Loans co uk hit with a heafty fine over PPI insurance

City watchdog, the FSA (Financial Services Authority), has fined loan broker, Loans.co.uk Limited (LCUK), £455,000 for failing to treat its customers fairly when selling Payment Protection Insurance (PPI). Payment protection insurance will provide you with an income to meet your outgoings if you are off work sick, have an accident or are made redundant. It pays out a monthly benefit to cover your mortgage and other related costs.

In LCUK's case the regulator found that it didn't have appropriate systems and controls in place to minimise the risk of unsuitable sales.

At LCUK, PPI was sold on an advised basis over the telephone. The FSA investigation found that the firm failed to gather and record information to show that the policy recommendations it made were suitable.

The watchdog also discovered that customers didn't receive enough information at the point of recommendation to make an informed decision about the PPI policy being offered. Therefore, customers could not be sure if LCUK's recommendation was the right option for them.

LCUK's breaches were particularly serious as the failings exposed approximately 14,400 customers to the risk of the sale of PPI which was unsuitable for their needs.

Margaret Cole, FSA Director of Enforcement said: "We have highlighted Payment Protection Insurance as an FSA priority due to the potential level of risk to consumers.

"Loans.co.uk Limited failed to make sure adequate processes were in place to ensure the suitability of its PPI recommendations and treat its customers fairly. The principle of treating customers fairly should be embedded in firms' business models to help prevent such failings and it is important that all firms review their systems and controls to reach this standard."

Coles added that PPI can provide valuable protection against changes in personal circumstances but that customers should come away from the sale having been given the best possible information to understand that the PPI is optional, what the policy will and will not cover and how much it costs.

In addition to the above transgressions the FSA also found that LCUK failed to have appropriate compliance monitoring procedures in place to identify failings in the sales process. Moreover, LCUK didn't provide guidance to staff on how to identify a complaint or adequately communicate its complaints handling procedure to them.

Following discussions with the FSA a remedial action plan for consumers has been implemented which involves a customer contact exercise and redress where appropriate.

By agreeing to settle at an early stage of the FSA investigation LCUK qualified for a 30% discount under the FSA's Executive Settlement Scheme. Without the discount the financial penalty imposed would have been £650,00

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