The Financial Services Authority has finally bared its teeth in the motor industry.
The £175,000 fine meted out to five dealerships for mis-selling of payment protection insurance (PPI) shows a clear intention to make an example of any company not meeting the FSA’s high expectations – even if, in its own admission, those companies did not deliberately try to mislead customers.
This point is key. The FSA believes dealers have had plenty of time to get their house in order and, as such, it is unwilling to embark on conversations when it unearths poor practice or slack processes. No warnings, yellow cards or three-strike rule – it’s hitting dealers straight in the pocket.
The fines were issued because the FSA’s investigations found out that the correct processes were not adhered to. The FSA wasn’t following up complaints – indeed, the dealers say they didn’t receive any – and it may well be that every customer who purchased PPI needed it. We – and the FSA – do not know.
All we do know is that there was an inherent risk because the dealers didn’t operate the correct methods and safeguards.
How were the fines – from £28,000 to £61,600 – worked out? The FSA doesn’t say, but it’s unlikely those dealers made anywhere near that level of profit from PPI policies.
Should consumers start to take more responsibility for their purchases? A topic as potentially confusing as PPI needs to be fully explained. But everyone has the paperwork and is told to read the small print and question anything they do not understand; yet their failure to do this makes the dealer culpable.
However, when a dealer signs a contract and doesn’t read the small print, they have very little recourse, as one recently found out when it discovered a maintenance contract for a finance system had a three-year deal instead of a one-year. He couldn’t get out of it.
As another dealer commented on the AM Forum: “If I sign for a new mobile contract thinking it is 12 months and it turns out to be 18 months, then I only have myself to blame.”
Many dealers have stopped selling PPI; many more could soon follow suit.