A&L: FSA findings regarding sale of PPI

Alliance & Leicester confirms that it has agreed a settlement with the Financial Services Authority in relation to advice given over the telephone prior to the sale of Payment Protection Insurance with unsecured Personal Loans between 14 January 2005 and 31 December 2007.

Under the agreement Alliance & Leicester will pay a financial penalty of £7 million.

As part of their investigation the FSA reviewed processes and a sample of phone calls and concluded that there was a risk that customers may have taken out an unsuitable insurance policy. Alliance & Leicester co-operated fully with the FSA's investigation and has improved its systems and processes for telephone contact, and also made changes to its training and monitoring from December 2007.

Alliance & Leicester will be writing to all the customers concerned and will put right any disadvantage identified.

David Bennett Group Chief Executive of Alliance & Leicester comments: "I apologise sincerely for our shortcomings. We will be writing to every customer concerned and will be working with independent accountants and the FSA to ensure that we put right any disadvantage identified.

"Customers can be assured that we are taking this matter very seriously and that we have reviewed and tightened up our processes from December 2007 to ensure that all customers get the right information and advice."

During the period concerned, less than half (41%) of personal loan customers took out Payment Protection Insurance with their loan. Following the telephone call during which the recommendation was made, customers were sent written details of the loan and insurance together with the costs, both with and without PPI cover. Once the customer had made their choice and sent back the signed documents the sale went through. All customers had a 30 day cancellation period in which to change their minds about the insurance cover. Over 80% of claims made during the period were paid.

In an exercise earlier this year, Alliance & Leicester commissioned an independent review by a firm of external accountants to find out more about customers' understanding of their PPI policy and any concerns they may have. From the work carried out, which involved contacting 4,000 customers, the review did not identify ‘any material or systemic issues in respect of the existing book of PPI linked to unsecured personal loans'. Alliance & Leicester will now be contacting all the customers affected by today's announcement, to put right any disadvantage.

What should customers do?

Customers need take no action. We will be writing to all customers who took out Payment Protection Insurance to cover their Personal Loan following a phone call between 14 January 2005 and 31 December 2007. The letter will set out the issues and they will then have the opportunity to raise any concerns. These will be reviewed and where any disadvantage is identified this will be put right. We will be working with a firm of external accountants who will provide independent oversight for the whole process.

How can customers find out more?

Further details can be found on alliance-leicester.co.uk (under Personal Loans).