A package of measures to protect consumers who have been sold payment protection insurance (PPI), or who are looking to take it out, has been introduced by the Financial Services Authority (FSA).
PPI covers repayments on credit products if the borrower is unable to pay off loans due to accident, sickness, unemployment or death, but accusations that lenders have mis-sold the product have long dogged the industry.
The regulator has now revealed its hand and told firms selling PPI that they must change their ways by 1 December 2010.
The FSA hopes the package will ensure customers are treated more fairly when complaining about PPI and will be better protected when buying the product.
Included within the package is new guidance for PPI providers to ensure complaints are handled properly and redressed fairly, and an open letter setting out common sales failings to help firms identify bad practice.
An explanation of when and why firms should analyse their past complaints to identify if there are serious flaws in sales practices that may have affected both complainants and non-complainants is also included.
"Today is the culmination of months of hard work and now, with these measures, we look forward to consumers being treated fairly whether they are buying or complaining about PPI," said Dan Waters, the FSA's director of conduct risk.
"Since we took over the regulation of PPI we've carried out 24 investigations and three thematic reviews, issued warnings, halted the selling of single premium PPI with unsecured personal loans, visited over 200 firms, and handed out some very significant fines. Now, with this package of measures we're confident we can mend a market that has been broken for too long.
"This remedy is fair to consumers and the industry alike. The onus is now on the industry to ensure it treats all customers fairly. We will be monitoring the implementation of our guidance closely to ensure real change is delivered."
Responding to the announcement, the Financial Services Consumer Panel urged firms to start handling complaints fairly as soon as possible ahead of the FSA's deadline.
"Consumers deserve to get an early Christmas present from firms and not have to wait until the new 1 December deadline," said Kay Blair, vice chairman of the Financial Services Consumer Panel. "The financial services industry has been dragging its feet over resolving PPI mis-selling and letting down customers by not handling their complaints fairly."
Ms Blair added that consumers who have already had PPI complaints rejected should consider taking them to the Financial Ombudsman Service, where 81% of complaints are currently being upheld.
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