UK car dealers offering payment protection insurance (PPI) as part of finance packages must ensure they follow the rules on sale of these products or risk incurring heavy fines, their trade group, the Retail Motor Industry National Franchised Dealers Association (NFDA), has warned.

The sale of insurance products, such as PPI, is regulated by the government's Financial Services Authority (FSA) and businesses that sell or advise on insurance products, such as credit protection insurance, warranties, GAP products, and general motor insurance, must be accredited by the FSA. If businesses fail to meet the standards required they will be fined, the NFDA cautioned.

NFDA director Sue Robinson said: "Dealers that offer finance packages, including PPI, must make sure that they follow the rules laid down by the FSA. This will involve training staff so they can provide the right advice on the various products, and having the right systems in place to ensure that customers are sold the correct product most suitable to their needs.

"The NFDA is working with the FSA to ensure that the regulations are as effective as possible, and that they benefit businesses and consumers alike."

Robinson added: "PPI is seen as a high risk product by the FSA, so requirements for businesses that offer it are more stringent than selling other insurance products. This has led to a number of dealers stopping PPI product sales, and concentrating on lower risk products, such as warranties and GAP.

The NFDA will help members navigate through the regulations, Robinson added.