Government's decision to not amend legislation deemed unfair to brokers is being called outrageous
The IIB said its not giving up trying to secure justice for brokers who had properly passed premiums to Independent Insurance prior to its collapse, only to find the credit card companies debiting their accounts as claw-back following refunds made by them to policyholders.
The Financial Services Compensation Scheme had actively encouraged policyholders to seek credit card refunds, as if a third party pays, the scheme does not have to compensate, said IIB director general Andrew Paddick.
He added: "Provisions in the Consumer Credit Act allow consumers to make a joint and several claim against third parties to a credit transaction and the credit card companies believe that their merchant agreements reflect this – leaving entirely innocent brokers being debited for premiums they have already paid to the insurer and acknowledged by the Provisional Liquidator as having been received."
The IIB had little success taking up the issue with officials at the FSCS, HM Treasury and the credit card companies, so Paddick raised the matter with Lord Hunt, who agreed to personally write to the minister, pointing out the problem with a view to appropriate legislative amendment.
In a written reply to Lord Hunt, Economic Secretary Kitty Ussher said: “This was a result of commercial terms agreed by the broker with the credit card provider and – indirectly – the broker’s recommendation of failed insurer”.
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. 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 – because we do not intend to give up in our quest for justice”.