Fraud and Regulatory Law

The City watchdog has fined five motor dealers a collective total of more than £175,000 for serious breaches over the way they sold controversial payment protection insurance (PPI).

The Financial Services Authority (FSA) said the failings by the dealers had exposed 2,175 customers to the risk of being sold unsuitable policies.

The FSA said the firms failed to gather enough information about customers, such as pre-existing medical conditions, current insurance cover and benefits they would receive from their employer. This meant that people could have been sold PPI that was unsuitable for them, either because they would not have been able to claim on their policy or because it duplicated cover they already had.

PPI covers debt repayments if the holder is unable to work or loses their job and has come in for heavy criticism from consumer groups, who claim the cover is expensive and often sold to people who would never be able to claim on it.

Sarah Wallace, Fraud and Regulatory expert at Irwin Mitchell said, "Firms who are typically involved in selling PPI are motor retailers, insurance brokers, mortgage firms and retailers arranging loans. The FSA has published a new factsheet that covers the key points for firms to think about when selling that type of product. The FSA action against the five firms indicates the resolve the FSA Enforcement Division have against motor retailers and the desire to impose high financial penalties as a sanction."