FSA warning on Payment insurance

30 November -0001

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The FSA has warned financial services firms that drastic action must be taken on the way they sell certain products, after a mystery shopping exercise revealed that Payment protection insurance is being sold to people who may never be able to claim on it.

According to the watchdog, companies selling the insurance are failing comply with the regulations, and poor sales practises make the problem worse.

In some cases, staff were giving advice when they shouldn't have done so, customers were not being warned about exclusions and the policies were not being explained correctly to the customers.

According to the research, of 30 companies that were offering Payment protection with unsecured loans, more than half were failing to take reasonable steps to ensure that policies were not sold to customers who were not able to claim on them.

Where advice was given it was often poor, and companies were over-reliant on the documentation on the policies given to customers, rather than explaining them.

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