Internet bank Egg has been fined £721,000 after the Financial Services Authority (FSA) found "serious failings" in its payment protection insurance (PPI) sales.

Between January 2005 and December 2007 the FSA said it found failings in 40% of the online bank's phone calls to its credit card customers when trying to get them to buy PPI.

The FSA has said Egg staff were advised to over-emphasise the positive features of PPI, and in some cases it was applied to customers' credit cards without their permission.

Further evidence shows that sales staff continued to promote the insurance to customers even if they had made clear they were not interested.

As a result the company has promised to write to 106,000 customers with PPI policies to ask if they have concerns over the way it was sold to them. If they do, they will be compensated with interest.

Margaret Cole, the watchdog's director of enforcement, said: "Egg used inappropriate sales techniques to try to persuade customers to buy payment protection insurance on their credit card even when they asserted they did not want the cover.

"All firms must ensure that customers are treated fairly when selling PPI and if a customer does not want PPI, they should not be pressured into taking it."

Egg is now expected to pay "substantial compensation" amounting to £1.67 million for every 10% of its customers who gain a refund.

The bank said: "Egg has worked constructively with the FSA to settle this matter as quickly as possible. We are taking the matter very seriously and would like to apologise to any customers who have been affected."

Other companies have also been penalised for poor practice when selling PPI, with Alliance & Leicester ordered to pay a £7 million fine in October after the FSA found them guilty of mis-conduct.

The latest review from the FSA was published in September and it highlights the "disappointing" practice used by banks to sell PPI.

Copyright © Press Association 2008