Ms Bea refinanced a loan with her lender to buy a new car. The loan contract included premiums for Payment Protection Insurance (PPI). Ms Bea made a complaint after she asked the lender to cancel the PPI policy. The lender said she could not cancel it, because it was a condition of the loan. Ms Bea said she did not know that it was a condition of the loan. She said, if she had known, she would have tried to get a cheaper policy somewhere else.
The IFSO Scheme confirmed the lender could require Ms Bea to take out PPI cover, because there was a risk that Ms Bea would not be able to repay the $5,000 shortfall, if something unexpected happened.
However, the lender couldn’t show it had helped Ms Bea to understand the PPI cover. It could not show it provided her with important information about the cover. Ms Bea was not able to get insurance cover through a different insurer. Therefore, the IFSO Scheme decided that the lender should not charge interest on the PPI premiums. The lender made a payment to Ms Bea’s account for the interest she had already paid on the premiums.