HSBC subsidiary fined £1 million for PPI failings
A subsidiary of HSBC has been fined over £1 million by the Financial Services Authority for the way it sold payment protection insurance to customers.
HFC Bank, which provides finance through retailers such as Currys and PC World as well as its branch network, has been part of HSBC since 2003. It has today been fined £1,085,000 by the financial regulator for selling controversial PPI policies to customers without making sure that the product was suitable for their needs.
The fine is the first the FSA has issued since September when it warned it would crack down on PPI failings. It is also the largest PPI-related fine to date.
PPI is sold alongside credit and loans to cover repayments should the borrower be unable to work due to illness or unemployment. The way companies sell PPI has been the subject of an in-depth investigation by the Competition Commission amid fears that it is widely mis-sold and fails to properly protect customers.
Margaret Cole, director of enforcement at the FSA, says: “HFC's failings put its customers at risk of buying unsuitable protection insurance and the financial impact on them of unsuitable advice was likely to be significant."
HFC's has 136 branches in the UK and sells secured and unsecured loans as well as protection insurance.
It has now agreed to make changes to its sales processes.
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
The practice of a dishonest salesperson misrepresenting or misleading an investor about the characteristics of a product or service. For example, selling a person with no dependants a whole-of-life policy. There have been notable mis-selling scandals in the past, including endowment policies tied to mortgages, employees persuaded to leave final salary pensions in favour of money purchase pensions (which paid large commissions to salespeople) and payment protection insurance. There is no legal definition of mis-selling; rather the Financial Services Authority (FSA) issues clarifying guidelines and hopes companies comply with them.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.