Banks to return €25m to customers over insurance breaches
Central Bank review of 350,000 finds thousands were mis-sold payment protection
Payment protection insurance promised to pay off loans and credit card debts in the event of illness or job loss. A review by the Central Bank has found €25 milion will be returned to customers. Photograph: Simon Dawson/Bloomberg
Some €25 million is being returned to customers of 11 financial institutions after a partial review of the payment protection insurance (PPI) sector found that one in five of the policies had been sold in breach of Central Bank rules.
The Central Bank yesterday said it had so far considered “over half” of the 350,000 PPI policies that had been sold in the Republic since mid-2007, with its review of the remainder expected to conclude soon. The results so far suggests the average amount to be returned to affected customers is about €750, although some could receive about €2,000. Some €12 million has already been distributed to 22,500 customers, with a further €13 million in the process of being refunded to a group of 21,500 individuals. The refunds cover premiums paid plus interest.
The firms involved are AIB, Bank of Ireland, Bank of Scotland, Danske Bank, EBS, GE Money, KBC Bank Ireland, MBNA, Permanent TSB, RaboDirect Bank Ireland and Ulster Bank. Until yesterday, MBNA had not officially been named as part of the group under review, which covers 80 per cent of PPI issuance in the Republic. A Central Bank spokeswoman said the bank would consider the findings of the current process when it is completed and then decide on how they could be applied to the remainder of the market.
The number of affected customers at each institution varies significantly, with updates on this expected to emerge over coming months. AIB and Bank of Ireland, the State’s largest banks, are both thought to be expecting a low refund rate.
Payment protection insurance promised to pay off loans and credit card debts in the event of illness or job loss , but has in recent years been exposed as being largely worthless in many cases, both here and in the UK. This prompted the Central Bank to investigate the sector and, ultimately, ask companies to look back at their PPI sales since 2007, when the Consumer Protection Code began to apply. The reviews are being overseen by independent third parties.
Mis-selling often arose because customers believed the PPI policy was compulsory when it was not.Other instances of breaching the Consumer Protection Code included self-employed customers being encouraged to take on policies that did not pay out to non-employees.
All customers who fall within the scope of the review process should expect to be contacted by the selling firm before the end of the year. The Central Bank advises that if customers are unhappy with the outcome, they should contact their firm directly. In the event that an affected customer might choose to retain their policy, the firm must conduct a “suitability” assessment.
“Consumers must be confident that all regulated firms are selling suitable financial products in compliance with the Central Bank’s code,” said Bernard Sheridan, the bank’s director of consumer protection.