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Egg fined £721,000 and will compensate PPI customers

egg Banking plc logo

The Financial Services Authority (FSA) has fined Egg Banking plc £721,000 for serious failings in its sales of credit card payment protection insurance (PPI).

 

The FSA found failings in approximately 40 per cent of telephone sales of credit card PPI made by Egg between January 2005 and December 2007. Egg sold PPI either when receiving a customer services call, or when making a sales call to a new customer. When Egg customers said they did not want PPI on their credit cards, the firm directed its sales staff to use techniques to persuade the customer to take the insurance – called ‘objection handling’.

 

These techniques included over-emphasising the positive features of the PPI, or telling the customer they could take the PPI for a free period and cancel it later if they did not want it. In some cases, even when the customer did not consent, PPI was applied to their credit card anyway.

 

In addition, in a significant number of cases Egg failed to obtain clear consent from customers to receive only limited information about the PPI during the telephone sale.

 

Egg will write to customers asking them to call a dedicated number if they have any concerns about the policy or the way it was sold to them and compensate them where appropriate – by way of illustration, Egg is expected to pay £1.67 million for every 10% of customers who receive a refund.

 

FSA Director of Enforcement Margaret Cole says, “Egg used inappropriate sales techniques to try to persuade customers to buy payment protection insurance on their credit card even when they asserted they did not want the cover. All firms must ensure that customers are treated fairly when selling PPI and if a customer does not want PPI, they should not be pressured into taking it. We will continue to fine firms where we find PPI failings. It is unacceptable that Egg did not identify the problems with its sales processes despite a series of high profile FSA communications on PPI, including earlier fines on other firms. Egg stopped telephone sales of credit card PPI in December 2007, and has agreed to write to customers and pay a full refund plus interest where appropriate. Egg is likely to pay substantial compensation as a result of this exercise.”

 

Egg sold over 106,000 credit card PPI policies at an average cost of £156. Egg sold PPI on a 'non-advised' basis, which means that the firm should provide information about the PPI on offer, but should not recommend the policy as suitable for particular customers.

     

Income protection insurance: News update: December 2008

 

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