Press Release

LENDERS RESPOND POSITIVELY TO FSA ANNOUNCEMENT ON PPI

19 October 2006

FLA (Finance & Leasing Association) today welcomed the FSA’s announcement that improvements have been made to the payment protection insurance (PPI) market since the regulator began its thematic review.  However, we share FSA’s concern that issues remain around compliance with the FSA’s rules. FLA members will continue to work with the FSA as it reviews its insurance conduct of business rules in 2007.

The FSA has identified concerns about the information given to consumers during the selling process.  FLA and others have produced a detailed guide to help consumers in choosing appropriate protection insurance. This guidance[1], reinforcing the FSA’s top tips for consumers, is currently being tested by Citizens Advice to ensure its maximum effectiveness.

FLA and its members are also making progress in developing accredited training schemes with retailers and motor dealerships to ensure that consumers taking out a PPI product will benefit from a sales person offering a professional service that is fully compliant with FSA marketing rules. 

The FSA is also concerned that there may be parts of a policy under which a consumer cannot make a claim. Since this revolves very much around an individual’s personal circumstances, FLA hopes that the improvements in customer information and sales processes will help ensure that no one is confused over what will constitute a valid claim, and what will not.

Trade associations, including FLA, have also agreed that member firms should always provide a fair refund when a PPI policy is cancelled early (unless a claim has been paid out or the policy has been transferred to another loan). Clear information on how refunds are calculated will be provided prior to purchase.

Martin Hall, Director General of FLA, whose members provide some £60.1 billion of consumer finance annually, said: “We agree with the FSA that PPI is an inherently sound and helpful product, which provides many people taking out loans with valuable protection. However, both the product and the sales process must achieve higher standards. We are therefore committed to work with others to ensure greater consistency of approach, openness and understanding.”

He added that: “Prompt cross-industry action in response to FSA’s findings is preferable to more regulation. This does however require the commitment and involvement of all concerned. Compliance with FSA sales rules is essential and consumers need to be able to understand clearly the cost, scope and limitations of policies for their particular circumstances.”

All FLA members must comply with our Lending Code which, for many years, has imposed strict guidelines on selling PPI. These have recently been updated. Where FSA’s findings indicate shortcomings, we shall be taking action to ensure compliance.