Swinton Insurance - charging a cancellation fee despite cancelling within 2 days

[kp278]

hi, i called up swinton this morning to cancel my insurance that automatically renewed on 30th june. they say i have to pay £60-something (£50 cancellation and £10+ for time on cover).

 

are renewals subject to a cooling off period, or just the credit agreement?

 

how many days in advance should they send the renewal? i read a doc in 2008 that says they have a legal requirement to send the renewal out with at least 28 days notice, but can't find anything for current year.

 

thanks, kristian

[unclebulgaria67]

hi, i called up swinton this morning to cancel my insurance that automatically renewed on 30th june. they say i have to pay £60-something (£50 cancellation and £10+ for time on cover).

 

are renewals subject to a cooling off period, or just the credit agreement?

 

how many days in advance should they send the renewal? i read a doc in 2008 that says they have a legal requirement to send the renewal out with at least 28 days notice, but can't find anything for current year.

 

thanks, kristian

 

FSA rules just say the renewal has to be received by customers within reasonable time. But there are rules that Insurers/Brokers have to apply by, which effectively mean you should get the renewal about 3 weeks ahead of renewal.

 

In regard to the cancellation fee, see http://fsahandbook.info/FSA/html/handbook/ICOBS/7/1

 

Following a renewal you do have a 14 day cooling off period as such and can cancel within the 14 days without penalty, just paying the time on risk. Outside of the 14 days, you would pay £50 plus the time on risk.

 

Refer Swinton to FSA Handbook ICOBS 7.1.1.1. They should follow this and if not raise a complaint.

[kp278]

some interesting reading. although it states i do not have to pay a penalty, section 7.2.3 states:

 

The amount payable may include:

(1) any sums that a firm has reasonably incurred in concluding the contract, but should not include any element of profit;

 

so they may argue the £50 fee does stand on the basis that it covers admin costs.

[kp278]

they also said if i didn't pay the cancellation fees straight away it would be put onto direct debit and incur a fee. i assume they should be giving me 30 days to settle the outstanding fees, looking at this:

 

Consumer's obligation on cancellation

 

ICOBS 7.2.7

06/01/2008

(1) A firm is entitled to receive from a consumer any sums and/or property he has received from the firm without any undue delay and no later than within 30 days.

 

(2) This period shall begin from the day on which the consumer dispatches the notification of cancellation.

[unclebulgaria67]

Up to you what you do next. Check with the FOS. They will say that a £50 cancellation fee charged within the cooling off period would be considered a penalty.

 

Have a read of this. http://www.financial-ombudsman.org.uk/publications/ombudsman-news/54/insurance.htm

 

I think you need to make a complaint to Swinton and pass it on to the FOS if necessary.

 

ICOBS 7.2.3 see other post below.

Edited July 2, 2011 by unclebulgaria67

[kp278]

that was difficult!!! i had to bite my tongue when he started talking about "obviously it's in the terms and conditions that were signed last year". really? according to the icob it's a new contract and not a continuation! but i just kept saying ok and let him feed me with crap.

 

ok so i cancelled and was told because i'm not paying the amount owed today (£63) it will now increase to £83 due to being placed on a direct debit. i'm not sure if this is an interest charge or what not but from reading some of those ombudsman decisions i'm not quite sure how they can argue that charging me £83 for two days insurance is proportionate!

 

can you find anything in the icobs that relate to renewal notice? i've had a look and a search but can't find anything.

 

thanks for your help

[kp278]

breakdown of costs:

 

£646.87 car insurance

-£546.28 refund from insurers

-£66.83 refund of interest

=£33.76

+£50.00 cancellation charge

=£83.76 to pay

 

if i had paid today i would have received a refund of interest of £87.11

which would have meant £63.48 to pay

[unclebulgaria67]

What they are telling you is not correct in my opinion. Speak to Swintons head office complaints handlers after you have checked with the FOS.

 

Please contact our Customer Assistance Team:

• In writing to Swinton, Swinton House, 6 Great Marlborough Street, Manchester M1 5SW.
  
• By telephone - call 0845 168 3676 or fax 0161 236 7102.
  

Swintons t&c's do state that they will make a cancellation charge of £50 within the 14 day cooling off period. So they may argue the toss. Hence my advice is to check with the FOS first to see what they say and then contact Swintons.

