The Financial Services Authority has put its foot down about nil refund terms in payment protection insurance contracts. Nil refund terms are contract terms which prevent customers from getting a particle refund on their payments if they cancel their PPI policy because they have paid off the loan that is being protected or their circumstances change.
THE FSA says it is concerned with some areas of payment protection insurance, and has come to an agreement with the industry to make single premium PPI polices fairer.
In a statement, the FSA said it has been "concerned with the overall fairness and transparency of refund terms in single premium PPI policy contracts and particularly the operation of nil refund terms."
The new agreement means that firms offering single premium PPI policies should no longer include nil refund terms in contracts and should contact existing customers whose policies do include them to reach a fairer agreement.
The FSA has also told companies that they should treat their customers fairly if they need to reissue the associated loan in order to cancel the PPI and do a fair calculation of the refund their customers would be owed should they cancel their PPI.
And to improve transparency surrounding PPI policies, companies are asked to provide tables that show how refunds are calculated so customers are aware of what they should receive.
The FSA's Managing Director of Retail Markets, Clive Briault 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.”
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