Lenders and insurers are to refund up to £60m ($96m) to more than 1m mortgage payment protection insurance customers hit by unfair premium rises or cuts to their policy benefits.
The Financial Services Authority on Wednesday announced it had secured an agreement with MPPI providers to reverse unfair changes to terms and conditions that were widely imposed from the start of the year.
MPPI is designed to meet mortgage repayments in the event of accident, illness or forced redundancy. But as unemployment began to spiral upward, policyholders were faced with increased premiums of £6-£7 a month and cuts, sometimes amounting to hundreds of pounds, in the monthly benefit the policy would pay out.
“The FSA’s concerns centred on the terms permitting these changes and how clearly they were disclosed,” the authority said on Wednesday. “The FSA expects its concerns to be addressed by the agreement reached.”
Trade bodies, including those representing banks, mortgage lenders, insurers and building societies, have until the end of June next year to make refunds or reverse any reductions in cover.
Under the deal, providers must agree to reinstate policies if the customer cancelled within two months of a premium rise or reduction in cover this year.
Providers have also agreed not to make any further changes to premiums or cover for at least the remainder of this year.
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