Related provisions for DISP App 1.4.13

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To access the FCA Handbook Archive choose a date between 1 January 2001 and 31 December 2004 (From field only).

12It would not be unreasonable if a firm providing redress in these circumstances were to frame its offer of redress on the assumption that the complainant will agree to surrender the policy. However, firms should bear in mind that there may be circumstances where it is appropriate for the complainant to retain the policy, for example, where it is being retained as a savings vehicle.
12The standard approach to redress can be illustrated by the following examples, which show how redress would be calculated in certain hypothetical but typical scenarios. (Because the examples are illustrative, round numbers have been used for 'established facts' in each example. The payments should be taken as being made monthly: firms should not approximate by assuming that payments are made annually. If the complainant has benefited from MIRAS, the calculations should allow
12Table of examples of typical redress calculationsExample 1Capital shortfall and higher endowment outgoingsExample 2Capital shortfall partially offset by lower endowment mortgage outgoingsExample 3Capital shortfall more than offset by lower endowment mortgage outgoingsExample 4Capital surplus more than offset by higher endowment mortgage outgoingsExample 5Capital surplus partially offset by higher endowment mortgage outgoingsExample 6Capital surplus and lower endowment mortgage
12Example 1Example 1 Capital shortfall and higher endowment mortgage outgoingsBackgroundCapital sum of £50,00025 year endowment policyDuration to date: 5 yearsEndowment premium per month: £75Established factsEndowment surrender value:£3,200Capital repaid under equivalent repayment mortgage:£4,200Surrender value less capital repaid:(£1,000)Cost of converting from endowment mortgage to repayment mortgage: (£200)Total outgoings to date Equivalent repayment mortgage (capital + interest
12Example 2Example 2Capital shortfall partially offset by lower endowment mortgage outgoingsBackgroundCapital sum of £50,00025 year endowment policyDuration to date: 5 yearsEndowment premium per month: £60Established factsEndowment surrender value: £2,500Capital repaid under equivalent repayment mortgage£4,200Surrender value less capital repaid under equivalent repayment mortgage:(£1,700)Cost of converting from endowment mortgage to repayment mortgage (£300)Total outgoings to
12Example 3Example 3Capital shortfall more than offset by lower endowment mortgage outgoingsBackgroundCapital sum of £50,00025 year endowment policyDuration to date: 8 yearsEndowment premium per month: £65Established factsEndowment surrender value: £7,300Capital repaid under equivalent repayment mortgage:£7,600Surrender value less capital repaid:(£300)Cost of converting from endowment mortgage to repayment mortgage: (£200)Total outgoings to date: Repayment mortgage (capital +
12Example 4Example 4Capital surplus more than offset by higher endowment mortgage outgoingsBackgroundCapital sum of £50,00025 year endowment policyDuration to date: 8 yearsEndowment premium per month: £75Established factsEndowment surrender value: £7,800Capital repaid under equivalent repayment mortgage:£7,600Surrender value less capital repaid:£200Cost of converting from endowment mortgage to repayment mortgage: (£250)Total outgoings to date: Repayment mortgage (capital + interest
12Example 5Example 5Capital surplus partially offset by higher endowment mortgage outgoings BackgroundCapital sum of £50,00025 year endowment policyDuration to date: 10 yearsEndowment premium per month: £75Established factsEndowment surrender value: £11,800Capital repaid under equivalent repayment mortgage£9,700Surrender value less capital repaid:£2,100Cost of converting from endowment mortgage to repayment mortgage: (£300)Total outgoings to date: Repayment mortgage (capital +
12Example 6Example 6Capital surplus and lower endowment mortgage outgoings BackgroundCapital sum of £50,00025 year endowment policyDuration to date: 10 yearsEndowment premium per month: £65Established factsEndowment surrender value: £10,100Capital repaid under equivalent repayment mortgage£9,700Surrender value less capital repaid:£400Cost of converting from endowment mortgage to repayment mortgage: (£200)Total outgoings to date: Repayment mortgage (capital + interest + DTA life
12Example 7Example 7Low start endowment mortgageBackgroundCapital sum of £50,00025 year endowment policyDuration to date: 10 yearsEndowment premium per month: starting at £35 in first year, increasing by 20% simple on each policy anniversary, reaching £70 after five years and then remaining at that level. Established facts:Endowment surrender value:£8,200Capital repaid under equivalent repayment mortgage:£9,700Surrender value less capital repaid:(£1,500)Cost of converting from
DISP App 3.7.8ERP
If a firm chooses to make this presumption, then it should do so fairly and for all relevant complainants in a relevant category of sale. It should not, for example, only use the approach for those complainants it views as being a lower underwriting risk or those complainants who have cancelled their policies.
