FSA forced to explain shortlist of PPI failings

Out-Law News | 25 Nov 2010 | 7:51 am | 1 min. read

The Financial Services Authority (FSA) said this week that a summary of errors commonly made in payment protection insurance (PPI) sales was intended to help firms do better in future, not prove that they had mis-sold PPI in the past.

Last August, in an open letter to the industry, the FSA listed fifteen common sales failings which it had identified through its thematic review work, mystery shopping exercises and enforcement actions. The letter appeared as an appendix to the FSA's final rules and guidance on how firms should assess consumer complaints about PPI sales and calculate appropriate redress.

The errors included failing to tell the consumer that PPI was optional, providing misleading or inaccurate information about the policy and failing to ensure the consumer would be able to make a claim.

The new rules and guidance become effective on 1st December. But on 8th October, the British Bankers’ Association (BBA) applied for a judicial review of the FSA's approach to PPI sales complaints.

One of the BBA's contentions is that, if a sale involves one or more of the common sales fallings listed in the open letter, the FSA will consider the firm to be in breach of its rules, any other rules  or the general law, without looking at all the relevant circumstances of the particular case.

In a statement released yesterday, the FSA said this is not its position.

"Rather, it has been the FSA’s experience, based upon the thematic and enforcement work mentioned above that sales in which one or more of the common failings occurred usually involved, on a proper consideration of all the circumstances of the sale, a breach of at least one of the FSA’s Principles for Businesses, or other FSA rules, or the general law," it said.

The regulator explained that the new guidance already provides that, in assessing a sale complaint, the firm "should consider, in the light of all the information provided by the complainant and otherwise already held by or available to the firm, whether there was a breach or failing by the firm”.

"So the common failings are not a substitute for a full assessment of the sale in light of all the available information," the FSA confirmed.

The statement continued: "The publication of the list of common failings is intended to help firms comply with their obligations when selling PPI and to give fair consideration to customer complaints about PPI in accordance with [the Dispute Resolution Sourcebook]."

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