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Providers hand out £40m in MPPI refunds

Providers of mortgage payment protection insurance have refunded a total of around £40m to consumers as part of redress measures agreed with the FSA last year.

The FSA entered into an agreement with MPPI firms in October 2009 after the regulator raised concerns about the fairness of contract terms which allowed increases in premiums and reductions in cover.

The regulator originally estimated the redress package would include refunds of around £60m.

Former FSA managing director of retail markets Jon Pain wrote to the Association of British Insurers, the Building Societies Association, the Council of Mortgage Lenders, and the British Bankers’ Association in October 2009 setting out the terms of the agreement reached.

It required MPPI firms to refund increases in premium and restore reductions in cover since January 1 2009 for all existing and past customers for all policies, regardless of when consumers were sold the policy.

Under the terms of the agreement. firms had to pay the refunds by no later than June 30, 2010.

The FSA says surveyed firms have now confirmed they have refunded increases in premiums totalling around £40m, and reversed any reductions in cover, for customers who experienced these changes to their policy in 2009.

Firms have also showed the FSA improved upfront disclosure of cancellation and variation terms, and amended their variation terms to ensure all customers know when firms can vary premiums and cover.

The FSA says in many cases firms have also extended the period of notice of cancellation.

The FSA says: “In view of the positive response by the industry, we are not planning any further steps or action at this time. However, we will continue to keep a watching brief and a high-level review will be conducted in 12 to 18 months time.

“We are committed to ensuring that MPPI customers have fair and adequately disclosed cancellation and variation terms that give clarity about when and why firms may alter their insurance premiums and terms of cover.”


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Message for Mark Hoban MP.

    Dear Mark Hoban MP

    You will note that this PPI product was sold by the banks to their tied clients, often part of a conditional mortgage selling that seemed to go unregulated by the FSA. Those same banks are training up their staff and packing the examination halls. In short Mark the banks are already gearing up for a post RDR bonanza.Your RDR Implementation Team is telling you what the banks want you to hear. That same team is packed with bankers and advisers to bankers. Its time for you to look beyond Gordon Browns tied FSA agenda and take an independent view? Support independent advice as it serves to support the consumers, the same consumers who elected you and voted out Crash Gordon.

  2. My colleague and I discussed this issue with 3 FSA representatives in 2006 at the SECC in Glasgow at a mortgage seminar. My colleague had worked in a bank for 20+ years, 10 as manager. He told the FSA reps about the targets the banks were giving to staff and that MPPI was to be added to any mortgage – no choice. He also told them that the profit margin on MPPI was about 55% so the FSA should be looking at the banks to address this. The answer we got was ‘We didn’t know they were doing that’. Didn’t know, or didn’t/still don’t want to know? TCF – The FSA dont have a clue what this is!

  3. Now that’s what I call REAL mis-selling Hector!!

    Shame no one was banned or named & shamed iin all this wasn’t it. Fines just got sucked up & spat out because £40M pales into insignificance when compared to the massive profits made on sales of MPPI by the big guns.

    Simon gives a good account of the nature of financial advice post 2012 methinks if Hoban, Hector & co have their way.

  4. As you can see there is no commission bias with bank advisers. Oh no, they have a system that is much more aggressive against sound advice than that.

    It is called a “pay plan” and I have never yet seen a system of reward for such an adviser that is not based on quantity and size of sales.

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