Capital One fined for PPI Mis-selling

Capital One Bank has become the latest lender to be fined by the FSA for failing to protect consumers against the risk of being mis-sold insurance policies.

The credit card firm was found to have neglected to ensure that 50,000 customers received important information about Payment Protection Insurance and has been fined £175,000 - although none of the fine will find its way back to borrowers.

The FSA found that Capital One had inadequate systems and controls for selling PPI insurance and thus failed to treat its customers fairly. During 2005, Capital One sold approximately 335,000 PPI policies on UK credit cards.

Margaret Cole, director of enforcement at the GFSA, said: "We are determined to see much better practice in PPI.

"It is unacceptable for people to be put at risk of buying unsuitable protection insurance through not being given the right information at the right time."

GE Capital Fined for PPI Mis-selling

GE Capital has been fined £610,000 by the FSA in the latest action against lenders for PPI mis-selling.

The FSA's final notice to GE Capital highlights a series of failings to ensure that borrowers received accurate advice on PPI policies, including:

Failure to review and change sales processes to ensure accurate and appropriate information;

Despite evidence available that sales staff were not appropriately advising consumers, GE Capital failed to implement proper training;

Despite having management information available from the middle of 2005 onwards that sales processes were failing consumers, GE Capital failed to act to ensure that they hhad in place proper monitoring systems to check compliance with FSA requirements;

Staggeringly, despite its knowledge that many consumers would have been mis-sold PPI policies GE Capital failed to put in place any programme to provide redress and to compensate its customers

GE Capital provided PPI to 850,000 consumers in 2005 with a premium value of nearly £8 million.

Banks make record profits as customer battle debt

Sunday Mirror, 7 January 2007

Exclusive by Stephen Hayward, Consumer Correspondent

HIGH street banks are set to declare record profits of more than £40BILLION A YEAR - while their hard-up customers plunge deeper into debt.

The astonishing profits - which work out at £112million a day - are up from £34billion the year before.

They come at the expense of customers who pay £5billion a year in overdraft fees and £3billion for controversial payment protection insurance on loans, credit cards and mortgage repayments.

Last night anti-debt campaigners accused the banks of growing rich on the back of spiralling personal debt, which now stands at a record £1.3trillion.

The biggest single winner is HSBC, Britain's biggest bank, which made £13billion last year, up from £11.5billion in 2005.

Halifax Bank of Scotland, accused of ruining Christmas for Farepak customers after failing to increase its owners' overdraft last October, has racked up £5.5billion profits, up from £4.8billion.


The figures are due to be announced over the next two months. They come as millions face bigger home loan bills because of rising mortgage rates.


There has also been a surge in repossessions and personal insolvencies - expected to top 100,000 a year for the first time.


Critics say high street banks have pushed up overdraft charges -which the Office of Fair Trading is investigating - while offering paltry interest rates on accounts.


Further profits have come from financing lucrative takeover deals, switching customers online and closing local branches.


Niall Cooper of the Debt On Our Doorstep pressure group said: "If interest rates go up it is quite feasible the debt bubble will burst."


Stuart Bernau, boss of Nationwide, Britain's biggest building society, said: "It's natural that customers will question whether they are getting good value and service from their banks."


Pula Houghton, senior policy advisor at consumer group Which?, said: "People are being penalised for the smallest transgression."


Britons owe a third of unsecured debt in Western Europe, typically £3,000 in debt - double that of their continental cousins.



WHO'S RAKING IT IN
HSBC £13bn
RBOS/NatWest £9.2bn
Barclays £7bn
Halifax Bank of Scotland £5.5bn
Lloyds TSB £3.7bn
Abbey £940m
Northern Rock £610m
Alliance & Leicester £553m
Bradford and Bingley £333m


HOW THEY HIT YOU
INTEREST rates up to 18.3% on overdrafts - 29.8 per cent on unauthorised ones.
£25 CHARGE for bouncing cheque.
A 5% RISE to 16% on credit card rates.
MONTHLY fees on credit cards.
3% INTEREST on balance transfers.
A £3 CHARGE on credit card cash withdrawals.

FSA to clamp down further on PPI mis-selling

The Financial Services Authority today announced a further clampdown on PPI mis-selling with a programme of visits to firms and threats of enforcement action.  The FSA also stated that it would review the current rules in relation to PPI sales and in the event that these were proving inadequate to protect consumers, would look at possible changes.

