AIB’s redress bill likely to be small

AIB yesterday launched a redress scheme for 110,000 credit card customers who paid for insurance they didn’t need.

However, it is likely the Government-owned bank will pay less than half of the estimated bill of up to €7m owing to affected users.

The Central Bank said it had been working with AIB for the lender to pay back insurance to credit card customers who had bought credit card protection insurance from Pinnacle Insurance because the card holders were already covered for parts of any losses.

AIB had been selling the insurance cover at an annual premium of €16 since August 2006, and repayments will therefore be calculated on the number of years customers have paid out for the insurance cover.

It believes the average payment per customer will be €66 and the total cost, if every customer were to apply, would reach over €6.6m.

AIB says it will be contacting affected customers and explaining to them how they can apply to get their money back under the redress scheme.

But experience of other redress schemes involving excessive credit card insurance payments show that at most 40% of affected customers will end up applying.

In recent months, the Central Bank had issued guidance to 161,000 customers affected by a separate redress scheme for credit card customers at Bank of Ireland, MBNA, and Ulster Bank.

Affected customers at these banks had been sold insurance cover through Homecare Insurance Ltd (HIL), but again parts of the insurance were already covered by the card providers.

Only €9m was claimed under the three banks’ redress scheme, meaning that around €10m was left unclaimed by card users.

It is believed that the Central Bank will continue to urge customers of the three banks to seek compensation even though the deadline for applying under the redress scheme has officially passed.

“We require all firms to make full disclosure to consumers of all relevant material information when selling any financial product,” said Bernard Sheridan, director of consumer protection at the Central Bank.

“It is important that consumers can have confidence that firms are acting in their best interests and that they are not sold any cover which they do not need,” he said.

“Where this has occurred it is our priority to ensure that consumers receive full redress. We encourage all affected consumers to make a claim.”

An AIB spokeswoman said that it was following procedures used in earlier schemes to compensate customers.