THE Financial Services Authority has altered draft rules governing the sale of payment protection insurance (PPI) in response to criticism from insurers and lenders.
As a result of the proposed changes, companies would have to pay smaller refunds to customers who bought single premium PPI policies, which have since been banned.
Providers of PPI, which allows borrowers to keep up debt repayments if they lose their income, will also be given more time to implement the new measures once they are finalised.
The Financial Services Authority also acknowledged that it had underestimated the costs of complying with the measures, designed to improve the way PPI providers deal with customer complaints.
It said it now estimated the costs borne by insurers and lenders at between £117m and £203m a year for five years, compared with an initial estimate of £58-80m.
The changes come in response to “highly critical” feedback from insurers and lenders on the proposed rules, the FSA said.
But the watchdog stressed that it was not abandoning its attempt to overhaul the PPI market.
“We’re disappointed that the industry has responded so critically to our proposals, but we remain 100 per cent committed to brining about genuine, lasting change in the PPI market,” FSA director of conduct risk Dan Waters said.
The FSA is opening up the revised proposals to further consultation until 22 April.