Clive Briault, FSA Managing Director of Retail Markets at the FSA, said:

"Improving sales standards in the PPI market remains a key priority for us and we see it as an indicator of whether firms are treating their customers fairly. Customers should come away from the sale having been given the best possible chance of understanding that PPI is almost always optional, what the policy will and will not cover, and how much it costs. The next phase of our programme will tell us what progress has been made and what further action is necessary."

The FSA is also examining the case for adding PPI to its suite of web-based tables which enable consumers to compare products. The outcome of this latest phase of work will be published during the third quarter of 2007. Meanwhile, in recognition of the wider structural issues that exist in the PPI market, the FSA will continue to work closely with the competition authorities.

OFT Issues Guidance on Unfair Credit

The Office of Fair Trading has issued guidance on the operation of the Unfair Credit Relationships test which will be introduced as part of the reforms brought in by the Consumer Credit Act 2006. The test will come into effect in April 2007 for new agreements signed after that date, and April 2008 for current agreements.

The guidance fails to set out a comprehensive view as to what an unfair relationship is, and there will be considerable uncertainty until test cases have been taken in the courts. However, there have been some revisions since the OFT consulted on it last year, and the OFT expresses the view that the courts will be able to take action against high cost lending.

The guidance states:

4.20..in the OFT's view there is clearly scope for the court to find that a credit relationship is unfair on the grounds that it involves excessive costs for the borrower. Section 140A(2) requires the court to have regard to all relevant matters and these could include the cost of the credit agreement or any related agreement. This appears to be endorsed by Ministerial statements in Parliament during the passage of the Consumer Credit Bill.

4.21 For example, the rate of interest charged under a credit agreement, or the rate or amount of other fees or charges, may be so much higher than those applicable generally in the particular market sector, or payable by borrowers in similar situations, as to make the relationship as a whole unfair to the borrower. They may also, in the particular circumstances, be oppressive or exploitive of the individual borrower even if they are in line with rates prevailing at the time in the particular sector.

4.22 In addition, excessive prices may be accompanied by other unfair terms or practices which may contribute to an unfair relationship as well as being susceptible to possible Part 8 action in their own right."

Debt on our Doorstep will be looking to work with agencies interested in taking test cases in relation to the cost of credit from April onwards. It should be noted that the guidance indicates that the cost of linked transactions (for example payment protection insurance and default charges can also be considered by the courts as part of an assessment of unfairness).

FSA Hands Out Another PPI Fine

The Financial Services Authority has fined Redcats (Brands) Limited £270,000, which trades in the UK under the brand name of Empire Stores and has a tie in with sub-prime lender London Scottish Bank Plc, for failing to treat its customers fairly when selling Payment Protection Insurance (PPI) in connection with home shopping products. The regulator found that Redcats did not have adequate systems and controls in place to minimise the risk of unsuitable sales.

There were also weaknesses in the way that Redcats operated and maintained its compliance systems, training and competence arrangements and sales processes.

Redcats’ breaches were particularly serious because they meant that over an 18-month period approximately 160,100 customers were sold PPI which might not have been suitable for their individual needs.

Redcats specialises in home shopping with PPI sold to cover instalment payments for the merchandise bought through catalogues by phone, post or via the Internet. The FSA investigation found that a significant number of customers were provided with insufficient information about the PPI policy features, terms, exclusions and limitations through its telephone sales channel.

Despite stating that its sales were made on an advised basis, Redcats failed to comply with regulatory requirements for advised sales. As a result a significant number of customers were sold PPI without being provided with personal recommendations or advice, either verbally or in writing, as to why the PPI policy met their demands and needs.

The FSA has confirmed that PPI mis-selling is a priority for enforcement and that other cases are pending. However, following action against Loans.co.uk (fined £455,000 in October 2006),the FSA revealed to Debt on our Doorstep that they had no plans to monitor the number of consumers reimbursed as a result of remedial plans put in place by the lenders following the fines.

Redcats also trades across the world under a number of different brand names as follows:

In France: La Redoute, La Maison de Valérie, Vertbaudet, Somewhere, Cyrillus, Daxon, Edmée
In Scandinavia: Ellos, Josefssons
In the United States: Chadwick’s, Metrostyle, Jessica London, Lane Bryant Catalog (changing to Woman Within), Roaman’s, KingSize, Brylane Home, The Sportsman’s Guide.