Financial Services Authority says financial firms must stick to official guidance issued by regulators
Financial firms developing a new breed of payment protection insurance-style products have been warned there is a danger these could be mis-sold if companies do not stick closely to the new official guidance issued by regulators.
Payment protection insurance (PPI) led to the costliest mis-selling scandal ever, with the banking industry’s total bill now standing at more than £12bn – a sum that looks likely to rise further.
The Financial Services Authority and the Office of Fair Trading said yesterday that they were “aware” some firms had developed, or were seeking to develop, new forms of protection that aimed to meet similar consumer needs to PPI.
“New payment protection products may offer benefits to customers but, if not designed and sold with consumers’ interests in mind, may pose risks similar to PPI. The previous failings in relation to PPI must not be repeated,” warned the two bodies, which have jointly published guidance to help prevent the problems of recent years recurring in a new generation of products.
The guidance tells firms that when they are defining the target market for their products and policies, they “should not equate eligibility for the product’s protection with the consumer having a need for that protection”. Firms need to be particularly careful when they bundle together different types of protection or link it to other products or services.
The FSA and OFT said they would “continue to monitor developments in the market,” and would take action if there was evidence that consumers were being put at risk.