Mutual society Liverpool Victoria has been fined a whopping £840,000 by the Financial Services Authority (FSA) for putting pressure on customers to take out single premium payment protection insurance (PPI).
The firm was hit with the fine for adding single premium PPI to personal loans sold over the phone between 2005 and 2007 without asking customers’ permission. When customers discovered the cost of PPI had been added and objected, the FSA says Liverpool Victoria put pressure on them to take out the insurance product.
The FSA also slams the firm for failing to explain that the cost of the single premium PPI was added to the loan and that as a result customers paid additional interest on the PPI premium for the life of the loan.
Out of 97 telephone calls reviewed by the FSA, 60% were found to break its rules on the way PPI is sold.
Liverpool Victoria is the eighth firm to be fined by the FSA over PPI. The original fine levied at Liverpool Victoria was £1.2 million, but because it settled at an early state it qualified for a 30% discount. However, its fine is still the second largest levied for PPI failings, with HFC Bank receiving the biggest fine of £1 million.
Margaret Cole, director of enforcement at the FSA, says Liverpool Victoria’s sales processes were “flawed” and left customers at risk.
She adds: "When customers phone for a quote, it is totally unacceptable for firms to add on the cost of insurance which the customer has not asked for. Many customers make their decisions when speaking to sales staff. If those conversations are unclear or misleading it will be no defense for firms to say that full details were included in paperwork, which customers received later.”
Customers affected by the mis-selling will be refunded the interest they paid on their PPI premiums automatically, meaning there is no need for them to write to the firm or apply for a refund.
All PPI customers will also be contacted and offered full redress where appropriate.
A spokeswoman for Liverpool Victoria says it is sorry for its "past shortcomings" in the PPI sales process.
She adds the FSA's findings cover around 14,500 policies, of which 75% were sold prior to July 2006: "The practices of automatically adding PPI to the quotation and not clarifying the full costs were rectified by July 2006. With around 50% of LVBS personal loans sold over this period, customers did not take up a PPI policy."