FSA reaches PPI agreement

The agreement means a series of measures relating to the fairness and transparency of refunds will have to be carried out by firms selling PPI.

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Clive Briault, managing director of retail markets, at the FSA, said: “This is an excellent outcome that delivers concrete benefits for consumers. When properly sold, PPI can provide valuable protection. But we have been particularly concerned with so called ‘nil refund terms’.

“These are contract terms that prevent consumers from receiving a partial refund if they cancel a single premium PPI policy for any reason. Such reasons could include consumers repaying the associated loan early or no longer being able to make claims due to changed circumstances."

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“The agreement, secured in collaboration with a number of trade bodies, means firms will be unable to include ‘nil refund terms’ in contracts with new customers and will have to contact existing clients with ‘nil refund terms’ to be informed of how refunds will be dealt with.”

Paul Thompson, chief executive at D&D Homecare Limited, said: “In principle what the FSA has done is a good thing, but in reality what the client gets back will vary. Once a lender has paid a commission out to a broker it is not going to get that back, which will only create an issue for brokers if it creates a claw-back of commission.”