UK watchdog fines HSBC unit over insurance

LONDON, Jan 16 (BDPREM DESK) - The UK's financial watchdog has fined HFC Bank, part of banking giant HSBC Holdings, 1.085 million pounds, its largest penalty to date, linked to the sale of payment protection insurance PPI.L. PPI covers the repayment of loans when borrowers fall ill, are injured or become unemployed, and has been the object of regulatory scrutiny for months, as watchdogs are concerned that Britons are being sold unsuitable cover at excessively high prices. Your Ad Here The FSA, which has fined at least five other firms over poor PPI selling practices, said that from January 2005 to May 2007, HFC did not require its advisers to gather enough information about customers and consider whether PPI was suitable. "These and other failings meant that HFC put its customers at an unacceptable risk of being sold PPI when it was not suitable for them," the FSA said in a statement on Wednesday. HFC, which has 136 branches in Britain, was also found not to have effective systems to train or monitor its staff or to identify potentially unsuitable sales. Its records were also insufficient to demonstrate sales were suitable. HFC was originally the UK arm of U.S. lender Household International, bought by HSBC in 2003. It provides both secured and unsecured loans, selling PPI alongside. Between January 2005 and May 2007, the period under scrutiny by the FSA, HFC sold PPI with 75 percent of the loans it provided, a total of 163,000 PPI policies. The FSA said HFC had agreed to implement changes and agreed to settle the fine early, qualifying for a 30 percent discount. HFC is part of HSBC Holdings but is still run out of the United States and is not part of HSBC's UK bank.