The city watchdog has warned financial firms “to get their house in order” over claims of mis-selling payment protection insurance (PPI) on loans.
The Financial Services Authority (FSA) is taking action over controversial ‘single premium' PPI, where the entire policy cost is paid upfront and often added to the debt that is being taken out.
Firms representing more than 40% of sales in the single premium market have agreed to review sales stretching back to July 2007.
The regulator is issuing new guidance to ensure PPI complaints are handled properly and 185,000 previously rejected claims across the wider PPI market will be reassessed.
The FSA's managing director of retail markets, Jon Pain, said: “The industry must show it can act fairly, consistently and in the best interest of consumers on PPI. All firms operating in this sector should take note and where necessary get their house in order.
“Where we find problems in PPI sales or complaint handling, firms can expect tough action, including requiring them to undertake reviews and, where appropriate, pay redress.”
Some consumers claimed premiums were added to their loan without them even knowing about it and the FSA banned sales earlier this year after a damning Competition Commission report.
But firms have rejected around 60% of the complaints they have received — and some have rejected nearly all.
The regulator has taken action against 22 firms for poor PPI sales practices — including a £7 million fine for Alliance & Leicester last year.