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This Week’s Dilenma

I have small mortgage brokerage and have also traditionally sold payment protection insurance. As far as I am aware I am trading compliantly but I keep seeing news items about firms getting large fines for selling PPI in a non-compliant way. Should I give up selling PPI? I can’t afford to lose the income and advising on mortgages is the most sensible time to sell PPI but I can’t risk a huge fine that will put me out of business.

You don’t have to give up the insurance advice and sales part off your business and forfeit the income – just make sure the correct sales process is followed.

This includes giving customers the correct disclosure documentation. There must also be a careful assessment of customers’ circumstances to ensure they need payment protection insurance. Do they have other insurances in place that cover loss of income? Do their employment terms include long periods of sick pay? If there are two people involved, what are the partner’s circumstances? How much can they afford to pay?

The next stage is to identify the appropriate product. For example, the policy must be one against which the customer can actually make claims.

A product should only be recommended after a fair analysis of the market. The third element of the compliant sales process is careful record-keeping.

But compliance is not just about the advice and sales process. All Financial Services Authority enforcement final notices emphasise that the enforcement has been necessary because of persistent breaching of the FSA’s principles for business, notably treating customers fairly.

These also cover subjects such as conducting business with due care, skill and diligence, communicating with customers in a way that is clear fair and not misleading and having adequate systems and controls and adequate training and competence procedures in place.

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