FSA promises fairer refunds
- 4TH MAY 2007
The consumer has recently won a small battle on the war against unfair payment protection insurance (PPI) that will no doubt lead to more claims being made. Lenders have agreed to offer consumers that choose to cancel their existing policies a fair refund of premiums, despite having previously inserted a no refund clause into payment protection insurance contracts.
The ‘nil refund’ clause features on single premium payment protection insurance policies, typically loans. However, should a policyholder decided to pay their loan off early or a change in personal circumstances means that they are no longer eligible to claim, up until this new ruling, they have not been entitled to a refund of their premiums.
If consumers failed to read the small print on the contract then it was unlikely that they were actually made aware of the nil refund clause in the first place.
Consumer groups have argued that payment protection insurance has not provided individuals looking to protect their credit repayments value for money. Not only was it of no benefit to a number of people taking out the policies because they could never have claimed on it, it also prevented a loss of profit for the lending companies if a refund was sought by the consumer.
The Financial Services Authority (FSA) and payment protection insurance trade unions have agreed to refrain from adding nil refund clauses to payment protection insurance contacts in the future, thus providing a better and fairer service for all consumers looking to protect their credit payments.
However, Simon Burgess from payment protection specialists British Insurance says that the new ruling has ‘failed’ consumers. “The FSA have not stipulated that the refund must be made on a pro-rata basis” he explains. “This means that in effect, a provider could make a refund of just 1% of the pro-rata amount due, then pocket the other 99%”.
He is calling for a ban on the singled premium policies, saying that it is “fairer to the consumers”.
