The authority now says “urgent action” must be taken to ensure that selling practices for Payment Protection Insurance (PPI) are in line with regulatory requirements.
At the beginning of 2005, the FSA made it clear that one of the risks it was prioritising was the sale of PPI with finance arrangements. As the regulator also made it clear it would name and shame businesses which flouted the new legislation, the findings make for sobering reading for the motor industry.
It visited 45 firms and the findings from 30 of them have given rise to the call to action. There has also been a mystery shopping exercise of 78 sites, split between lenders and intermediaries and the results of these are published in the FSA’s Consumer Research Paper 45.
All companies visited are to receive detailed feedback and a requirement to address any problems identified. Ominously, more serious cases are being referred for further investigation.
The key problems identified are:
The FSA sees three possible solutions. First, tougher regulatory requirements, such as the unbundling of PPI from the main transaction. Second, action by the Competition Commission, and third, that the industry improves its own standards.
The motor industry, manufacturers and dealerships are on notice to make sure customers have a clear understanding of what they are buying when they take out PPI with a loan.
Dealerships must review their current practices against the FSA rules and the issues identified above. Shortfalls and any remedial action should be implemented as a matter of urgency as the FSA has made a very clear warning.