Banks forced to refund €67m in 'mis-sold' payment protection
Over half PPI policies sold with mortgages and other products fail review
The Central Bank’s director of consumer protection, Bernard Sheridan, acknowledged yesterday that PPI can be a suitable product in certain circumstances, but he said consumers should approach the purchase of a policy with their “eyes open”.
More than one in five payment protection policies in Ireland were mis-sold, a Central Bank review has found, with 11 leading financial institutions being told to repay €67.4 million to 77,000 customers.
However, some 6,000 consumers who were mis-sold PPI policies since 2007 could miss out on refunds worth hundreds of euro because they have failed to reply to letters from their bank or lender, it emerged yesterday.
The average repayment to date has been €875 but it is thought that in some cases, the amount repaid could amount to several thousand euro. The €67.4 million total includes €4.9 million in interest.
The 6,000 consumers who could lose out on a refund have so far ignored or been unaware of at least three letters from the institution that originally sold them the PPI policy.
Under the terms of the Central Bank’s review, 11 financial institutions that had sold PPI policies since 2007 were required to write to customers to inform them of the review process and its outcome.
The Central Bank has instructed the companies to continue trying to reach the 6,000 customers who have not yet engaged with the process and has urged anybody who has not acted on a letter received to reply now.
The bank insists that unclaimed refunds will not benefit the institution that should be paying them out, noting that repayments due in 5,000 of these cases are for amounts of more than €100. In the event that a policyholder due a refund has died, the Central Bank expects that the relevant financial institution would look “sympathetically” on applications from their next of kin or legal representative.
The institutions covered by the the PPI review were: AIB; Bank of Ireland; Bank of Scotland (Ireland); Danske Bank; EBS; GE Capital Woodchester; KBC Bank; MBNA Europe Bank; Permanent TSB; RaboDirect; and Ulster Bank.
Between them, these 11 providers represent 80 per cent of the Republic’s PPI market, with the remaining 20 per cent including sellers such as credit unions or financial intermediaries. The Central Bank will now consider how to approach this rump of policyholders who could be due refunds.
The review commenced last year and applied to the 353,806 PPI policies that had been sold in the Republic since mid-2007, when the Consumer Protection Code began to apply. Policyholders from before that date should contact their institution directly if they have a concern, the Central Bank said.
The review did not break down the numbers affected at each institution, but it said PPI policies sold alongside mortgages and asset/car finance products were the most problematic, with slightly more than half of the 52,295 such policies under review given a “fail”. Policies sold alongside 212,510 personal loans had a fail rate of about 20 per cent.
PPI policies promised to pay off loans and other debts in the event of illness or job loss, but their value has largely been discredited in recent years as wide evidence of mis-selling emerged here and in the UK. This prompted the Central Bank to ask sellers to examine policies sold, with the look-back overseen by independent third parties.
Mis-selling often arose when consumers thought taking on a PPI policy was compulsory when it was not.
Breaches of the Consumer Code also included instances of self-employed individuals being sold policies that would only pay out to employees. Some policies also failed the review because of poor record-keeping on the part of the seller.
The Central Bank’s director of consumer protection Bernard Sheridan acknowledged yesterday that PPI can be a suitable product in certain circumstances, but he said consumers should approach the purchase of a policy with their “eyes open”.
“Firms selling any financial product must ensure they properly assess the needs of consumers and provide products which meet those needs,” Mr Sheridan said.
People with PPI policies that remain open but are due a refund have the option of refusing the payment and retaining the policy. The Central Bank also pointed out that the outcome of the review would not preclude a consumer from individually complaining to their financial institution or to the Financial Ombudsman.