The Financial Service Authority and the Office of Fair Trading in the UK have taken a stand against the big banks selling inappropriate payment protection insurance to consumers.

Payment Protection Insurance (PPI)

The FSA and OFT have issued warnings to the banks to help protect consumers who otherwise might be talked into buying an insurance that they do not need.

Damage to Consumers:

The sale of PPI policies to many consumers was inappropriate and damaging to the consumer. Banks were originally suggesting many consumers take the insurance as a protective measure against mortgages, credit cards and other types of loans.

The primary sellers of the policies were the large banks throughout the UK, who told consumers that they needed the policy for various reasons based on the type of debt. The problem is that the policy did not fit the needs and wants of consumers who were purchasing the insurance.

For many men and women, the insurance did not protect against the problems they might face from the loans and were not appropriate to meet their needs. Consumers paid each month for the insurance policy, but when something happened they would find that the insurance either did not cover for their debts or did not pay enough to handle the problem if a legitimate claim was approved by the insurance.

The false and inappropriate sale of the insurance was financially damaging for many consumers who would find that they were either not given any money under the insurance or were given too little.

FSA and OFT Taking a Stand:

The FSA and OFT have taken a stand against the unfair practices of the banks who sold inappropriate insurance to many consumers. They took the banks and other sellers of PPI policies to the High Court due to the mis-selling of the insurance policy.

During the court case, they pointed out how the policy was damaging consumer finances and was falsely sold to many customers who were not even eligible or in need of PPI policies. The High Court sided with the organisations and ordered the banks to set aside six billion pounds to pay compensation for wronged consumers.

Financial Authority Crackdown:

The result of the scandal from PPI policies is a crackdown on inappropriate financial services throughout the UK. The FSA has determined that instead of allowing groups and banks within financial services an opportunity to create problems for consumers that eventually explodes into a scandal, they will take measures to prevent the formation of problems in the first place.

The development of the new Financial Conduct Authority, or FCA, is the answer to the problems. The FCA has been given the authority to stop unfair and inappropriate policies from getting into the market beforehand so that consumers will have some protection against unfair and inappropriate practices in the future.

The authorities are planning to regulate new payment protection insurance and financial services to prevent banks from selling to customers who do not need the policy, selling policies that do not meet consumer needs, giving too little money for legitimate claims or writing agreements that are too complicated for consumers to understand. By cracking down on the way the insurances and companies sell the products, they will help protect consumers better.

New Guidelines:

The FSA and OFT have began drafting the new guidelines financial services are required to follow before the policies are approved for public use.

The guidelines will require that all banks identify the target market before selling a single policy to prevent selling to customers who will not receive coverage for their needs.

Furthermore, they must make sure the insurance policies have enough money to protect against the real problems consumers might face. The insurance should ensure consumers are really protected in full rather than only given partial protection.

The final issue that the FSA and OFT have determined requires a guideline is the complicated paperwork. The new guidelines will help regulate fair practices by allowing consumers an opportunity to compare policies and ensure that if consumers want to switch to a new provider they will not face complications on the way.

The FSA and OFT will work together to ensure all areas of UK financial services meet these guidelines. The FSA plans to check the financial insurances while the OFT is in charge of looking after the non-insurance services. This will provide protection in all areas of the financial industry.


The scandal that occurred as a result of unfair practices and services has created an opportunity for change. As PPI policies have pointed out a fatal flaw in consumer protection, the authorities have started taking action to fix the situation. Taking advantage of consumers will soon become a problem of the past as the organisations take action to prevent financial services from taking advantage of trusting consumers

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Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim

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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.