FSA & OFT reveal guidelines on payment protection products
Wednesday, 02 November 2011 02:00
The Financial Services Authority (FSA) and the Office of Fair Trading (OFT) have published guidance in a bid to prevent another mis-selling scandal following the recent furore over payment protection insurance (PPI).
Companies have been informed that any PPI products must accurately reflect customers' needs, produce a benefit that matches expectations and have a transparent pricing structure.
Margaret Cole, FSA managing director, commented: "This is the first time that the FSA has issued guidance on the design of a specific product. Firms must learn the lessons of the past and make sure they have consumers' needs at the heart of new product development.
"That is why we are acting early to ensure firms understand the risks they should bear in mind when designing these products and how they can manage these risks when developing or distributing the product," he added.
The move comes amid growing concerns that financial products are being developed which have similar traits to PPI.
Banks have been instructed to repay billions of pounds in compensation after mis-selling these products, which cover loan repayments if borrowers fall ill or lose their job, to millions of people who did not need it.
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