Following publication of the OFT and FSA’s final guidance on Payment Waiver, representatives from both regulators yesterday met with over 50 delegates from leading lending and insurance companies to provide further clarity on the final guidance.
Payment Waiver is a contractual promise from a lender to cancel a payment in the event of a specified event, such as sickness or unemployment. The FSA and OFT confirmed in their final guidance that Waiver is not insurance as no benefit is ‘paid’ to the customer, with the lender instead choosing to waive payments which would otherwise fall due.
Unlike PPI where lenders made vast profits selling insurance off the back of loans and mortgages, often to customers who could not claim, a Payment Waiver is not a separate product but a feature of the overall agreement and contained within the advertised APR.
Roger Humber, CEO at waiver specialists Protection Products Limited, said: “We are very pleased the FSA and OFT have come out with such a strong message endorsing payment waiver in this way.
“It is now time for lenders to put protection back into the market place, and what better way than by providing an integral safety net built into their loans to help customers who experience financial shock.”
Humber added: “Because Payment Waiver is not a separate product there is no commission and the total cost of the loan includes the cost of the waiver. Many lenders are choosing to absorb this cost entirely to enhance their loans and build market share, whilst others may increase the cost of their loans slightly. However, as a lender must remain competitive in the market place they will aim to make this increase as small as possible.”
The guidance identifies various steps relating to the design and promotion of Waiver and provides a clear message for lenders to ensure positive customer outcomes are achieved and maintained at all cost, with robust product design and continuing product governance to ensure the previous failings experienced with PPI are never repeated.