The Alliance & Leicester have been fined a record £7million by the Financial Services Authority (FSA) for mis-selling payment protection insurance (PPI) with their loans and mortgages. In addition, they are required to contact the clients sold the policies and offer financial compensation.

The fine related to sales of PPI over a 3 year period from January 2005. The Alliance & Leicester had failed to ensure that customers were clear that the insurance was optional and that it would cost an average of £1265. Sales of PPI insurance is big business. During the three year period, the Alliance & Leicester sold over 210,000 PPI policies worth a whopping £265 million! Particular criticism was made of the Alliance & Leicester's sales technique whereby customers were put under pressure to purchase the insurance in telephone conversations but with the follow up paperwork explaining that it was optional hidden in the small print. The FSA said that is was totally unacceptable for a company to operate in this way and to rely on paperwork which most customers would not be able to understand.

The FSA fine comes at a time where there is increasing pressure on the regulatory body to investigate financial mis-selling. In the current economic downturn, many people are looking to their PPI policies to assist them with mortgage or loan repayments only to find they are insufficient or that they are caught by the small print. A new wave of claims are now in the offing with solicitors marketing for clients who have suffered a financial loss in this way and who wish to pursue a claim against their bank or broker on a no-win no-fee basis backed by a new type of After the Event Insurance.