Friday, August 22, 2008
Dealers fined £175,000 by FSA
Five motor retailers have been fined more than £175,000 in total by the Financial Services Authority for serious breaches relating to sales of payment protection insurance (PPI).
GK Group Limited, George White Motors Limited, Ringways Garages (Leeds) Limited, Ringways Garages (Doncaster) Limited and Park’s of Hamilton (Holdings) Limited sold PPI alongside loans for a car or motorbike.
Following investigations at each business, the FSA discovered a number of major issues:
Failing to gather enough information about each customer (including pre-existing medical conditions, existing insurance cover and benefits received from employers), creating the unacceptable risk of unsuitable sales of PPI;
Not monitoring the quality of the advice given by sales staff and to ensure that appropriate sales processes were followed;
And one dealer did not adequately assess whether customers were eligible to claim for benefits from the PPI policies they sold, and another did not assess complaints properly.
Margaret Cole, FSA Director of Enforcement, said: "Motor retailers that sell PPI have to meet the same standards as the rest of the financial services industry.
"All firms selling PPI must treat their customers fairly, including taking proper steps to make sure sales are suitable and customers are eligible to claim on the policy - PPI remains a top priority for the FSA in 2008 and beyond.
"Where we discover PPI failings, we will not hesitate to take tough action and impose higher penalties."
The FSA is committed to helping motor retailers better understand its rules, and is is holding a free roadshow for car and motorcycle traders on Thursday October 2, at the Craiglands Hotel, Ilkley, West Yorkshire.
The event, bookable through the FSA website, will look at the issues of FSA compliance that motor retailers want to know more about.
The Rulings:
Parks of Hamilton
Fined £61,600 for failures which exposed 714 customers to unacceptable risk of buying PPI policies that were not suitable.
The Scottish dealer group encouraged sales staff to sell the highest level of PPI cover available to eligible customers, and marked them down on monitoring checklists if they did not do so, no matter whether the policy was most suitable for the customer;
Sales staff were not required to gather and consider sufficient information about customers’ personal circumstances and needs, such as costs and health conditions, when making recommendations;
Parks of Hamilton did not provide customers with an adequate Statement of Demands and Needs (SODAN) to explain why it had recommended a particular PPI policy;
It failed to give customers a statement of price;
It had ineffective systems to monitor staff, using a purely quantitative check rather than checking the quality of the advice;
When its own monitoring had detected compliance failures, the dealer hadn’t taken adequate remedial action;
Parks of Hamilton did not assess customer complaints in a fair manner, and made unjustified and incorrect claims to complainants who suggested taking the matter to the Financial Ombudsman Service.
The FSA said Parks of Hamilton’s failings are view as particularly serious because the breaches occurred over an extended period, during which it had made changes to monitoring which encouraged staff to sell the most comprehensive cover, despite public reports and guidance by the FSA on the subject of PPI.
GK Group
Fined £51,100 for failures which exposed 734 customers to unacceptable risk of buying PPI policies that were not suitable.
The Chesterfield-based group failed to gather sufficient information about a customer’s circumstances;
Sales staff recommended the most comprehensive level of cover for which the customer was eligible rather than considering the most suitable level of cover for their needs;
GK produced a generic SODAN document which was not individually tailored to the customer, and did not record sufficient relevant information such as pre-existing medical conditions;
It had an inadequate structure and ineffective procedures for monitoring sales and had failed to routinely monitor sales;
It failed to produce sufficient management information to ensure that senior management was aware of risks associated with its regulated business activities;
The FSA said there were several mitigating factors taken into account.
GK proactively suspended sales of PPI and implemented a remediation programme to ensure all customers who have been disadvantaged will receive appropriate redress, without prompting by the FSA.
It had also engaged an external consultant prior to the FSA beginning enforcement action, to review its PPI sales process, and has since revised the process and the SODAN and overhauled staff training.
George White Motors
Fined £28,000 for failures which exposed 282 customers to unacceptable risk of buying PPI policies that were not suitable.
