The Financial Services Authority landed the furniture retailer Land of Leather with a £210,000 fine yesterday, claiming it put almost 60,000 customers at risk of buying insurance which was totally unsuitable for their needs.
Unusually, the regulator also fined the company's chief executive, Paul Briant, £14,000 for failing to properly oversee the sale of the insurance within the group's 90 stores – the first time the regulator has fined the chief executive of a non-financial firm. The FSA said both fines would have been higher had the company and Mr Briant not agreed to settle at an early stage.
The fines relate to payment protection insurance (PPI) policies, between May 2006 and February 2007, which were bundled into hire-purchase agreements. Although customers who paid off loans within 12 months avoided buying insurance, those with a balance at the end of the first year were automatically enrolled into a PPI agreement, which cost an average of £380 per customer.
While Land of Leather secured regulatory approval to sell insurance in May 2006, its sales force was not fully trained until six months later. Furthermore, it was not subject to any effective checks until February 2007.
The FSA said that while Mr Briant had delegated responsibility to other management, he was the sole "approved person", and was ultimately accountable.
"Firms must not sell PPI unless they have appropriate systems and controls in place to ensure customers are treated fairly," said Margaret Cole, the FSA's director of enforcement. "We are determined that firms should change their behaviour in selling PPI and the fines against Land of Leather and Mr Briant show our determination.
"Mr Briant's fine sends out a strong message that senior management are responsible for ensuring that their firm has robust and effective systems and controls and is complying with its regulatory obligations. Retail firms whose primary business is not selling general insurance will be held accountable to the same regulatory standards."
Land of Leather said it had reviewed all processes surrounding the sale of PPI products.
"We were not mis-selling these products, but we do regret that some of the service processes around their sale were not as robust as our customers have the right to expect," the company said in a statement. "We acted quickly to remedy these weaknesses."Reuse content