Mutual fined £840,000 for mis-selling credit cover

City watchdogs slapped a £840,000 fine on Liverpool Victoria for misselling insurance today in a stark warning to other firms.

The Financial Services Authority imposed the huge penalty on the friendly society for pushing payment protection insurance on customers seeking personal loans between January 2005 and August 2007.

Liverpool Vic, a mutual that claims an ethical stance, is the eighth firm to be fined for poor PPI practices in the last two years.

PPI is sold with credit to cover repayments if the policyholder falls ill or loses their job, but customers calling Liverpool Vic for loans were not told the cover was optional and many were not made aware it meant additional interest on the premium for the life of the loan.

The fine, the FSA's second-largest for this type of mis-selling, shows an increasingly tough stance by the regulator. Liverpool Vic promised to pay compensation and received a 30% reduction for settling early in the investigation - otherwise it would have been the biggest-ever penalty imposed in relation to the sale of insurance cover.

An FSA spokesman said: "Firms are not following the requirements and are pushing the cover on customers. We are likely to give out even larger fines in the future."