FSA imposes a public censure on Eastern Western Motor Group
Margaret Cole
The sale of PPI is a priority for us due to the high potential risk for consumers in the way this product is sold. 
FSA/PN/137/2006
20 December 2006
The Financial Services Authority has today imposed a public censure on Eastern Western Motor Group Limited (EMWG) for failures relating to its sale of Payment Protection Insurance (PPI) in connection with vehicle finance agreements.
EMWG failed to organise and control its regulated business effectively. In particular, it did not keep an adequate record of the PPI sale on customers' files or provide customers with a statement of the total price for the PPI policy. In addition it did not sufficiently apportion compliance responsibilities among its senior management and did not ensure adequate training and monitoring of its sales staff.
EWMG is a franchised car dealer with a significant presence in Scotland and Newcastle-upon-Tyne. Its primary business is the sale of new and used cars with PPI being sold to cover vehicle finance agreements.
FSA Director for Enforcement Margaret Cole said:
'The sale of PPI is a priority for us due to the high potential risk for consumers in the way this product is sold. EWMG's failings, particularly those regarding the statement of price, created a risk of consumer detriment. A clear statement of price is essential in order for a customer to be able to determine whether the PPI policy is the right product for them. EWMG could not determine whether sales staff were operating in a way which paid due regard to the information needs of customers, as there was little or no monitoring of sales staff. We have taken a number of enforcement actions relating to PPI recently and there will be more to follow.'
In determining the penalty level the FSA took into account a number of mitigating factors. The number of PPI policies sold by EWMG was low and the firm had sought independent compliance advice prior to FSA supervision interest, indicating an intention to comply with FSA requirements. EWMG cooperated fully with the FSA and in the relevant period, only one complaint was received in relation to PPI cover. But for the limited number of PPI policies actually sold, a financial penalty would have been proposed.
The FSA has previously fined two firms over deficient PPI selling practices Regency (PN 88/2006) and Loans.co.uk (PN 105/2006) Two other cases have recently concluded where problems relating to PPI also featured Capital Mortgage Connections (PN 119/2006) and Home and County Mortgages (PN 132/2006). Other PPI enforcement cases are pending.
Notes for editors
- The full text of the Final Notice, dated 20 December 2006, is available on the FSA website. This includes the background to the case, the relevant statutory provisions and the regulatory requirements contravened and the factors taken into account when settling the level of the fine.
- EWMG was in breach of FSA Principles for Businesses 2, 3 and 7 and also specific provisions in parts of the FSA Handbook, Senior Management Arrangements, Systems and Controls (SYSC) and Insurance Conduct of Business (ICOB).
- EWMG has been authorised by the FSA since 14 January 2005, with permission to advising on and arranging non-investment insurance contracts.
- Customers who arranged vehicle finance agreements through EWMG were offered PPI policies offering cover for life, critical illness and accident and unemployment. EWMG sells regular premium policies, the latter having terms of between two and four years.
- An FSA report on PPI published in October identified areas of continuing concern about PPI sales standards. Findings showed that firms were still not giving customers clear information during the sales conversation and customers were still not being made fully aware that there may be parts of the policy under which they cannot claim.The FSA's Payment Protection Insurance work published in October can be found in Press Notice 104/2006.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.
Principle 2: A firm must conduct its business with due skill, care and diligence.
Principle 3: A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
Principle 7: A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.