Guidance for payment protection insurance

The Financial Services Authority, with the support of the Office of Fair Trading, have developed new guidance for firms selling payment protection insurance and similar protection products to consumers.

The Financial Services Authority (FSA), with the support of the Office of Fair Trading (OFT), have developed new guidance for the appropriate handling of payment protection insurance (PPI) and similar products.

These guidelines are designed to help maintain a focus on protecting the consumer interests – to lower the risk of mis-selling that has plagued previous PPI sales initiatives.

Other forms of financial protection, such as short-term income protection, were highlighted by the FSA as potentially posing a potential risk to customers if not “designed and sold with consumers’ interests in mind”.

In a statement accompanying the new guidance, the FSA said:

“[The FSA and OFT] will continue to monitor developments in the market, and will take appropriate action under their respective powers where there is evidence that firms’ products or practices risk causing detriment to consumers.”

The guidance details the importance of maintaining fair trading, and discusses how firms can manage risk in their sales and marketing strategies. It sets out the importance for firms to:

  • Identify the target market for the protection
  • Ensure that the cover offered meets the needs of that target market
  • Avoid the creation of barriers to comparing, exiting or switching cover.

 

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