FSA Guidelines for the Sale of PPI
Controversial new Financial Service Authority (FSA) guidelines for the sale of payment protection insurance have come into effect. The guidelines aim to protect consumers from being mis-sold an unsuitable policy and come in response to a countrywide mis-selling scandal that has seen thousands of customer complaints and billions paid out in compensation.
The new FSA guidelines for the sale of PPI are controversial as they were the subject of a Judicial Review earlier this year. The review was requested by the British Banking Association who were unhappy that the new guidelines could be applied retrospectively to past sales. It was claimed that the new FSA guidelines for the sale of PPI could potentially cost the industry £4 billion and force several insurance companies out of business. These claims were rejected by the High Court; however, and the new rules have now come into force.
The aspect of the FSA guidelines on the sale of PPI that proved most controversial was a rule that lenders must review old sales and actively approach customers who may have been mis-sold cover. As a result, the court's verdict was seen as a huge victoria for consumers.
In October 2011 another new set of guidelines came into force concerning new sales of PPI. Introduced by the Competition Commission the rules include a requirement that PPI providers must emphasise that policies are optional. They will also be required to explain terms and costs clearly to the customer and provide claim payout ratios to customers upon request. In addition, information regarding sales must now be passed to the Office of Fair Trading and the Money Advice Service. This information will be monitored and is likely to be published in comparison tables for consumers.
One significant new rule that has yet to be implemented, but is due to come into effect in April 2012 is regarding when PPI cover can be sold. Many mis-selling complaints have centred on customers being given incorrect or misleading information at the point of sale. From April, though, policies must be sold a minimum of seven days after the credit agreement is set up.