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10th Dec 2008
FSA fines Egg £721,000 for PPI failings
FSA fines Egg £721,000 for PPI failings
Credit card provider Egg Banking has been fined £721,000 by the Financial Services Authority for serious failings in the sales of payment protection insurance.
The FSA found failings in approximately 40% of telephone sales of credit card PPI made by Egg between January 2005 and December 2007.
Egg sold PPI either when receiving a customer services call, or when making a sales call to a new customer.
When Egg customers said they did not want PPI the firm directed its sales staff to use techniques to persuade the customer to take the insurance – called ‘objection handling’.
These techniques included over-emphasising the positive features of the PPI and telling the customer they could take the PPI for a free period and cancel it later if they did not want it.
In some cases, even when the customer did not consent, PPI was applied to their credit card anyway.
Egg will write to customers asking them to call a dedicated number if they have any concerns about the policy or the way it was sold to them and compensate them where appropriate – by way of illustration, Egg is expected to pay £1.67m for every 10% of customers who receive a refund.
Margaret Cole, director of enforcement at the FSA, says: “Egg used inappropriate sales techniques to try to persuade customers to buy payment protection insurance on their credit card even when they asserted they did not want the cover.
"All firms must ensure that customers are treated fairly when selling PPI and if a customer does not want PPI, they should not be pressured into taking it.
“We will continue to fine firms where we find PPI failings."
Cole says it is unacceptable that Egg did not identify the problems with its sales processes despite a series of high profile FSA communications on PPI, including earlier fines on other firms.
Egg stopped telephone sales of credit card PPI in December 2007 and has agreed to write to customers and pay a full refund plus interest where appropriate.
She says Egg is likely to pay substantial compensation as a result of this exercise.
The FSA says it has taken into account Egg’s customer contact exercise and commitment to compensate customers where appropriate and has significantly reduced the level of penalty which it would otherwise have imposed on the firm.
Egg also qualified for a 30% discount under the FSA’s executive settlement |
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