PPI providers to offer fair refunds
Consumers caught up in the battle against Payment Protection Insurance companies have enjoyed a victory after PPI companies agreed recently to ensure that a fair refund was given to consumers that cancel policies.
In the past, many PPI contracts have included a nil-refund policy, but since the whole issue of the fairness and effectiveness of PPI came under question recently PPI companies have now decided that they will offer a fair refund to policyholders that decide to cancel their policies.
As part of the deal that has been agreed between the Financial Services Authority and the PPI company trade unions, payment protection insurance providers will no longer be applying nil-refund clauses to PPI contracts. PPI is usually recommended to borrowers when taking out credit such as credit cards and loans, but has been under fire because many policies are ineffective for the consumers’ needs, and in many cases consumers weren’t even told what they would be covered for.
There are a number of steps that will be taken by PPI providers as part of the new agreement that has been reached with the Financial Services Authority. This includes not including nil-refund clauses to new contracts and removing them from older contracts. It also includes contacting customers that currently have nil-refund clauses in order to explain how refunds will now be dealt with.
One FSA spokesperson stated: 'It will now be up to the insurer to show that the refund they offer is reasonable and fair. It might not necessarily mean that consumers get a pro-rata refund because there maybe increased risk at the start of a finance agreement and there will be set-up costs to the insurance, but there will be a significant consumer benefit arising from this change.'
This is Money advises: ‘If you want to cancel a single premium PPI policy and are not happy with the refund that has been offered you should write to your insurer – or the firm that sold you the insurance – citing that firms have to give fair refunds under the Unfair Terms in Consumer Contracts Regulations and that they must explain how they came to the refund level.’
Tom Smith
10th April 2007
More Information:
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If you're taking out a sizeable loan, the idea of payment protection may sound like a good idea. Programs such as these protect buyers in the event that they are unable to make payments on the loan due to events such as layoffs or medical emergencies.
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Almost every time you apply for a loan or other form of credit, you are asked if you would like to purchase credit insurance. It my even be automatically added to your contract without you noticing.
- Loan extras including PPI
