News - Lenders face debt insurance fines
Posted on October 12, 2007 in the Mortgage insurance category
Up to 10 banks and lenders are expected to be fined for mis-selling payment protection insurance (PPI) in coming weeks, the BBC has learned.
The Financial Services Authority (FSA) is set to fine them about 1m each, said BBC Business Editor Robert Peston.
PPI is a widely sold form of insurance that covers people in case they cannot pay their mortgages or other loans as a result of illness or unemployment.
Consumer groups have criticised PPI as a “protection racket”.
Some “big names” can expected to be fined in coming weeks, Mr Peston said.
Financial costs
But while the fines will be small for major lenders, news of the penalties could prompt customers who believe they were mis-sold PPI policies to launch compensation claims.
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 It’s humiliation time again for banks and lenders  Robert Peston, BBC Business Editor
Analysis: PPI penalties
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“So the financial cost for the lenders could become more significant,” Mr Peston added.
Earlier this month the FSA said it would be carrying out a new drive in the coming six months to improve sales standards at firms which sell PPI.
It warned that it may also tighten the rules on selling these types of policies as it is not convinced that they offer customers enough protection.
Last year the OFT concluded a five-month investigation into PPI by describing it as a type of insurance that failed consumers because too often it gave them a poor deal and offered less protection than they thought.
So far three companies - Regency Mortgage Corporation, Loans.co.uk, and the retail group Redcats - have been fined 781,000 between them for mis-selling the policies.
Originaly from Source
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