loan-sense.co.uk

The FSA (Financial Services Authority) has fined credit card and loans provider, Capital One Bank (Europe) Plc (Capital One) £175,000 for failing to have adequate systems and controls for selling Payment Protection Insurance (PPI) and for failing to treat its customers fairly.

PPI is applied to a number of credit products including mortgages, loans, credit and store cards, and protects a borrower’s ability to pay the loan in case of accident, sickness or unemployment. Around 6.5 to 7.5 million policies are taken out each year

The regulator says that from January 2005 to April 2006, Capital One failed to ensure that 50,000 customers received important information about the policy - including all exclusions - although they did receive a policy summary. Affected customers were unable to check what they were covered for or if the policy was right for them.

While Capital One’s main business is providing credit cards, loans, and savings accounts from its operations centre in Nottingham, it also sells PPI on a non-advised basis to its credit card and loan customers over the telephone, internet or during the card application process. The FSA’s investigation focussed purely on credit card PPI sales. During 2005 Capital One sold approximately 335,000 UK credit card PPI policies.

The watchdog concedes that Capital One has been proactive in carrying out a full remedial programme addressing the systems and controls issues. Indeed, one part of the remedial programme ensured that those customers who did not receive the policy document had the opportunity to be compensated. The cost of this part of the programme, including potential premium refunds and settled claims, is estimated at around £3 million, of which £1.1 million related to customers after general insurance regulation started in January 2005.

This fine follows two phases of FSA work looking into PPI and the way it is sold. A third phase is underway and by the end of June 2007, the FSA will have visited over 200 PPI firms in two years.