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The internet bank Egg has been fined £721,000 for serious failings in the way it sold payment protection insurance (PPI) to its credit card customers, the City watchdog has announced.
The Financial Services Authority (FSA) said it had found failings in around 40% of telephone sales of PPI made alongside credit cards between January 2005 and December 2007. During that period Egg sold more than 106,000 PPI policies at an average cost of £156.
Although the bank was authorised to sell PPI on a non-advised basis, which meant it could only provide information on the policy on offer and not recommend that consumers buy it, the FSA found it had instructed sales staff to use hard-sell techniques on those who chose not to buy cover.
These included over-emphasising the benefits of the cover or telling customers they could take it out for free for a limited period and then cancel. In some cases, Egg applied the cover to a customer's credit card even when they had not agreed to buy it.
The FSA's director of enforcement, Margaret Cole, said Egg had used "inappropriate sales techniques" to try to persuade customers to buy PPI.
"All firms must ensure that customers are treated fairly when selling PPI and if a customer does not want PPI, they should not be pressured into taking it," she said. "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."
Egg will now write to customers who bought the cover offering them the chance to cancel their policy and get a full refund. A statement from the internet bank said: "We are taking the matter very seriously and would like to apologise to any customers who have been affected.
"We will be contacting all customers impacted by this, giving them the opportunity to review whether the product was or is still suitable for them. A dedicated team of call centre staff will be ready to assist with customer enquiries on this issue."
It added that only 2% of the sales in question had taken place since the bank had come under the ownership of Citigroup - since it was bought in May last year it said it had taken "proactive steps" to make sure it complied with regulations.
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