PPI, FSA raps broker’s knuckles
City watchdog, the Financial Services Authority (FSA), has fined Hadenglen Home Finance Plc (Hadenglen) £133,000, and its chief executive £49,000, for inadequate systems and controls when recommending re-mortgages and Payment Protection Insurance (PPI) to customers. This is the first time the FSA has fined both a firm and its chief executive for re-mortgage and PPI failings.
The failings were discovered as a result of the FSA’s second phase of PPI work in May 2006. The regulator found that Ashby de la Zouch-based Hadenglen exposed approximately 2,000 re-mortgage and 1,900 PPI customers to the unacceptably high risk of being sold a product which wasn’t suitable.
Hadenglen’s Chief Executive Richard Hayes was responsible for the firm’s business practices and for ensuring that its systems and controls for selling re-mortgages and PPI were appropriate. He implemented a sales strategy for re-mortgages ‘without regard to the risk that customers would have to pay an early redemption charge and other fees when re-mortgaging that may have been unsuitable’.
Hayes also failed to ensure that the sales practices for PPI were adequate. Hadenglen didn’t gather sufficient information from customers and didn’t take into account the cost of PPI when making a recommendation. As a result re-mortgage customers incurred significant charges that may not have been in their best interests and PPI customers were advised to purchase a product that may not have been suitable for their needs or under which they were not able to claim.
The FSA says it also found serious weaknesses in Hadenglen’s compliance monitoring, training and competence regime, use of management information and senior management oversight of the business.
According to the watchdog Hayes has implemented a comprehensive review of systems and controls and retained external consultants to advise on this process. Hadenglen has implemented a remedial action plan for consumers which involves a customer contact exercise and redress where appropriate.
Without the above action the FSA says the fines would have been significantly higher. In addition, Hayes and Hadenglen agreed to settle at an early stage of the FSA’s investigation and therefore qualified for a 30% discount under the executive settlement procedures. Without the discount the fines would have been £70,000 for Hayes and £190,000 for Hadenglen.