In February 2007, the Financial Services Authority fined Capital One Bank £175,000 for failing to have adequate systems and controls for selling Payment Protection Insurance (PPI) insurance and for failing to treat its customers fairly.
From January 2005 to April 2006, Capital One failed to ensure that 50,000 customers received important information about the policy including all exclusions although they did receive a policy summary. Affected customers were unable to check what they were covered for or if the policy was right for them.
Capital One’s main business is providing credit cards, loans, and savings account. It also sold PPI on a non-advised basis to its credit card and loan customers over the telephone, internet or during the card application process. The FSA’s investigation focussed purely on credit card PPI sales. During 2005 Capital One sold approximately 335,000 UK credit card PPI policies.
The FSA found that as a result of its inadequate systems and controls:
- Capital One failed to send a policy document to more than 50,000 PPI customers between January 2005 and April 2006, although they did receive a policy summary;
- two out of four script options used by its sales associates did not ask the customer for consent explicitly to receive only limited information over the telephone;
- the scripts did not ensure adequate disclosure in enough cases of policy features and benefits and policy exclusions and limitations;
- Capital One failed to provide customers who purchased PPI other than by telephone with the policy document prior to the conclusion of the contract; and
- its compliance monitoring of telephone sales of PPI was not sufficiently effective.