The firm should, for the purposes of redressing the complaint, use the value of £9 per £100 of benefits payable as the monthly price of the alternative regular premium payment protection contract. For example, if the monthly repayment amount in relation to the loan only is to be £200, the price of the alternative regular premium payment protection contract will be £18.
DISP App 1.4.9GRP
12If it is not possible for a firm to reconstruct a policy, then it should offer the investor equivalent redress, for example, by paying a cash lump sum equivalent to the amount that would have been credited to a reconstructed policy.
12Example 8Example 8Term extends beyond retirement age and policy reconstructionBackground45 year old male non-smoker, having taken out a £50,000 loan in 1998 for a term of 25 years. Unsuitable sale identified on the grounds of affordability and complaint raised on 12th policy anniversary.It has always been the intention of the complainant to retire at State retirement age 65.Term from date of sale to retirement is 20 years and the maturity date of the mortgage is 5 years after
12Example 9Example 9Term extends beyond retirement age: example of failure to explain investment risksBackground45 year old male non-smoker, having taken out a £50,000 loan in 1998 for a term of 25 years. Unsuitable sale identified on the grounds of affordability and complaint raised on 12th anniversary.It has always been the intention of the complainant to retire at state retirement age 65.Term from date of sale to retirement is 20 years and the maturity date of the mortgage
12Example of assessment set out at 1.3.10The following example illustrates the position:Surrender value£10,000TEP value£16,000Loss calculated by standard approach£5,000Remortgaging costs£300Total£15,300Complainant receives £16,000 all ultimately funded from the TEP sale.Surrender value£10,000TEP value£13,000Redress calculated by standard approach£5,000Remortgaging costs£300Total£15,300Complainant receives £15,300, £13,000 ultimately funded from the TEP sale and £2,300 ultimately
DISP App 3.9.2GRP
In assessing redress, the firm should consider whether there are any other further losses that flow from its breach or failing or from its failure to disclose commission (as applicable), 1 that were reasonably foreseeable as a consequence of the firm's breach or failing or of its failure to disclose commission,1 for example, where the payment protection contract's cost or rejected claims contributed to affordability issues for the associated loan or credit which led to arrears
DISP App 3.1.5GRP
In this appendix:(1) (a) at step 1,3 “historic interest” means the interest the complainant paid to the firm because a payment protection contract was added to a loan or credit product;3(b) at step 2, “historic interest” means in relation to any sum, the interest the complainant paid as a result of that sum being included in the loan or credit product;32(2) "simple interest" means a non-compound rate of 8% per annum;3(3) "claim" means a claim by a complainant seeking to rely upon
DEPP 6.5D.4GRP
(1) The FCA3 will consider reducing the amount of a penalty if a firm will suffer serious financial hardship as a result of having to pay the entire penalty. In deciding whether it is appropriate to reduce the penalty, the FCA3 will take into consideration the firm’s financial circumstances, including whether the penalty would render the firm insolvent or threaten the firm’s solvency. The FCA3 will also take into account its statutory objectives3, for example in situations where
DISP App 3.4.1GRP
DISP 1.3.3 R requires the firm to put in place appropriate management controls and take reasonable steps to ensure that in handling complaints it identifies and remedies any recurring or systemic problems. If a firm receives complaints about its sales of payment protection contracts it should analyse the root causes of those complaints including, but not limited to, the consideration of:(1) the concerns raised by complainants (both at the time of the sale and subsequently);(2)
EG 11.1.3RP
1The FCA has power to apply to the court for a restitution order under section 382 of the Act and (in the case of market abuse) under section 383 of the Act. It also has an administrative power to require restitution under section 384 of the Act. When deciding whether to exercise these powers, the FCA will consider whether this would be the best use of the FCA's limited resources taking into account, for example, the likely amount of any recovery and the costs of achieving and
DEPP 6.7.1GRP
Persons subject to enforcement action may be prepared to agree the amount of any financial penalty, or the length of any period of suspension, restriction, condition,5 limitation or disciplinary prohibition5 (see DEPP 6A)4, and other conditions which the FCA seeks to impose by way of such action. These4 conditions might include, for example, the amount or mechanism for the payment of compensation to consumers. The FCA recognises the benefits of such agreements, as4 they offer
DEPP 6A.2.3GRP
The FCA1 will consider it appropriate to impose a suspension, restriction, condition,3 limitation3 or disciplinary prohibition3 where it believes that such action will be a more effective and persuasive deterrent than the imposition of a financial penalty alone. This is likely to be the case where the FCA1 considers that direct and visible action in relation to a particular breach is necessary. Examples of circumstances where the FCA1 may consider it appropriate to take such