Personal loan payment protection insurance News
 

The Financial Services Authority handed down fines of £22million in 2008 as it clamped down on cases of mortgage fraud and loan insurance bad selling practices.

The Financial Services Authority (FSA) issued a record 48 fines for breaches that also included pressure selling, pension transfers and market abuse.

The largest fine was a £7million penalty against Alliance and Leicester for mis-selling payment protection insurance.

The total value of fines was four times greater that the £5.3m ($7.7m) handed down by the FSA in 2007, and the highest since 2004.

It marks a shift to a much stricter approach by the Financial Services Authority against those breaking their rules as the economic downturn continues unabated.

The huge fine handed down to Alliance and Leicester in October led to Payment Protection Insurance mis-selling being the category with the biggest total fine pot in 2008 of £10million.

Loan Payment Protection Insurance is typically sold alongside a personal loan and provides cover if the debt repayments cannot be met because of death or redundancy.

But from January 2005 to the end of 2007 Alliance & Leicester trained its staff to put pressure on customers who queried the inclusion of loan payment insurance in their loan quotes.

The bank, which is being taken over by Banco Santander, apologised and promised to pay people back.

Is there a moral to this story? Well if nothing else it adds fuel to the debate about shopping around for loan payment insurance, and not accepting the lenders own version of this personal loan insurance which might be unsuitable, expensive and regretted later.