The Financial Services Authority fined Loans.co.uk £455,000 for neglecting to treat its customers fairly yesterday, accusing it of not having adequate controls in place to ensure that Payment Protection Insurance was only sold to suitable clients.
The lender sells PPI policies to its customers over the phone after they have taken out a loan with the company. However, the FSA said the group's salesmen failed to gather enough information about clients to justify their recommendations, and did not give customers enough information about the policy to allow them to make informed decisions.
The regulator said Loans.co.uk's failings were particularly serious, as they had put some 14,400 clients at the risk of being mis-sold a PPI policy. Commenting on the penalty, Margaret Cole, the FSA's director of enforcement said: "We have highlighted Payment Protection Insurance as an FSA priority due to the potential level of risk to consumers.
"Loans.co.uk Limited failed to make sure adequate processes were in place to ensure the suitability of its PPI recommendations and treat its customers fairly. The principle of Treating Customers Fairly should be embedded in firms' business models to help prevent such failings and it is important that all firms review their systems and controls to reach this standard.
"PPI can provide valuable protection against changes in personal circumstances. But customers should come away from the sale having been given the best possible information to understand that the PPI is optional, what the policy will and will not cover and how much it costs. We encourage consumers to ask straightforward questions of sales staff when PPI is mentioned to help them to identify whether the product is right for them."
The fine comes just days after the FSA published a study revealing that a number of firms are not giving customers adequate advice when selling them a PPI policy. In particular, the FSA said many firms were neglecting to point out what clients would and would not be covered for.
Earlier this month, the Office of Fair Trading also put the PPU market in the spotlight, referring it to the Competition Commission, over concerns that consumers were being overcharged.
The FSA said Loans.co.uk had managed to reduce its fine from £650,000 to £455,000, by agreeing to settle at an early stage.Reuse content