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What with a Grey Market forming, the Post Office potentially reducing the cost of Payment Protection Insurance and now further news from the FSA, it could be time for the Secured Loans industry to circle it’s wagons.

The FSA reports that underwriters are removing restrictions from their PPI which prevent customers from receiving refunds on their insurance if they pay off loans early.

The industry practice of putting ‘nil refund’ clauses on policies paid upfront (added to the loan principal) has drawn the attention of the regulator which believes these terms are unfair to consumers.

The FSA reports that after raising its concerns with the underwriters it had received a number of undertakings from insurers to strike out nil refund terms in their policies.

Although the FSA hasn’t actually introduced legislation, to stop insurers from having the nil refund terms, it is hoping that other insurers will take notice of the undertakings and it’s encouraging consumers to complain and tell the firm about the cases published on the FSA website.

The FSA has also raised new concerns about nil refund clauses in cases where the customer wants to cancel their PPI but not pay off the loan.

The knock on affect of all this could be that Secured Loan Introducers get less commission for the PPI element of the Loan. If insurers have their profits reduced by these things happening they are naturally going to either increase the cost of insurance or, badly for us, decrease the downstream commission rates.

I’m a bit upset today, my Sister Karen’s just gone back to Australia. She lives over there with her two children, Andrew and Lisa, and her hubby Andy, they run a company called Weldalloy.

I like it when Karen visits because we always end up reminiscing about the 1980s. Karen originally moved to New Zealand and I always remember the year, because she emigrated at about the same time Maori Venture won the Grand National in 1987. I must have been just about the only person in our circle of family and friends who didn’t back it!

On this visit we discussed the - what seem silly now - hairstyles people had in the 80s, all the girls wearing leggings, most men having a ‘centre parting’ and the various Discos we used to go to.

We also discussed about the limited number of clothes shops there used to be. If you were a man you’d go into the local Burtons to get a new shirt for Christmas Eve and then when you went out there’d be at least three other lads with the same top on in each pub! Makes you think about the amount of choice we have nowadays.

As always Karen departed with a “It’ll be a long time before I come back to England Adrian”.

Thankfully for me - she said EXACTLY the same thing last year

There seems to be an overlap or grey area forming between Sub Prime and Prime Mortgages. A number of mainstream mortgage companies, for example the Leeds Building Society, are now offering what they called ‘Credit Repair Mortgages’. These are being offered to people with credit blemishes rather than poor credit records.

It appears the grey market customers are people who are what the Industry calls ‘Light Adverse’. These are people with things like County Court Judgements that are a certain period old or people that have just missed a few payments on their regular mortgages.

Some of the new Credit Repair Mortgage lenders are even offering borrowers the chance to switch, with no penalties, to a Prime Rate Mortgage after 3 or so years, if the borrowers credit record improves.

I suppose this activity could slightly start to eat into the Secured Loans market and I guess the reasons for Prime Rate Lenders moving into this market can be summarised as:-

• Sub Prime now accounts for a higher percentage of the overall market than it did 5 years ago. Growth in Sub Prime lending has outpaced the mainstream market.
• Prime lenders can charge more by lending to Credit Impaired borrowers.
• Prime lenders realise that people, with previously good financial track records, can have there credit record impaired purely through things like divorce and redundancy and can therefore represent less of a risk than ‘normal’ Sub Prime borrowers.

If you have any thoughts about this let me know - PLEASE!