The Financial Services Authority fined a high street retailer for the first time yesterday as it stepped up its crackdown over controversial sales tactics involving payment protection insurance (PPI).

Land of Leather, the struggling sofa chain, and Paul Briant, its former chief executive, were found guilty of failing to train staff adequately to sell PPI or monitor what they were doing. The firm was fined £210,000. Mr Briant, who left the business that he founded last month, will pay a £14,000 penalty.

A spokesman for the retailer insisted that the investigation had not been the reason for his departure.

Over the past year the FSA has fined six firms over poor PPI selling practices, HFC Bank receiving the largest penalty of £1 million. GE Capital Bank, which runs store cards for some of the high street’s biggest names, was fined £610,000 in January.

PPI policies are designed to provide a safety net for customers, by covering repayments on loans, credit cards and mortgages for a fixed period.

However, consumer watchdogs say that most customers are misled about the cover and that the policies simply generate a windfall for finance companies underwriting them.

The FSA said yesterday that while it had found no evidence of mis-selling at Land of Leather, the retailer did not have any systems in place to know if any customers sold PPI policies would benefit from them. It said that the sofa retailer had failed to ensure that there were effective checks on its sales force until February 2007.

As a result, 58,000 customers were exposed to “an unacceptable increased risk of buying unsuitable PPI”. Most customers never paid a premium, as they paid off loans from Land of Leather within a year. However, more than 8,000 paid premiums as high as £719. The FSA said that between May 2006 and June 2007 Land of Leather had generated around £3.1 million from sales of the policies.

The FSA said that after it contacted the company, Land of Leather voluntarily suspended all PPI sales until it had ensured that its procedures complied with the regulator’s guidelines.

Margaret Cole, the FSA’s director of enforcement, said: “We are determined that firms should change their behaviour in selling PPI and the fines against Land of Leather and Mr Briant show our determination in this area.

“Mr Briant’s fine sends out a strong message that senior management are responsible for ensuring that their firm has robust and effective systems and controls and is complying with its regulatory obligations.”

Shares in Land of Leather, which has issued two recent profit warnings, fell 4½p to 40½p.

A spokesman said: “We were not mis-selling these products, but we do regret that some of the service processes around their sale were not as robust as our customers have the right to expect. We are now once again offering this service with appropriate procedures in place to ensure that our customers receive the highest levels of service in this area.”

— John Browett, the new chief executive of DSG International, the group behind Currys and PC World, is expected to cut 400 head office jobs this week. He may also announce the closure of up to 200 underperforming stores as he tries to revive the business, and he may cut the dividend by as much as 50 per cent.

Times Recommends

• Brown targets fat cats after nationalising banks
• US shares soar on global banking rescue
• Europe follows Brown to head off meltdown