The Swindon-based dealer's SODAN was inadequate and did not demonstrate that eligibility or suitability of regular and single premium PPI policies had been fully assessed of considered;
It failed to ensure that SODANs were always appropriately completed or that recommendations made to customers matched their needs;
In some instances, customers were recommended a regular premium policy but were sold a single premium policy;
The dealer sold PPI without effective monitoring of its sales force, as the controls in place were not sufficiently robust to ensure staff sold PPI fairly;
George White Motors’ monitoring procedures did not identify that customers were at an unacceptable risk of being sold PPI policies that they were ineligible for.
The FSA said there were several mitigating factors taken into account.
After a visit from the FSA, George White Motors amended the wording of its SODAN, held one-to-one conversations with all staff about PPI sales procedures, and appointed an independent training company to supervise all managers responsible for supervising sales staff, and to review 10% of written PPI business each month.
Where the dealer had sold single premium PPI after having recommended regular premium PPI, without advising them of the difference between the policies, it reduced its commission to ensure there was no additional cost to the customer.
Ringways Garages (Leeds) and Ringways Garages (Doncaster)
Fined £35,000 for failures which exposed 445 customers to unacceptable risk of buying PPI policies that were not suitable.
The Yorkshire dealer group's sales staff were not required to gather and consider sufficient information about customers’ personal circumstances when making sales, and its processes consequently did not ensure that its recommendations were suitable;
It did not provide customers with information that set out their needs, nor explain why Ringways was recommending the policy;
Its systems for monitoring staff were ineffective, in failing to identify potentially unsuitable sales; Information provided to Ringways’ management was not sufficient to enable them to identify problems with PPI sales;
Record-keeping was insufficient;
Problems in its sales processes were identified by the FSA, and not by Ringways’ own systems and procedures.
The FSA said there were several mitigating factors taken into account.
Ringways suspended PPI sales, voluntarily changed its FSA permissions and has implemented a remedial action plan.
Its senior management team cooperated fully and willingly with the FSA’s investigation.
DATED: 22.08.08
FEED: AM
GK Group Limited, George White Motors Limited, Ringways Garages (Leeds) Limited, Ringways Garages (Doncaster) Limited and Park’s of Hamilton (Holdings) Limited sold PPI alongside loans for a car or motorbike.
Following investigations at each business, the FSA discovered a number of major issues:
Failing to gather enough information about each customer (including pre-existing medical conditions, existing insurance cover and benefits received from employers), creating the unacceptable risk of unsuitable sales of PPI;
Not monitoring the quality of the advice given by sales staff and to ensure that appropriate sales processes were followed;
And one dealer did not adequately assess whether customers were eligible to claim for benefits from the PPI policies they sold, and another did not assess complaints properly.
Margaret Cole, FSA Director of Enforcement, said: "Motor retailers that sell PPI have to meet the same standards as the rest of the financial services industry.
"All firms selling PPI must treat their customers fairly, including taking proper steps to make sure sales are suitable and customers are eligible to claim on the policy - PPI remains a top priority for the FSA in 2008 and beyond.
"Where we discover PPI failings, we will not hesitate to take tough action and impose higher penalties."
The FSA is committed to helping motor retailers better understand its rules, and is is holding a free roadshow for car and motorcycle traders on Thursday October 2, at the Craiglands Hotel, Ilkley, West Yorkshire.
The event, bookable through the FSA website, will look at the issues of FSA compliance that motor retailers want to know more about.
The Rulings:
Parks of Hamilton
Fined £61,600 for failures which exposed 714 customers to unacceptable risk of buying PPI policies that were not suitable.
