The failings at A&L are the most serious we have found. This is reflected in the record PPI fine. It is very disappointing that after three years of regulation we are still finding serious problems in PPI sales.
Braintree, Essex (PRWEB) October 13, 2008
The record fine slapped on Alliance and Leicester for failings when selling payment protection insurance (PPI) vindicates Burgesses' long held stance against rip-off lenders.
The PPI specialist has been warning customers for years against buying insurance from lenders as it is nearly always much more expensive than going through a broker.
Now the Financial Services Authority has supported that stance by hitting mortgage bank A&L for £7 million for a general failure by its advisers to give customers details of the cost of PPI. In addition A&L sought to find reasons to sell PPI without properly considering what customers needed.
"This kind of shoddy selling practice is exactly what we at Burgesses have been complaining about for years," said managing director Sara-Ann Burgess.
"I am pleased that the regulator has sought to make an example of A&L and hopefully the severity of the fine will make other lenders revisit their business practices to make sure they are not guilty of encouraging or abetting similar low standards of business practice."
The FSA said A&L did not make it sufficiently clear that PPI was an optional purchase and trained its staff to put pressure on customers when they queried the inclusion of PPI in their quotation or challenged advisers' recommendations.
Margaret Cole director of enforcement at the FSA said: "The failings at A&L are the most serious we have found. This is reflected in the record PPI fine. It is very disappointing that after three years of regulation we are still finding serious problems in PPI sales."
A&L must now implement a substantial and comprehensive customer contact programme, overseen by third party accountants. It will write to all customers who took out policies by telephone in conjunction with an unsecured loan between 14 January 2005 and 31 December 2007 prompting them to review their policy against product information sent to them. It will also review any relevant rejected complaints and claims and has committed to pay redress where appropriate.
This remedial action has been taken into account by the FSA and has reduced the level of penalty that would otherwise have been imposed on the firm.
Burgess added: "For a firm to actively train its advisers to put pressure on customers when recommending insurance cover, which they have not asked for and may not need, is particularly reprehensible.
"As the economic climate deepens and cash becomes less scarce, it is vital that customers can be confident they are not in danger of being ripped off when they buy a product that is designed to protect their finances.
"For truly impartial advice they should contact a broker or independent financial adviser or even do their own price comparison online."