Written permission to stop misselling

FINANCIAL institutions should have written permission from customers before attempting to sell them investment products, the Consumers’ Association of Ireland (CAI) said yesterday.

This principle should be introduced by the Irish Financial Services Regulatory Authority (IFSRA), according to the finance spokesman for CAI, Eddie Hobbs.

This agreement should last just a year, obliging banks to write to customers every year, he said.

In the light of the latest scandals it was imperative that such a code be insisted on, Mr Hobbs said.

Without such permission banks should not be permitted to pass on sensitive account information to sales staff in branches who then target customers for new business.

In the case of older more vulnerable people financial institutions had “an extra duty of care” to ensure their best interest were served at all times, he said.

Weekend reports suggest pensioners who shifted deposits into investment funds faced losses of up to €80,000 as share values plunged in the wake of the stock market crash.

AIB customers affected complained they were not made aware of the risks involved.

AIB has denied it failed its customers pointing out that demand existed for a better investment return than that available on low deposit rates.

Mr Hobbs was scathing in his general criticism of the banks and said the IFSRA had to step in to ensure proper standards were introduced.

It was not acceptable that banks could tip off sales people that clients had money to invest based on knowledge of their accounts.

That risk runs across the entire banking sector and at this stage the banks were more like car salesmen.

“The older generation in particular held bankers in the same esteem as the priest in Irish society and needed protection from all forms of misselling,” he said.

AIB said it wasn’t company policy to systematically move pensioners’ savings to investment products.

However the vexed question of misselling investment product to pensioners is just the latest in a long list of scandals to hit AIB.

Last week it had to publicly apologise for overcharging Irish customers by €14m on foreign exchange transactions.

Clients of the bank were charged 1% of the value of their exchange transactions instead of 0.5%.

This practice ran for eight years.

In 2002 AIB was rocked by the loss of €690m in its Allfirst subsidiary in the US.

It was also a lead player in the DIRT tax scandal and paid Revenue €114m to settle that misdemeanour.

In 1985 its general insurance subsidiary ICI collapsed and had to be bailed out by the State.