Government refuses to amend legislation relating to premiums paid by credit card
The IIB is demanding a written apology from Economic Secretary Kitty Ussher following the government’s refusal to amend legislation deemed unfair to brokers.
The trade body has been lobbying the government on behalf of brokers which had their accounts debited by credit card companies attempting to claw back refunds they made to policyholders following the collapse of Independent Insurance. This, it said, was unjust.
CII president Lord Hunt wrote to Economic Secretary Kitty Ussher, on behalf of the IIB, pointing out the problem with a view to amending the legislation.
If an insurance company collapses, policyholders can recover premiums paid by credit card from the card provider. The provider can then usually claw back any payment made from the broker.
In a written reply to Lord Hunt, Ussher said the legislation would not be amended. “This was a result of commercial terms agreed by the broker with the credit card provider and – indirectly – the broker’s recommendation of the failed insurer”.
IIB director general Andrew Paddick said: “This is an absolutely outrageous allegation made under the signature of the minister. Independent Insurance was authorised by the FSA and had ‘A’ ratings or better with the leading agencies.
“Brokers who recommended it to clients were not failing in their duty of care in any way. As recently determined by the court, the collapse of the company was attributable to criminal false accounting.”
Paddick added: “I think we are owed a written apology from Kitty Ussher and would hope, at the same time, she will reconsider her position in this matter.”
He said the Financial Services Compensation Scheme (FSCS) had encouraged policyholders to seek credit card refunds, under the Consumer Credit Act, so that the scheme itself did not have to compensate.
Had the policyholders paid by any other means but credit card, the FSCS would be responsible for the refunds.
“This leaves entirely innocent brokers being debited for premiums they have already paid to the insurer and acknowledged by the provisional liquidator as having been received.”
It is not known how much it will cost the broking sector, but Paddick said individual brokers had each lost several thousand pounds.
Paddick said the IIB would continue to lobby on the matter in 2008.