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complaint
Mr and Mrs A are complaining that Nationwide Building Society mis-sold them a payment protection insurance (PPI) policy when they took out a mortgage.
background
The circumstances leading to this complaint and my initial conclusions are set out in my January 2015 provisional decision. I attach a copy of that decision, which forms part of this final decision. In my provisional decision, I explained why I intended to uphold Mr and Mrs A’s complaint and invited both parties to let me have any further comments or evidence by 2 March 2015. Both Nationwide and Mr and Mrs A have received the provisional decision: Mr and Mrs A had no further comments; Nationwide has provided further submissions for my consideration.
my findings
I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint.
I think the relevant issues to take into account are the same as those set out in the note on our website about our approach to PPI complaints.
Nationwide highlights that the self-employed restriction was pointed out three times in the certificate of insurance. It says that because Mr A was self-employed, it’s likely that Mr and Mrs A’s attention would have been drawn to this restriction. I agree that the certificate describes the restriction three times, but using different, undefined phrases on each of the three occasions. I don’t think this was clear, fair and not-misleading information. So if Mr and Mrs A’s attention had been drawn to all three, I don’t think they would have clearly understood it. But the certificate was sent to Mr and Mrs A after the sale and there’s no information to show me that any of these three clauses was highlighted to them before they took out the policy. So I still don’t think that Nationwide did enough to meet Mr and Mrs A’s information needs.
Nationwide argues that if Mr and Mrs A had not been happy with the terms of the policy when they received the policy certificate after the sale, they could have cancelled it. This is, of course, true. But Nationwide was required to provide enough information before the sale to allow Mr and Mrs A to decide if they wanted PPI. Provision of policy information afterwards doesn’t cure this failing.
Mr and Mrs A’s policy included accident and sickness cover as well as unemployment cover. Nationwide says that because the self-employment restriction only applied to unemployment claims, Mr A would still have had the full benefit of the accident and sickness cover. Nationwide also says that because the restriction only effected Mr A’s ability to claim, it sees no reason why it’s being directed to refund Mrs A’s premiums.
Mr and Mrs A were sold one policy that covered them jointly for accident, sickness and unemployment cover, paid for by a single premium. The benefit was split between them with the larger proportion being in respect of Mr A. So the policy would only have paid out the full benefit if they were both able to claim at the same time. The self-employment restriction did only apply to Mr A, and only for unemployment claims. Nevertheless, I think it was a significant limitation on the ability of the main insured person to claim, and on the benefit of the policy to both Mr and Mrs A. So I still don’t think they would have bought the policy if it had been brought to their attention. Accordingly, the best way to put that right is to put them
in the position they’d have been in if they hadn’t bought it.
It follows that I uphold Mr and Mrs A’s complaint, and direct Nationwide to put things right as described below.
putting things right
So I direct Nationwide to:
Calculate and pay Mr and Mrs A an amount equal to the premiums they paid in respect of this policy.
Calculate and pay Mr and Mrs A a further sum equal to 8% simple interest on each of those premium payments from the date they were made to the date of settlement.
Set out its calculations for Mr and Mrs A.
I understand that Nationwide is required to deduct basic rate tax from this part of the compensation. Whether Mr and Mrs A need to take any further action will depend on their
financial circumstances. More information about the tax position can be found on our
website.
Mr and Mrs A should refer back to Nationwide if they are unsure of the approach it has taken and both parties should contact HM Revenue & Customs if they want to know more about the tax treatment of this portion of the compensation.
my final decision
For the reasons above and in my provisional decision, I uphold Mr and Mrs A’s complaint and direct Nationwide Building Society to put things right in the way I’ve described above.
Under the rules of the Financial Ombudsman Service, I am required to ask Mr and Mrs A to accept or reject my decision before 23 March 2015.
Mike Foster ombudsman
they say that they were told that Mr A would have to “ inform the tax office and stop being self-employed ”. Because he wanted to continue his business, he didn’t do this, so couldn’t claim.
I‘ve looked at the 1992 policy certificate, which Nationwide says was sent to Mr and Mrs A after the sale. Information about what self-employed people must prove to make an unemployment claim appears in sections two, three and seven. Each time the wording is different, but at section three the policy excludes claims for unemployment by self-employed people unless:
“ you have ceased trading because you could not find enough work to meet all of your reasonable business and living expenses and have declared this to the Inland Revenue ”
This is consistent with what Mr and Mrs A say they were told when they tried to claim but wasn’t onerous on its own. ‘Ceased trading’ isn’t defined in the Section 12. But Section 2 says that to claim, self-employed people would have to prove that they’ve been made involuntarily insolvent. As this is outside Mr A’s control, this was a significant restriction on the policy for him. It would have been important for Mr and Mrs A in deciding if the policy suited them. So Nationwide had a duty to draw it to their attention before they bought the PPI. There’s no information to show me what was or was not provided to them before they bought the policy. But even if they had all the information in the policy certificate, with three different statements about when self-employed people could claim, I don’t think that Nationwide drew their attention to this restriction in a way that was clear, fair and not misleading. So I don’t think Nationwide met Mr and Mrs A’s information requirements about the self-employed restrictions.
The restrictions on self-employed people claiming would have made it very difficult for Mr and Mrs A to make a claim. I think that in their circumstances, if this restriction had been drawn to their attention, they wouldn’t have bought the policy. Because of this I intend to uphold their complaint.
putting things right
So I intend to direct Nationwide to:
A. Calculate and pay Mr and Mrs A an amount equal to the premiums they paid in respect
of this policy.
B. Calculate and pay Mr and Mrs A a further sum equal to 8% simple interest on each of those premium payments from the date they were made to the date of settlement.
C. Set out its calculations for Mr and Mrs A.
I understand that Nationwide is required to deduct basic rate tax from this part of the compensation. Whether Mr and Mrs A need to take any further action will depend on their financial circumstances. More information about the tax position can be found on our website.
Mr and Mrs A should refer back to Nationwide if they are unsure of the approach it has taken and both parties should contact HM Revenue & Customs if they want to know more about the tax treatment of this portion of the compensation.
my provisional decision
For these reasons, I intend to uphold the complaint and direct Nationwide Building Society to put things right in the way I’ve described above.
Mike Foster ombudsman
