Policy
Response
Payment Protection Products Consultation
Response by the BSA|
Contact: Colette Best Date: 18 Jan 2012 |
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We view payment protection insurance as a fundamentally useful tool if sold appropriately. At a time when government is concerned about the potential for the number of house repossessions to rise, payment protection products can form a useful part of a safety net to keep people in their homes. The BSA report ‘A joined up approach to helping mortgage borrowers’ explores this issue further and a copy can be viewed at www.bsa.org.uk/docs/publications/helping_mortgage_borrowers.pdf.
We have serious concerns about the definitions used for debt freeze and debt waiver. These are currently ambiguous and risks extending the scope of the guidance to products which we do not believe are intended to be included.
A primary concern is that the term ‘debt freeze’ may include forbearance provisions offered on a case-by-case basis by lenders to borrowers experiencing difficulty in meeting their monthly mortgage payments. The provision of forbearance is already tightly regulated and subject to guidance by the FSA, therefore introducing further requirements on these provisions is likely to be costly to consumers and impractical for lenders.
The second concern with the definition of debt freeze is that it may inadvertently include mortgages which include the option for borrowers to take payment holidays, or to make overpayments and underpayments against the balance of overpayments accrued. These types of products are a useful option for those wishing to vary their mortgage payments around other commitments and should not be considered a form of payment protection within the scope of the guidance.
We would urge the FSA to expand the definitions of debt freeze and debt waiver to make it explicit that forbearance by lenders and mortgages with ‘payment holiday’ features are outside the scope of the guidance.
The rest of the guidance, we feel is a sensible and measured approach to ensuring that the mis-selling issues with payment protection insurance are not repeated.
The full response can be found at the link below.
The BSA response to the Payment Protection Products consultation
