High street bank Alliance & Leicester has been fined a record £7 million for "serious failings" over selling techniques for payment protection insurance (PPI).
The Financial Services Authority (FSA) said telephone sales staff at the bank failed to make clear that the insurance for its loans was optional, and they were also trained to put pressure on customers when they queried the inclusion of PPI.
FSA enforcement director Margaret Cole said: "The failings at A&L (Alliance & Leicester) are the most serious we have found. This is reflected in the record PPI fine."
The failings occurred between 2005 and 2007, the FSA said, when A&L sold 210,000 policies at an average price of £1,265.
PPI covers people taking out loans against risks including unemployment or serious illness.
A&L chief executive David Bennett said the bank would pay back any customers found to have lost out unnecessarily from the mis-selling.
Mr Bennett said: "I apologise sincerely for our shortcomings. We will be writing to every customer concerned and will be working with independent accountants and the FSA to ensure that we put right any disadvantage identified."
A spokesman for A&L said "it was impossible to say" at this stage how much might have to be paid back to customers. The bank said that, during the period concerned, 41% of personal loan customers took out PPI with their loan. More than 80% of claims made during the period were paid, it added.
All customers who took out PPI loan insurance following a phone call between January 14, 2005 and December 31, 2007 will be written to.
The FSA said the failings resulted in "unacceptable levels of non-compliant sales and a high risk of unsuitable sales" over the three-year period. The FSA has previously taken action against 18 firms over poor PPI selling techniques.
