Credit card companies were wrong to charge brokers following the collapse of Independent Insurance, said an IIB legal consultant.
The IIB has finally received legal opinion, following a review of the merchant agreements brokers have with credit card companies.
Under typical agreements, credit card companies can refund cardholders and debit merchants with the amount of any liability, which has or is likely to be incurred.
"However, in the case of Independent Insurance there was no liability falling on the credit card companies to the brokers' clients in respect of the activities of the brokers concerned. The brokers simply collected the premium and forwarded it to the Independent. Once paid to Independent the insurance transaction had been completed and the risk of any financial failure of Independent passed to the policyholders themselves," said IIB
"Affected brokers could seek re-payment from the credit card companies that wrongly debited their accounts and made refunds to cardholders. If the credit card companies subsequently re-charge cardholders, this in turn will allow qualifying policyholders to obtain compensation from the Financial Services Compensation Scheme (FSCS). Under these circumstances it would be far easier for the FSCS board to allow brokers to recover under the scheme where they hold a deed of assignment issued by a qualifying policyholder - otherwise consumers may face re-charges on their credit cards and having to wait for compensation after all this time," said IIB.
