Home Loans News:
Government is stepping in to give you more home loan insurance options
For years banks have been forcing homeowners to accept their short-insurance policies before granting their home loans.
The top South African Home Loan providers have been hiding behind a single clause in the Short-Term insurance act that forces short-term insurance cover on homeowners when you apply for a home loan.
Perfin.co.za reports that the Competition Commission is set to challenge the Financial Services Board (FSB) in an attempt to amend the legislation.
The matter came to light in July 2005 when a Cape Town homeowner challenged Nedbank on their decision not to allow her to choose her own homeownerâ€™s cover.
In a landmark ruling, Charles Pillai, the Ombud for Financial Advisory and Intermediary Services (FAIS), found that Nedbank and Nedbank Group Insurance Brokers had fallen foul of the FAIS Act.
The FAIS Act was introduced to protect consumers from poor advice and misselling, and to uphold the integrity of the financial services industry. The Act came into effect in October 2004.
Pillai believes that this section in the Short Term Insurance Act denies consumers the right to choose.
According to the report, as much as 30 new cases of this nature have been reported to Pillai in the last week and in almost all of the cases, particularly following his determination in the Nedbank case, the banks settled by allowing the client free choice.