The FSA has set the payment protection insurance (PPI) industry a 17 March deadline to address critical issues or face regulatory intervention.
Details of the deadline have been circulated to members of the Council of Mortgage Lenders (CML) executive committee in a restricted memorandum.
The document says the FSA met with the relevant trade bodies on 19 December 2005 and then in a subsequent letter sets out key messages for the industry to take on board, including its wish to see improvements to what it deems market failure issues related to conduct of business compliance, transparency and product choice.
The FSA said that trade bodies have until the deadline to introduce concrete self-correcting voluntary measures to address these issues or the it will impose its own corrective actions.
These could include measures to separate the sale of insurance from core products; or at least better clarify sales processes.
Simon Burgess managing director of britishinsurance.com said: “This comes as no surprise and having warned the market and seen little in the way of improvement, the regulator is at last baring its teeth. Hopefully the PPI market can avoid being nannied further by the regulator and sort itself out.
“However, there have been countless examples in the past where financial markets have not been mature enough to deal with their problems and have found themselves facing outside intervention and regulation.”
In the memorandum the CML also expressed its concern that the PPI market would be unable to recommend or implement changes that would go far enough to placate the FSA and avoid its intervention come the March deadline.
