DISP App 3.7A Approach to redress at step 2

1This section applies to a CCA lender at step 2.

Where the firm concludes in accordance with DISP App 3.3A that the non-disclosure has given rise to an unfair relationship under section 140A of the CCA, the firm should remedy the unfairness.

In relation to a single premium payment protection contract, the firm should pay to the complainant a sum equal to:

1. (1)

   the commission actually paid; plus

2. (2)

   an amount representing actual profit share; minus

3. (3)

   50% of the total amount paid (or other percentage as in DISP App 3.7A.4E).

The firm should also pay historic interest in relation to that sum, where relevant. It should also pay simple interest on the whole amount.

In relation to a regular premium payment protection contract, the firm should pay to the complainant in respect of each redress period a sum equal to:

1. (1)

   an amount appropriately representing the commission paid in respect of that period; plus

2. (2)

   an amount appropriately representing profit share in respect of that period; minus

3. (3)

   50% of the amount appropriately representing the total amount paid in respect of that period2 (or other percentage as in DISP App 3.7A.4E).

A firm should pay the aggregate of those sums and also pay historic interest in relation to each of those sums, where relevant. It should also pay simple interest, where relevant.

In cases where the presumption that failure to disclose commission did not give rise to an unfair relationship (in DISP App 3.3A.4E(2)) has been rebutted and the firm has concluded that the non-disclosure gave rise to an unfair relationship under section 140A of the CCA, the firm should consider what level of commission plus anticipated profit share would not have given rise to unfairness in that case, and use that amount (expressed as a percentage) at DISP App 3.7A.3E(3) or DISP App 3.7A.3AE(3) as appropriate.

If the complainant has received any rebate, the firm may calculate the amount of the rebate that represents commission and actual profit share sums paid up to the point of the rebate that were more than 50% (or such other percentage determined under DISP App 3.7A.4E) of the total amount paid in relation to the payment protection contract and deduct this from the amount of redress otherwise payable to the complainant.

Additionally, where a single premium policy was added to a loan:

1. (1)

   for live policies, where there remains an outstanding loan balance, the firm should, where possible, arrange for the loan to be restructured (without charge to the complainant but using any applicable cancellation value) with the effect of ensuring the number and amounts of any future repayments (including any interest and charges) are the same as would have applied if the commission plus anticipated profit share was 50% (or such other percentage determined under DISP App 3.7A.4E) of the total amount paid in relation to the payment protection contract; or

2. (2)

   for cancelled policies, the firm should pay the complainant the difference between the actual loan balance at the point of cancellation and what the loan balance would have been if a sum equal to that payable under DISP App 3.7A.3E (before historic or simple interest) had not been added (plus simple interest) minus any applicable cancellation rebate value.

Additionally, for a regular premium payment protection contract, where the policy is live the firm should disclose the current level of known or reasonably foreseeable commission and currently anticipated profit share and give the complainant the choice of continuing with the policy without change or cancelling the policy without penalty.

For the purposes of DISP App 3.7A.7E, currently anticipated profit share should be read as requiring a projection forwards from the date of disclosure rather than from the date of the original sale.

Where a claim was previously paid on the policy, the firm should not deduct this from the redress paid.