PPI regulation due early 2013

Robyn Hall

December 14, 2012

The Financial Services Authority refused to confirm the due date but said: “We intend to publish the paper early next year.”

Mortgage Introducer understands the final regulation will be ready for sign off in mid January following lengthy consultation with the protection industry.

In November 2011 the FSA said its intention was to target product features or pricing structures that create barriers to comparing products, exiting a policy or switching cover.

Margaret Cole, FSA managing director, said at the time that firms must learn the lessons of the past and make sure they have consumers’ needs at the heart of new product development.

And she added: “That is why we are acting early to ensure firms understand the risks they should bear in mind when designing these products, and how they can manage these risks when developing or distributing the product.”

Protection Products Limited chief executive Roger Humber said he expected the final paper to exempt payment waivers from being caught by regulation.

He said: “We fully expect the paper to reaffirm the long held view shared by the courts and FSA that a payment waiver feature within a credit agreement or regulated mortgage contract is not a contract of insurance as no benefit is paid to a customer.

“The final paper will make a clear distinction between insurance forms of protection, such as short term income protection which is subject to the seven day PPI point of sale prohibition, and non-insurance payment waiver.”

A waiver is an integral feature of a lending agreement whereby the lender agrees to cancel a customer’s payments for a set period of time on the occurrence of a specified event such as unemployment or illness.

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