A couple, referred to as Mr and Mrs K, had a meeting at home in 2007 with a Lighthouse adviser because they wanted to arrange a re-mortgage and also wanted to consolidate debt.
The mortgage term was arranged for 21 years and the single premium policy was sold alongside this.
The policy, sold in November 2007 and which came into effect in January 2008, ran for four years and was set up in Mr K’s name only to cover him for accident, sickness and unemployment.
The monthly benefit selected was for £825 for a maximum benefit of 24 months and the cost of the PPI was about £2,574.
I think if they’d understood that they were paying for the policy over 21 years and were only getting cover for four years, they wouldn’t have thought that was good value for money.Nimisha RadiaThe couple complained nothing was made clear and easy for them to understand and at no point did the adviser explain that by adding the single premium of the policy and the broker fee to the mortgage, they would end up paying extra.
The pair added there was no breakdown of the interest they would be incurring and what that meant over the term of their mortgage and while the policy cost was spread across the mortgage term, the policy only covered part of it.
A Financial Ombudsman Service investigator upheld the complaint but Lighthouse didn’t agree with their ruling.
Lighthouse argued as they’re not the lender or the insurer, they don’t have control of the documents provided and there was no requirement for them to mention the interest cost of the policy.
In a final decision, ombudsman Nimisha Radia said the overall cost of the policy had been included in the documents but none of the key documents set out the full cost of the PPI over the term of the re-mortgage.
Also, Ms Radia said the documents do not suggest Mr and Mrs K would have received a pro-rata refund if they had cancelled their PPI policy early.
She said: “The policy didn’t offer them the flexibility I think they may’ve needed.
“Had Lighthouse made the terms clear, I don’t think Mr and Mrs K would’ve bought the policy because I think that it’s more likely than not they would’ve wanted a flexible arrangement.
“I think if they’d understood that they were paying for the policy over 21 years and were only getting cover for four years, they wouldn’t have thought that was good value for money.
“So overall I don’t think Mr and Mrs K were given the right advice and information at the time of sale. And I don’t think that the policy was suitable for them.”
As Mr and Mrs K borrowed extra to pay for the PPI, so their loan was bigger than it should have been, the ombudsman said the couple need to be given back the extra they had paid for this cover plus interest at 8 per cent a year.
emma.hughes@ft.com