 

I think adding a £50 cancellation charge to a policy that has only been renewed for 2 days, is a penalty charge. If it were only a £5 fee then fair enough. The FOS link I added earlier seems to say no charge within the cooling off period, except for the cover.

 

Putting you on to Direct Debit and adding interest is illegal, if this is not your choice. They cannot force you to take credit. Trying to remember the law in this area. I am sure the FOS will know this.

[unclebulgaria67]

ICOBS 7.2.2 06/01/2008 (1) When a consumer exercises the right to cancel he may only be required to pay, without any undue delay, for the service actually provided by the firm in accordance with the contract.

(2) The amount payable must not:

(a) exceed an amount which is in proportion to the extent of the service already provided in comparison with the full coverage of the contract; and

(b) in any case be such that it could be construed as a penalty.

(3) A firm must not require a consumer to pay any amount:

(a) unless it can prove that the consumer was duly informed about the amount payable; or

(b) if it commenced the performance of the contract before the expiry of the cancellation period without the consumer's prior request.

(4) A consumer cannot be required to pay any amount when exercising the right to cancel a pure protection contract.

(5) A consumer cannot be required to pay any amount when exercising the right to cancel a payment protection contract unless a claim is made during the cancellation period and settlement terms are subsequently agreed.

 

 

[Note: article 7(1), (2) and (3) of the Distance Marketing Directive]

ICOBS 7.2.3 06/01/2008 The amount payable may include: (1) any sums that a firm has reasonably incurred in concluding the contract, but should not include any element of profit;

(2) an amount for cover provided (i.e. a proportion of the policy's exposure that relates to the time on risk);

(3) a proportion of the commission paid to an insurance intermediary sufficient to cover its costs; and

(4) a proportion of any fees charged by an insurance intermediary which, when aggregated with any commission to be repaid, would be sufficient to cover its costs.

 

Ok, after thinking about this further, the 7.2.2. effects of cancellaton apply to all cancellations, not just those within the cooling off period. My opinion is 2 a) & b) apply here and outweigh 3 a). I would make the case that £50 in terms of the other costs of cancellation constitute a penalty and therefore it does not matter that the £50 cancellation charge is noted in the policy.

[raydetinu]

now I pressume you have taken out insurance with somebody else prior to this? would not that of prompted you to cancel prior to renewal?

Did you in fact receive a letter from swinton about renewal.

Did they send you a new certificate, usually get that or a cover note on renewal date?

Anyway IMO you do have 14 days to cancel from date agreeing to cover.

did you pay monthly or in one gor, if monthly you have to sign a new loan agreement? if you didnt then no agreement exists.?

[kp278]

now I pressume you have taken out insurance with somebody else prior to this? would not that of prompted you to cancel prior to renewal?

yes. it's the wifes insurance!

 

Did you in fact receive a letter from swinton about renewal.

yes, on the 13th june, but looking at both swintons terms and the icob it would indicate they should send it out 21 days prior. i think this is the term i'm going to argue with them first.

swintons "key facts" from their policy documentation:

Renewing your policy

At least 21 days before each policy renewal date we will tell you the premium and terms and conditions that will apply for the following year. If you wish to change cover or do not wish to renew the policy then please tell us before the renewal date.

You will have 14 days to cancel the policy after the renewal date and receive a refund of any premiums paid, as described in "Your rights to cancel the policy" above.

 

Did they send you a new certificate, usually get that or a cover note on renewal date?

Yes, there's a cover note.

 

Anyway IMO you do have 14 days to cancel from date agreeing to cover.

did you pay monthly or in one gor, if monthly you have to sign a new loan agreement? if you didnt then no agreement exists.?

it's not so much the fact i can cancel it, swinton are not refusing me the right to cancel, it's just the charges they are imposing that i wish to argue. i haven't signed the credit agreement, but that's separate from the insurance anyway. like a credit card. if i spent £2k on a card and cancelled the credit agreement, i'd still have to pay the £2k+

[raydetinu]

well their own terms state full refund!

I bet swinton have not paid the underwrters yet, so no cost to them! which would have been by the credit loan co.( who are? ) probably BISL, anyway.

so in fact nobody has paid anybody yet; Swinton pulling a fast one.

How much did they take?

I trust you have now cancelled the DD, just in case they take some more!

so what happened between the 13 th June and 30th June; did you just forget to cancel the renewal?

