Self-employed people are among the few million Britons who can now claim a refund if they were sold payment protection insurance (PPI) inappropriately or unfairly.
PPI, designed to cover loan repayments if the borrower loses their job or falls ill, have been popularised by the self-employed’s need for a safety net for their home or business.
The recession has breathed fresh life into demand for such agreements, but high street providers have hijacked the insurance product by hiking premiums and restricting cover.
Cue the declaration by Britain’s financial regulator that lenders must now review 185,000 individual cases about PPI cover, whose complaints the lenders arbitrarily dismissed.
The Financial Services Authority added it would refund one million customers, including the self-employed, and reinstate original levels of cover, following the unfair changes.
The regulator said it was concerned at the terms permitting these changes, which have helped the product yield £5billion a year, and how clearly they were disclosed to customers.
Under its industry-wide agreement, the FSA also said it would freeze both premiums and cover for existing customers for at least the rest of this year.
However, it is probable that refunds will be more fitting to the self-employed, as some have been sold cover they would be unable to claim for because of their employment status.
Other mis-selling of PPI includes lenders restricting cover in the light of pre-existing medical conditions, demanding a single fee, upfront, or ending cover before the final repayment is due.
Jon Pain, managing director of supervision at the FSA, said: “The FSA welcomes this positive move by MPPI firms to reverse recent changes in premiums or cover which will put affected customers back in the position they were in before the policy was changed.
“It will also give all MPPI customers clarity about when and why firms will be able to vary these in future. This clarity will provide the basis for MPPI to remain a valuable option for many mortgage customers who wish to take out protection, alongside the mortgage commitment they are taking on.”
Lenders will contact customers if their policy is affected, and will make all refunds, due to total £60million, by the end of June 2010, the FSA said.
Yet consumers can take action if they feel they were mis-sold PPI but do not hear from the lender – firstly by complaining to their lender and then, if to no avail, by calling the Financial Ombudsman Service.
Lucy Widenka, of consumers’ group Which?, reflected: “We’re pleased that the FSA has taken action against firms who’ve effectively been selling people umbrellas then trying to take them away at the first sign of rain.
“Customers must be refunded as quickly as possible, as many could be in financial difficulty as a result of their cover being reduced. What’s more, offending firms must be named to make MPPI policyholders aware that this could affect them.”
However, the group cautioned that “there could yet be a
sting in the tail” for PPI policyholders, as providers will be allowed to vary
their contracts in the future on the grounds they do so fairly, meaning the
potential for price hikes in the New Year.
Oct 13, 2009
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