Mis-selling probe to order refunds

Seven financial institutions are expected to be ordered to pay back tens of millions of euro in mis-sold payment protection insurance premiums by the Central Bank’s director of consumer protection, Bernard Sheridan.

Already two banks, AIB and Bank of Ireland, have paid back more that €4m to 13,000 customers who were mis-sold insurance. It is expected that millions more will have to be paid back to thousands of other customers who were mis-sold the insurance products over a long number of years. It is not know if any of the seven financial institutions have made provisions for the millions they will have to pay out.

Today at noon, the Irish Examiner understands, the results of a “themed investigation” by Mr Sheridan will outline widespread abuse by banks of customers who were mis-sold the products.

The Central Bank investigation has found that the mis-selling of payment protection insurance to the self-employed, those close to retirement, and those on contract — the bulk of whom were ineligible to be insured under such policies — was widespread.

The central focus of the investigation was for 2008, when close to 140,000 payment protection insurance policies were sold, and 2009-2011, when a further 136,000 policies were sold. Payment protection insurance covers mortgage, loan and credit card repayments in the event policyholders become ill, are involved in an accident or become unemployed.

Mr Sheridan will leave the banks under no doubt that where breaches are identified “any affected consumers are appropriately restituted”.

Initiating the investigation the Central Bank said: “We have completed our initial review of seven lenders and are now commencing further more detailed assessments as the initial review raised a number of concerns.

“We intend to complete this assessment in the first half of 2012 to determine if regulatory action is necessary and will follow up with each firm directly. A summary of the main findings will also be published.”

British banks have set aside over £5.5bn (€6.6bn) to compensate British customers who were wrongly sold payment protection insurance. In Britain, it was found that the vast majority of payment protection insurance policies were mis-sold.