Fined
Alliance & Leicester fined $12 million over PPI sales
Alliance & Leicester Plc, the U.K. lender being taken over by Banco Santander SA, will pay a record 7 million-pound ($12.2 million) fine for improperly selling payment-protection insurance.
Alliance & Leicester failed to tell customers the real cost of PPI insurance, which is sold to cover loan repayments in case of illness or unemployment, the Financial Services Authority said in a statement today. It's the FSA's biggest fine over PPI sales.
The problems with the PPI sales “are the most serious we have found,” Margaret Cole, the London regulator's director of enforcement, said in an e-mailed statement today. “It is particularly unacceptable for a firm to train its advisers to put pressure on customers when recommending insurance cover which they have not asked for and may not need.”
U.K. financial and antitrust regulators are focusing on how lenders sell PPI at a time when the banking and financial- services industry is in crisis. The U.K. government may invest at least 45 billion pounds in three of the country's biggest banks to bolster capital depleted by mortgage-related losses, three people with knowledge of the situation said today.
The FSA said last week that it would increase scrutiny of the PPI market and "use a range of regulatory powers at its disposal" if it found problems. In June, the Competition Commission found that banks and retailers overcharge by as much as 1.4 billion pounds a year because consumers aren't advised they can choose other providers.
Alliance & Leicester Group Chief Executive Officer David Bennett said in a statement that the company “sincerely” apologizes for its shortcomings. The Leicester, England-based company cooperated with the regulator and qualified for a 30 percent discount on the fine, the FSA said. “We will be writing to every customer concerned and will be working with independent accountants and the FSA to ensure that we put right any disadvantage,” said Bennett.
(Published by Bloomberg - October 7, 2008)