FINANCE firms looking to sell payment protection products in future should take care to properly identify their customers and check the product does what the customer thinks it does, the Financial Services Authority (FSA) and Office of Fair Trading (OFT) said yesterday.
The new guidelines are intended to explain to firms how they can avoid misselling PPI in future – banks are expected to pay a total of over £12bn in compensation to customers who were wrongly sold the product in recent years.
Banks must also make sure customers can easily compare the product on offer with other services on the market, the OFT stressed.
Lawyers urged care in designing the products in future.
“Debt freeze or waiver products will attract close scrutiny,” says Bill McCaffrey from CMS Cameron McKenna. “Creditors will have to ensure that cover meets customer needs and be transparent over price – matters that ought to be covered in the creditors’ required pre-contractual explanations to customers. Regarding consumer credit, particular care must be taken in documenting the product, considering whether the APR is impacted and how best to advertise within the scope of regulation.”