The Financial Services Authority (FSA) has fined Swinton Group Ltd, the high street insurance broker, £770,000 for serious failings in their advised sales of single premium payment protection insurance (PPI). 

Following discussions with the regulator, Swinton has also agreed to contact over 350,000 customers who paid for the PPI and offer a full refund. 

Between December 2006 and March 2008 the FSA found that the firm’s PPI sales process was flawed.  The problems arose as a result of an “assumptive” selling technique in which PPI was automatically included in insurance quotes without first establishing that the customer had any real demand or need for the PPI cover.  This resulted in unacceptable levels of non-compliant sales.

In addition, Swinton did not make it sufficiently clear that PPI was optional and did not properly disclose the cost of PPI at the point of sale.  Firstly, the cost was bundled within the initial insurance quote and secondly, Swinton failed to disclose before the sale completed that the policy only cost £1.21 with the remainder of the £15/£20 charged being a fee taken by Swinton.

Swinton’s PPI customers will now be able to get a full refund.  Swinton will also pro-actively review previously rejected claims and pay compensation where appropriate. Swinton accrued approximately £7.8 million from its PPI sales.

Swinton exited the PPI market in March 2008 following a request from the FSA when these failings came to light.

Margaret Cole, FSA director of retail enforcement and financial crime, said:

“These were deliberate breaches. Swinton was fully aware it should establish a customer’s need for PPI before recommending it, yet nearly half a million policies were sold to customers who didn’t necessarily require them.

“Swinton’s PPI sales fell a long way short of our requirements and the firm clearly failed to treat its customers fairly.  This penalty, the remedial action, and Swinton’s departure from the PPI market - along with our recent announcement outlining the FSA’s tougher measures for regulating PPI – serve as a shot across the industry’s bow to remind it to play fair, or not play at all.”

By agreeing to settle at an early stage of the investigation Swinton qualified for a 30% reduction on the full fine; were it not for this discount, the FSA would have imposed a financial penalty of £1.1 million.

fsa.co.uk

DebtWizard comment

PPI policies are designed to offer peace of mind to consumers that their repayments will be covered in a time of crisis, such as illness or unemployment, but they are not cheap and can add as much as £700 to a £4,700 on a three year loan. 

The Competition Commission has recommended that sale of all PPI policies are to be severely restricted from October 2010. The policies can still be sold but not at the time a lender grants the loan; instead they must wait until at least seven days has lapsed. 

Consumers should not be pressured or deceived into buying PPI, which has happened in thousands of cases. 

Naturally it is in the lender’s interest to reject PPI claims, hoping the consumer will give up the fight therefore it is encouraging to see that the FSA has taken a hard line and named and shamed Swinton Group. 

I wonder how many other firms are waiting for that knock on the door.

Do you feel you have been mis-sold PPI and don't know where to start?

If this is the case then we have our very own easy to read questions and answersas well as Letter 1 template to request your terms and agreement and Letter 2 template to demand a refund, all free at the;

DebtWizard guide to Payment Protection Insurance (PPI).