain

    Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
    Cheaper energy on the way, but it's not all sunshine and rainbows

    Cheaper energy on the way, but it's not all sunshine and rainbows

    Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most