Egg Banking, the online banking company with a base in Dudley, has been fined more than £700,000 for selling credit card insurance unfairly.
And the bank could be facing a compensation payout of more than £16million to customers misled into taking out payment protection.
The Financial Services Authority gave Egg the fine for “serious failings in its sales of credit card payment protection insurance (PPI)”. It said Egg pressured customers into taking insurance policies they did not want in up to 40 per cent of telephone sales calls.
According to the FSA, Egg used techniques including over-emphasising the benefits of payment protection, or erroneously telling the customer they could sign up for protection for free for a trial period and then cancel.
In some cases, customers were charged for payment protection even when they specifically said they did not want it.
Margaret Cole, the director of enforcement at the FSA, said: “Egg used inappropriate sales techniques to try to persuade customers to buy protection payment insurance on their credit card even when they asserted they did not want the cover. All firms must ensure customers are treated fairly when selling PPI and if a customer does not want PPI, they should not be pressured into taking it. We will continue to fine firms where we find PPI failings. It is unacceptable Egg did not identify the problems with its sales processes despite a series of high profile FSA communications of PPI, including earlier fines on other firms. Egg stopped telephone sales of credit card PPI in December 2007, and has agreed to write to customers and pay a full refund plus interest where appropriate. Egg is likely to pay substantial compensation.”
Egg is set to write to customers asking them to contact a number if they have any problems, and to offer them compensation where appropriate. The FSA said this could mean Egg paying up to £16.7million in compensation.
The fine, which cost Egg £721,000, could have been over £1million if the banking firm had not agreed to settle early, the FSA said.
Egg, owned by global financial services group Citi, said it had taken “proactive steps” to stop the problem.
A spokeswoman said: “Egg has worked constructively with the FSA to settle this matter as quickly as possible. We are taking this matter very seriously and would like to apologise to any customers affected. We will be contacting customers impacted by this, giving them the opportunity to review whether the product was or is suitable for them. Staff will be ready to assist with enquiries.”