Review of rules on mis-selling sought after fall in complaints
Fianna Fáil’s Michael McGrath says balance of proof favours banks and investment firms
Fianna Fáil’s finance spokesman Michael McGrath said in cases where a customer has a justifiable grievance, an efficient remedy must be available to them. .Photograph: Brenda Fitzsimons/Irish Times
Fianna Fáil’s finance spokesman Michael McGrath has called for a review of the rules governing the mis-selling of financial products following the publication of figures which showed a significant fall-off in the number of complaints upheld by the Financial Services Ombudsman.
Figures supplied to Mr McGrath on foot of parliamentary question indicated that in the last three years less than 40 complaints of mis-selling brought before the ombudsman have been successful, out of a total of over 1,300 complaints.
“The numbers are declining year after year. It would be nice to think that this is because of scrupulous actions on the part of financial institutions in ensuring that customers are only sold products which are suitable for their financial needs,” Mr McGrath said.
“However in practice the balance of proof appears to fall very much on the customer, while banks and investment firms are able to escape sanction for very poor quality advice.”
“Financial services firms have consistently acted in a manner contrary to the interests of customers in a range of issues. These have included the sale of endowment mortgages, savings products with high up front charges and payment protection insurance to those ineligible to claim.”
Last month, a Central Bank review found that more than one in five payment protection policies (PPIs) here were mis-sold.
Following the review, which applied to the 353,806 PPI policies that had been sold in the Republic since mid-2007, 11 leading financial institutions were directed to repay €67.4 million to 77,000 customers.
In many cases, consumers thought taking on a PPI policy was compulsory when it was not.
“In some instances it would seem the sole motivation of firms is to collect their fee with little regard for the long term interests of their client,” Mr McGrath said.
“Financial institutions will always claim that they received customer consent that the product the person was sold was suitable for their circumstances. In practice we know that there is a huge information gap between banks, insurance companies and investment firms on the hand and their respective clients.”
“It’s often the case that people feel justifiably aggrieved that they did not fully understand what they were buying, particularly in the case of complex products. A signature on a piece of paper should not absolve firms of their responsibilities.”
Mr McGrath called on Minister for Finance Michael Noonan to undertake an overhaul of the rules governing the sale of financial products to ensure a greater degree of protection is afforded to customers.
“In cases where a customer has a justifiable grievance, an efficient remedy must be available to them,” he said.