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Capital One fined over PPI sales

Capital One fined over PPI sales
Capital One has been fined £175,000 by the Financial Services Authority (FSA) over payment protection insurance (PPI) sales failings.
The fine relates to 50,000 policies sold to customers between January 2005 and April 2006.
The FSA said the card provider had failed to provide full information to customers about policy exclusions.
PPI is a form of insurance that covers people in case they cannot pay loans as a result of illness or unemployment.
Capital One is the latest firm to be penalised for sales breaches. Last month, GE Capital bank was fined a record £610,000 for similar failings.
In response, Capital One said it accepted the fine and had amended its sales practices.
Failings
Capital One has some four million customers throughout the UK. It is one of the UK's biggest providers of credit cards.
The FSA investigation centred on the sale of 335,000 PPI policies relating to credit card debt.
Failings pointed out by the FSA included:
• Capital One failed to send a policy document to more than 50,000 PPI customers between January 2005 and April 2006
• Sales scripts did not ensure adequate disclosure of policy features and exclusions to customers
• Capital One's monitoring of sales calls was not sufficiently effective.
The card provider said it had taken what the FSA had to say on board.
"We consistently review our policies and practices and had made a number of significant improvements prior to the FSA's investigation," Sanjiv Yajnik, Capital One Europe chief executive said.
"The FSA has recognised that Capital One co-operated fully throughout the investigation," he added.
Investigation
The PPI industry is worth an estimated £5.5bn a year.

Online help with PPI Claims

New online help for PPI customers

People who want to buy payment protection insurance (PPI) can now get advice from the website of the Financial Services Authority (FSA).

The watchdog has launched a set of tables to help consumers compare the policies on offer and their cost.

PPI insures people in case they cannot repay loans due to ill health or job loss, and has proved controversial.

This month the Competition Commission said insurers were overcharging their PPI customers by £1.4bn a year.

A spokesman for the FSA said that the tables were "a starting point to give customers basic information about what the polices offer and what they cost".

"PPI is almost always optional and consumers need to consider their own financial circumstances when deciding to purchase it and make sure they are clear about what will be covered," he added.

Complaints

The selling of PPI has been very controversial for several years, with critics such as Citizens Advice describing the industry as a "protection racket".

Insurers have been accused of selling polices that are too expensive and which may even fail to provide the cover they claim to offer.

The FSA has levied numerous fines on financial companies for mis-selling PPI policies.

And the Competition Commission even suggested that to protect customers it might impose temporary price limits and ban firms from selling PPI policies to customers at the point at which they take out a loan.

In the last financial year nearly 11,000 people complained to the Financial Ombudsman Service about the PPI policies they had bought, making the insurance one of the fastest growing sources of complaint.

Comparisons

PPI still mis-sold, says Which?

PPI still mis-sold, says Which?
BBC
Many people are still being misled into buying payment protection insurance (PPI) to cover their credit card payments, Which? claims.
A survey for the consumers' association suggests that nearly 10 million people have a PPI policy with their cards.
But 13% - 1.3 million - bought it under the mistaken belief it was compulsory or would improve their chances of having their card application approved.
Which? said people were wasting their money buying any form of PPI policy.
"Credit card PPI is a modern day snake oil - it's a useless product, expensive and poorly designed," said Doug Taylor of Which?
"In this time of economic uncertainty, people are effectively throwing away £970 million each year, when they should be encouraged to seek independent financial advice about protecting their finances as a whole," he added.
This was rejected by the British Bankers Association (BBA), who said the insurance was a valuable "plan B".
"Taking out PPI is not a condition for agreeing to provide the borrowing facility and people are free to shop around if they want to," a BBA spokesperson said.
"Last year, a mystery shopping exercise carried out by the FSA showed improvements in staff making it clear to customers that cover is optional and new rules which came into force in July tighten the PPI regime even further," the spokesperson added.
PPI is designed to ensure that people can still repay their loans, such as credit card payments or mortgages, if they fall ill or become unemployed.
Criticism
Consumer bodies such as Which? and Citizens Advice have long campaigned against the selling of PPI, describing it as little more than a protection racket run by the banks to boost their profits.
In June this year the Competition Commission calculated that customers were being overcharged for the insurance policies each year because of a lack of competition at the point of sale.