[kp278]

hi, they haven't taken anything yet. the direct debit is cancelled.

can they restart the direct debit?

as said above it's the wife's insurance and yes she didn't think to cancel renewal.

[unclebulgaria67]

If it a DD that you have cancelled at the bank, then they should not set up another, as to do so would be against BACS rules as it would be without your authorisation. Your bank would be required to refund any money taken immediately on your request.

 

Put in the complaint straight away to Swinton and leave them with no doubt that the complaint will be referred onto the FOS. If the complaint goes to the FOS, it would cost them a £500 case fee and your wife nothing apart from stamp or phone call.

 

The basis of the complaint in my opinion is that the £50 cancellation fee, two days into a policy with only about £10 as a time on risk, represents a penalty. Swinton have also in the event of a complaint changed the payment method to monthly without your consent, so they could add interest. And then there is the issue of the renewal documents not being received within reasonable time i.e 21 days ahead of renewal.

[kp278]

hi, i'm going to call them this morning and will let you know how i get on. the bit about increasing the charges is quite damning on them i think.

threatening to increase the amount of money we owe them unless i pay within 1hr won't help them i expect.

[kp278]

looks like the direct debit wasn't cancelled in time and they took first payment (£61).

i can see them being a little more stubborn now. just waiting for call back from local branch manager.

[kp278]

i spoke to fos. they didn't give me an opinion on any of the points i raised, just said i should exhaust swintons complaints procedure first. not much help at this stage. kind of reminded me of trading standards

[kp278]

this is interesting. not got to the bottom yet.

http://forums.moneysavingexpert.com/showthread.php?t=973701

[unclebulgaria67]

looks like the direct debit wasn't cancelled in time and they took first payment (£61).

i can see them being a little more stubborn now. just waiting for call back from local branch manager.

 

If you did not authorise the payment, you have the normal DD guarantee rights, which requires your bank to refund your account and send the entry back unpaid to Swinton. Your bank should be more than happy to do this, particularly if you explain the issues with Swinton which could end with the FOS.

 

In regard to Insurers justifying these cancellation charges on the basis of costs incurred. This in a cancellation that occured two days after a renewal, where the charges are five times the amount of the time on risk. I would bet that Swinton will waive the charge, if you were to go to the FOS. It is just not in the interest of Swinton to allow the FOS to start looking at their processes and they way you were dealt with.

[kp278]

regarding the direct debit, swinton would be using the existing DD agreement from last years policy and have carried it over. can they do this?

[unclebulgaria67]

regarding the direct debit, swinton would be using the existing DD agreement from last years policy and have carried it over. can they do this?

 

Yes they can. The DD stays in force until it is cancelled.

 

If they processed this DD before the Insurance was cancelled and these issues arose, I would still tell the bank it was not authorised. I doubt they will call Swinton to find out the date of your call, to see whether it was right for them to return the payment unpaid. They will probably take your word and let you sort it out with Swinton.

[raydetinu]

how did you cancel the DD, phone, on line, at bank and when?

when did they take the money; check dates.

[kp278]

missus called them about half hour ago and they're going to stop the direct debit going out. or reverse it, i don't know the specific terminology.

 

DD cancel was done 1st july online, payment today. so not the two days you should usually allow, another lesson for the missus.

 

i haven't heard back from swinton branch manager yet. i think for the time being i'll send them a letter confirming the date i cancelled the insurance and wait for them to reply advising the outstanding fees. then i can kill some time going back and forth asking them to breakdown the fees. at least i'll have it in writing then. is this a good idea?

[unclebulgaria67]

Well from what I understand of Swinton is that they don't give much in the way of authorisation or discretion to branch manager. Just various targets they have to achieve for generating money for the least possible cost.

 

I think your wife should speak to Swintons head office, as shown on their complaints procedure. Have read much online which seems to indicate the head office customer services will make decisions to write off amounts, where customers have not received the service expected or have been treated unfairly. I suspect branch managers would tend to cover up for the actions of their staff and themselves, when they are hamstrung in being able to resolve themselves.

[kp278]

i tried earlier but first question i was asked was had i spoken to the branch manager. i completely agree that it's just a formality. i've given them 6hrs to call me back, that's enough. i'll call customer assistance tomorrow morning and push it through.