FSA and OFT publish PPI guidance

Robyn Hall

January 24, 2013

Recently firms have ceased offering PPI and started to develop and sell other forms of protection such as short-term income protection insurance or debt freeze and debt waivers linked to a credit agreement or mortgage.

In a statement released by the FSA it said: “New payment protection products may offer benefits to customers but, if not designed and sold with consumers’ interests in mind, may pose risks similar to PPI. The previous failings in relation to PPI must not be repeated.”

The joint guidance reflects the fact that different credit products and linked payment protection products are subject to different regulatory regimes; the Financial Services and Markets Act (for which the FSA has responsibility) and the Consumer Credit Act (for which the OFT has responsibility).

The two organisations 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 expected transfer of the regulation of consumer credit from the OFT to the Financial Conduct Authority in 2014 will give the FCA powers to create new rules including to extend the current Competition Commission point of sale ban to other products, if it felt it was necessary.

The FSA’s guidance for payment protection products within its jurisdiction stresses that firms should ensure that product features reflect the needs of the consumers they are targeting.

The document sets out the importance of identifying the target market for protection products, ensuring that the cover offered meets the needs of that target market and avoiding the creation of barriers to comparing, exiting or switching cover.

The OFT section of the guidance stresses that firms should be aware of the relevant statutory provisions and how these may apply in relation to credit agreements with debt freeze or waiver features.

It places particular importance on the need for adequate transparency to consumers regarding the nature, price and implications of such products.

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