Liverpool Victoria, the UK's largest friendly society, was fined £840,000 and ordered to pay millions of pounds in compensation yesterday for breaching regulations during its sale of almost 15,000 payment protection insurance policies between 2005 and 2007.
The company sold the policies to customers who took out personal loans, automatically adding the cost to the loan even if customers did not ask for it. In the event that customers noticed and asked for it to be removed, hard sale tactics were used to try and get them to continue paying.
The fine, by the Financial Services Authority (FSA), would have been some £1.2m if the company had not agreed to co-operate at an early stage. However, the total bill will run into millions after the FSA ordered it to immediately compensate all customers for any interest earned from the PPI premiums. Liverpool Victoria, which recently rebranded under the name LV=, may also have to reimburse some customers all of their premiums.
The FSA said some 14,500 customers were affected, with the average policy costing around £1,600 including interest – earning the company and its underwriters more than £23m of revenue.
"When customers phone for a quote, it is totally unacceptable for firms to add on the cost of insurance which the customer has not asked for," said Margaret Cole, the FSA's director of enforcement. "Many customers make their decisions when speaking to sales staff. If those conversations are unclear or misleading it will be no defence for firms to say that full details were included in paperwork."
She added: "The sales process was flawed in its design. The firm has stopped all sales of PPI and is now proposing a comprehensive programme to contact its customers and pay them compensation."
Liverpool Victoria said: "LVBS apologises to customers for any past shortcomings in the PPI sales process. It has proactively launched an appropriate customer redress programme and will be writing to all customers affected."
Consumer groups said the incident was evidence that PPI polices were still being mis-sold. Louise Hanson, the head of campaigns for Which?, said: "While it's good to see firms being hit in the pocket for mis-selling, the FSA and industry need to do more to stop it happening in the first place.
"Anyone who has a personal loan or credit card should check whether they have a PPI policy."Reuse content