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Egg Payment Protection

In 2008 Egg, the country’s first purely online lender, was fined £721,000 by The Financial Services Authority (FSA) for failings regarding the sale of payment protection insurance. Payment protection, often referred to simply as PPI, is a form of insurance cover sold with credit cards and other financial products. PPI insures the borrower against involuntary employment by stepping in to cover debt repayments. Many issues have been highlighted with this kind of cover; however, including the issue of mis-sale.

The Egg payment protection fine was levied after an FSA investigation found the lender had used ‘inappropriate sales techniques’ to try and sell the cover. This included trying to persuade customers to take out the cover after they had refused it and related to telephone sales of the product between January 2005 and December 2007. The lender was found to have coached staff to over-emphasise positive features associated with the product and to have used what it termed ‘objection handling’ to try and push through sales. Instances were also found were sales staff had failed to get clear confirmation from customers that they were happy to hear only limited information regarding the cover and even some cases were Egg payment protection had been added after the customer had refused the cover.

The problems highlighted were by no means limited to sales made by Egg and the investigation was part of a wider investigation undertaken by The FSA. The FSA was alerted to issues within the PPI industry as a whole as a result of a ‘super complaint’ submitted by The Citizens Advice bureau (CAB) in 2005. The CAB’s complaint entitled ‘Protection Racket’ was heavily critical regarding payment protection cover and the way it was being sold by many lenders. As a result of The FSA’s investigations several major lenders, including Capital One and Alliance and Leicester also received fines.

As a result of the issues raised by the FSA, Egg took the decision to no longer sell payment protection cover via telephone sales while there has been a marked improved in sales techniques used by lenders across the financial industry.

Since the FSA’s initial investigation in 2006 there has been a huge rise in the number of unhappy customers making PPI complaints. Many critics have accused lenders of mis-selling the product for years and claimed more should have been done sooner to regulate sales.

It is difficult to pinpoint exactly why the mis-sale of PPI was allowed to reach such epidemic proportions, but it is likely to be the result of a combination of factors. During their investigations the FSA discovered many lenders had failed to appropriately train staff. As a result, many mis-sales occurred purely because staff did not fully understand the product, it terms and exemptions. It was also highlighted by the FSA that many lenders had failed to put in place appropriate processes to protect customers from mis-sale.

If you suspect you may have been mis-sold an Egg payment protection policy or a PPI policy by another lender you have the right to make a complaint. Thousands of customers have already successful made a PPI reclaim. To find out more call 0207 471 2000.

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