Liverpool Victoria fined £840,000 over loan insurance sales

The City regulator has fined Liverpool Victoria Banking Services £840,000 for pushing single premium payment protection insurance on customers. 

Liverpool Victoria Banking Services’ telephone sales process was flawed and added the cost of PPI to customers’ quotation for a personal loan, according to the financial watchdog.

Many customers were unaware the cover was optional and those who objected to the extra charge were pressured to take it on the policies. The FSA found 60% of the 97 sales calls it reviewed at LVBS broke its rules.

‘The LVBS sales process was flawed in its design,’ said Margaret Cole (pictured), FSA director of enforcement. ‘When customers phone for a quote, it is totally unacceptable for firms to add on the cost of insurance which the customer has not asked for.’ 

The arm of insurer LV= made £23 million from the 14,500 PPI policies it sold between January 2005 and August 2007. These policies cost customers an estimated average of £1,600.

The FSA said the information customers were provided was unclear, unfair and misleading. Monitoring of staff was insufficient and checks were inadequate, the regulator said.

LVBS staff could earn bonuses of up to two thirds of their basic salaries by pushing PPI policies. The sales bonuses offered on PPI policies were four times the size of those offered for personal loans, the firm's main business.

LVBS trained its staff to overcome customers objections to the additional PPI policies with lines like ‘Peace of mind for little cost’. Only customers who turned down the more expensive PPI plan were offered cheaper basic cover.

The FSA gave LVBS a 30% reduction in its fine for settling early and promising to contact customers and pay compensation. Without this reduction the fine of £1.2 million would have been the largest ever PPI penalty, followed by in January 2008.

‘LVBS apologises to customers for any past shortcomings in the PPI sales process,’ said a spokeswoman for LVBS. ‘It has proactively launched an appropriate customer redress programme and will be writing to all customers affected.’ 

The Competition Commission warned last month consumers were getting from PPI policies. The commission proposed banning firms from selling PPI to consumers at the point of sale for other products.