UK online bank Egg Banking (Egg), a unit of US bank Citi, has
joined a growing number of financial institutions to fall foul of
the Financial Services Authority (FSA) for mis-selling payment
protection insurance (PPI).
Handing down a £721,000 ($1.07 million) fine, the FSA said Egg
had used “inappropriate sales techniques” to try to persuade
customers to buy PPI on their credit card even when they asserted
they did not want cover. In some cases even when a customer did not
consent to buy PPI it was still applied to their credit card.
“It is unacceptable that Egg did not identify the problems with
its sales processes despite a series of high profile FSA
communications on PPI, including earlier fines on other firms,”
said the FSA’s director of enforcement, Margaret Cole.
However, blame for mis-selling cannot be laid entirely on Citi,
which acquired Egg from UK life insurer Prudential in 2007. The
£575 million acquisition announced in January 2007 became effective
on 1 May 2007.
The FSA’s probe into PPI mis-selling by Egg began in September
2007 and covered the period 14 January 2005 to 17 December 2007.
Failings were found in some 40 percent of telephone sales of credit
card PPI during the period.
In a statement Citi it said that in its final notice the FSA
acknowledged that from 1 May 2007 Citi undertook “proactive steps
to improve compliance with its [PPI] obligations.” According to
Citi only about 2 percent of PPI mis-selling occurred subsequent to
1 May 2007.
In addition to the fine Egg agreed to write to customers and pay
a full refund plus interest where it is found that mis-selling had
“Egg is likely to pay substantial compensation as a result of
this exercise,” noted Cole.
According to the FSA Egg is estimated to pay £1.67 million for
every 10 percent of customers who receive a refund.