Poor PPI suitability checks cost Loans.co.uk £455,000

Loans.co.uk Limited (LCUK), whose primary business is loan broking, has been fined £455,000 for failure to carry out adequate suitability checks and keep proper records of sales of payment protection insurance during the period 14 January to 22 November 2005. LCUK’s 42 salespeople sold PPI on an advised basis by phone using a prepared script as part of a loan or mortgage arrangement. A supervision visit during a thematic review of PPI sales in August 2005 revealed that the price of cover was automatically included in the cost of the loan, without being requested, and was not disclosed separately. A sample of sales indicated that the PPI premium added between 19% and 28% to the customer’s debt. Advisers also failed to check if the customer already had insurance in place. The firm was put in Enforcement at the end of 2005 and a subsequent internal audit report confirmed these and other failings. Before August 2005 the script did not bring to the customer’s attention exclusions for existing medical conditions and the term of the contract was not mentioned during the telephone conversation. The Final Notice says that in the majority of cases the PPI cover period was shorter than the term of the loan. The information given orally was insufficient, the FSA says, to enable the customer to make an informed decision. The firm instead sought to comply with ICOB by including material on terms and exclusions in subsequent written disclosure. Although the customer was able to refuse the PPI cover before the contract was confirmed, they would have to contact LCUK in order to do so. The original sales adviser would then draft a revised credit agreement which could delay the release of loan funds by as much as two weeks. The additional time was specified in the documentation.