Mis-sold policies to cost banks millions
The Central Bank will today issue formal instructions to six named banks — Bank of Ireland, Allied Irish Banks, EBS, GE Money, Ulster Bank, and Permanent TSB — to commence reviews of all PPI sales since Aug 2007 and to contact as many as 300,000 policy holders to outline the approach they will be taking and the expected timelines for completion of their reviews and the payment of compensation.
The Central Bank is also extending its investigation to look at mis-sold PPI policies by other banks and credit institutions, having found the problem to be systemic in the Irish banking sector. The Central Bank is understood to be determined that where breaches are found customers will be “appropriately restituted” with premiums repaid in full and appropriate interest paid.
It is expected that the first compensation payments will be made in the new year. However, two of the banks to be named today, AIB and Bank of Ireland, have made €4.1m initial restitution payments to 13,000 customers who were mis-sold PPI policies. It is understood the banking sector is making provisions to pay back tens of millions of euro to customers.
The big five British high- street banks have already set aside £9bn (€11.1bn) to compensate British customers who were wrongly sold payment protection insurance. In Britain, it has emerged that the vast majority of PPI policies were mis-sold.
To date, the Central Bank investigation has focused on PPI mis-selling to the self-employed, those close to retirement, and those on contract — the bulk of whom were ineligible to be insured under such policies.
The Central Bank’s director of consumer protection, Bernard Sheridan, said: “The Central Bank is requiring the firms to take an orderly, co-ordinated, and consistent approach to their reviews and we will continue to monitor them closely. Consumers of the firms undertaking the reviews do not need to do anything at this point; they will be contacted directly by their PPI seller in relation to the review process and next steps.”
The Central Bank said complaints regarding the sale of PPI policies since Aug 2007 will be investigated by the firms listed as part of their reviews.
“All other PPI complaints must be dealt with in compliance with the 2012 Consumer Protection Code, including those relating to sales prior to Aug 2007,” the regulator said.
In June, in a letter to the financial institutions by the Central Bank’s head of consumer protection, insurance, investment, and intermediaries, Patricia Moloney, said: “During the course of its review, the Central Bank identified cases where some firms were unable to provide entire files in relation to consumers, including records of telephone sales, while other files which were provided were missing key documents such as application forms or statements of suitability.”
The Central Bank also said it is aware that many PPI-related complaints and enquiries are being referred to firms by claims management companies on behalf of consumers.
“It is important for consumers to know that such companies charge fees and that the costs to the consumer can be significant,” the regulator added.
The Central Bank estimates that claims management companies may charge upfront fees to act for consumers and/or charge fees up to 25% of any refund due to a consumer.
