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EGG BANKING PLC
(Egg)
Date: 9th December 2008:
The FSA gave Egg Banking plc (Egg) a Decision Notice on 5 December
2008, which notified the firm that pursuant to section 206 of
the Financial Services and Markets Act 2000 (the Act), the FSA
had decided to impose a financial penalty of £721,000 on
Egg. Click Here for a copy of the
FSA Final Notice document.
LIVERPOOL VICTORIA
BANKING SERVICES Ltd
Date: 29th July 2008:
The FSA gave LVBS Ltd a Decision Notice on 28 July 2008 which
notified them that pursuant to section 206 of the Financial Services
and Markets Act 2000, the FSA has decided to impose a financial
penalty of £840,000 upon them. This penalty is in respect
of breaches of Principles 3, 6 and 7 of the FSA's Principles
for Businesses and associated rules between 14 January 2005 and
8 August 2007 in relation to sales of Payment Protection Insurance
offered in connection with unsecured personal loans.
The financial penalty imposed
is for breaches of the FSA's rules in relation to the firm's
sales of single premium PPI offered in connection with unsecured
personal loans via its telephone sales channel. These breaches
related to LVBS failure to:
- take reasonable care to organize
and control its affairs responsibly and effectively, with adequate
risk management systems;
- pay due regard to the interests
of its customers and treat them fairly; and
- pay due regard to the information
needs of its clients, and communicate information to them in
a way which is clear, fair and not misleading.
LVBS did not tell customers on
the telephone that PPI was optional and the paperwork provided
to customers also failed to make it clear that this was an optional
product which the customer could choose not to buy.
When customers realized that
they did not have to buy PPI and objected to it, LVBS put pressure
on customers to take the PPI by using 'objection handling' techniques.
This risk was further increased by the financial incentive schemes
LVBS operated for PPI sales staff.
During the relevant period, LVBS
sold approximately 14,500 PPI policies at an estimated average
cost of £1,600 (including interest) generating a gross
PPI income of approximately £23 million.
HFC BANK LIMITED
Date: 16th January 2008:
The FSA gave HFC Bank Ltd a Decision Notice on 11 January 2008
which notified them that pursuant to section 206 of the Financial
Services and Markets Act 2000, the FSA has decided to impose
a financial penalty of £1,085,000 upon them. This penalty
is in respect of breaches of Principles 9 and 3 of the FSA's
Principles for Businesses and associated rules between 14 January
2005 and 28 May 2007 in relation to sales of Payment Protection
Insurance.
The FSA has imposed a financial
penalty on HFC for breaches of the FSA's Principles and rules
in relation to its sale of PPI. These breaches related to HFC's
failure to:
- Take reasonable care to organize
and control its affairs responsibly and effectively, with adequate
risk management systems;
- HFC's sales staff were not required
to gather, and take into account, sufficient information about
customer's personal circumstances and objectives when making
sales. HFC's processes did not therefore take adequate steps
to ensure that its personal recommendations were suitable.
- HFC did not provide its customers
with information that adequately set out their demands and needs
and explained why HFC was recommending the policy. Nor did HFC
require its advisers to identify the customer's demands and needs
which would not be met.
- HFC failed, in particular, to
require advisers to gather and analyse sufficient information
about the following: A customer's future needs and circumstances,
alternative means to protect the loan, the type and level of
cover required and pre-existing medical conditions.
- HFC is a large firm which sold
approximately 163,000 PPI Policies over the Relevant Period (of
which 124,000 were single premium) from 235 branches (136 branches
by the end of the period) across the UK
ALLIANCE &
LEICESTER PLC
Date: 6th October 2008:
The FSA gave Alliance & Leicester plc a Decision Notice on
6 October 2008 which notified them that pursuant to section 206
of the Financial Services and Markets Act 2000, the FSA has decided
to impose a financial penalty of £7 million upon them.
This penalty is in respect of breaches of Principles 3, 6, 7
and 9 of the FSA's Principles for Businesses and associated rules
between 14 January 2005 and 31 December 2007 in relation to sales
of Payment Protection Insurance offered in connection with unsecured
personal loans.
The breaches relate to Alliance
& Leicester's failure to:
- take reasonable care to organize
and control its affairs responsibly and effectively, with adequate
risk management systems;
- pay due regard to the interests
of its customers and treat them fairly; and
- pay due regard to the information
needs of its clients, and communicate information to them in
a way which is clear, fair and not misleading.
- take reasonable care to ensure
the suitability of its suitability of its advice and discretionary
decisions for any customer who is entitled to rely upon its judgment
The FSA considers that A &
L has breached Principle 6 of the FSA's Principles of Businesses
by not making it clear to customers that the PPI was optional,
and by using inappropriate sales techniques that put pressure
on the customer to accept the recommendation, allied with inappropriately
managed adviser inducements, to encourage customers to buy PPI.
During the relevant period approximately
211,000 PPI single premium policies were sold on approximately
514,000 loans (including to customers who had initially declined
PPI on their internet application), giving a penetration rate
of approximately 41%.
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