FSA / OFT / FCA:
“Non-insurance forms of protection include where the terms of a [regulated mortgage contract] or credit agreement are modified on the occurrence of specified events. Two examples are [payment] freeze and [payment] waiver…… Neither is covered by Competition Commissions point-of-sale prohibition relating to PPI, or by the ‘anti-avoidance’ clause in the Competition Commissions Order.”
Competition Commission:
“The [Point of Sale Prohibition] Order covers contracts of insurance only. As such, [payment] freeze or [payment] waiver products or features of products that do not constitute contracts of insurance are outside the scope of the [Point of Sale Prohibition] Order”
FSA:
“[Payment] freeze or waivers are contractual terms within a loan or credit product under which the lender agrees to waive its right to seek (either some or all of a) repayment should a specified adverse event happen to the borrower. In return, the borrower might pay a higher interest rate on the loan. While these products have some very similar characteristics to credit insurance products from the customer’s perspective, we consider that they do not usually constitute insurance in a legal sense and are instead regulated under the rules for the sale of various lending or credit products.”
The UK Courts:
The Court of Appeal have stated that a payment waiver option is not an insurance contract as no benefit is paid to the customer if the event occurs.
For more information please contact us today!