The Scottish dealer group encouraged sales staff to sell the highest level of PPI cover available to eligible customers, and marked them down on monitoring checklists if they did not do so, no matter whether the policy was most suitable for the customer;
Sales staff were not required to gather and consider sufficient information about customers’ personal circumstances and needs, such as costs and health conditions, when making recommendations;
Parks of Hamilton did not provide customers with an adequate Statement of Demands and Needs (SODAN) to explain why it had recommended a particular PPI policy;
It failed to give customers a statement of price;
It had ineffective systems to monitor staff, using a purely quantitative check rather than checking the quality of the advice;
When its own monitoring had detected compliance failures, the dealer hadn’t taken adequate remedial action;
Parks of Hamilton did not assess customer complaints in a fair manner, and made unjustified and incorrect claims to complainants who suggested taking the matter to the Financial Ombudsman Service.
The FSA said Parks of Hamilton’s failings are view as particularly serious because the breaches occurred over an extended period, during which it had made changes to monitoring which encouraged staff to sell the most comprehensive cover, despite public reports and guidance by the FSA on the subject of PPI.
GK Group
Fined £51,100 for failures which exposed 734 customers to unacceptable risk of buying PPI policies that were not suitable.
The Chesterfield-based group failed to gather sufficient information about a customer’s circumstances;
Sales staff recommended the most comprehensive level of cover for which the customer was eligible rather than considering the most suitable level of cover for their needs;
GK produced a generic SODAN document which was not individually tailored to the customer, and did not record sufficient relevant information such as pre-existing medical conditions;
It had an inadequate structure and ineffective procedures for monitoring sales and had failed to routinely monitor sales;
It failed to produce sufficient management information to ensure that senior management was aware of risks associated with its regulated business activities;
The FSA said there were several mitigating factors taken into account.
GK proactively suspended sales of PPI and implemented a remediation programme to ensure all customers who have been disadvantaged will receive appropriate redress, without prompting by the FSA.
It had also engaged an external consultant prior to the FSA beginning enforcement action, to review its PPI sales process, and has since revised the process and the SODAN and overhauled staff training.
George White Motors
Fined £28,000 for failures which exposed 282 customers to unacceptable risk of buying PPI policies that were not suitable.
The Swindon-based dealer's SODAN was inadequate and did not demonstrate that eligibility or suitability of regular and single premium PPI policies had been fully assessed of considered;
It failed to ensure that SODANs were always appropriately completed or that recommendations made to customers matched their needs;
In some instances, customers were recommended a regular premium policy but were sold a single premium policy;
The dealer sold PPI without effective monitoring of its sales force, as the controls in place were not sufficiently robust to ensure staff sold PPI fairly;
George White Motors’ monitoring procedures did not identify that customers were at an unacceptable risk of being sold PPI policies that they were ineligible for.
The FSA said there were several mitigating factors taken into account.
After a visit from the FSA, George White Motors amended the wording of its SODAN, held one-to-one conversations with all staff about PPI sales procedures, and appointed an independent training company to supervise all managers responsible for supervising sales staff, and to review 10% of written PPI business each month.
Where the dealer had sold single premium PPI after having recommended regular premium PPI, without advising them of the difference between the policies, it reduced its commission to ensure there was no additional cost to the customer.
Ringways Garages (Leeds) and Ringways Garages (Doncaster)
Fined £35,000 for failures which exposed 445 customers to unacceptable risk of buying PPI policies that were not suitable.
The Yorkshire dealer group's sales staff were not required to gather and consider sufficient information about customers’ personal circumstances when making sales, and its processes consequently did not ensure that its recommendations were suitable;
It did not provide customers with information that set out their needs, nor explain why Ringways was recommending the policy;
Its systems for monitoring staff were ineffective, in failing to identify potentially unsuitable sales; Information provided to Ringways’ management was not sufficient to enable them to identify problems with PPI sales;
Record-keeping was insufficient;
Problems in its sales processes were identified by the FSA, and not by Ringways’ own systems and procedures.
The FSA said there were several mitigating factors taken into account.
Ringways suspended PPI sales, voluntarily changed its FSA permissions and has implemented a remedial action plan.
Its senior management team cooperated fully and willingly with the FSA’s investigation.
DATED: 22.08.08
FEED: AM
