Thousands to share €50m windfall over insurance errors
Banks ordered to repay fees to 70,000 customers sold 'useless' policies
THOUSANDS of people are in line for compensation after they were sold an insurance product that has been branded "useless".
Around 35,000 people are in line for €25m in windfall refunds after a review of half of all payment protection insurance policies sold since 2007.
By the end of the review another 35,000 people are expected to be identified for compensation, with the total expected to top €50m.
But critics have accused the Central Bank of deliberately keeping the overall number of payouts down in a bid to reduce the cost to the banks.
Compensation payments of up to €3,000 each are to be paid out to people who were mis-sold the insurance, with the average payout set to be €700.
Eleven banks and finance houses have been ordered to refund customers who should never have been sold the insurance.
One in five of the policies was found to be mis-sold to consumers.
This is in contrast to Britain, where far higher numbers have been told they were mis-sold the insurance.
Frank Conway of the Irish Financial Review accused the Central Bank of suppressing the problem in a bid to protect the banks.
Mr Conway said: "The Central Bank has deliberately limited the numbers getting compensation to reduce the costs to the banks."
And chief executive of the Consumers' Association Dermott Jewell said there was no reason to believe the mis-selling of what he called "useless" payment protection insurance (PPI) was any less a problem here than in the UK.
Mr Jewell said: "There should be more people compensated. The scale of the mis-selling of the product here is likely to be the same as in the UK."
In Britain, banks have been forced to set aside €22bn to cover complaints. That is twice the cost of last year's London Olympics.
The English financial services ombudsman upholds seven out of 10 complaints.
But the Central Bank, which is overseeing a review of the sale of payment protection here, said yesterday mis-selling had been identified in just one in five sales of the product here.
Payment protection insurance was sold with personal loans, credit cards and mortgages. It is designed to meet the monthly repayments if the policyholder becomes ill, has an accident or loses their job.
Large numbers of people have been mis-sold the insurance because certain types of consumer are excluded from making a claim on the policy.
Most policies exclude claims from people who are retired, the self-employed, homemakers, and part-time workers. These people should not have been sold payment protection policies.
And thousands of other consumers that did not know they had a policy, are also likely to get refunds for the premiums they have paid, plus interest.
The Central Bank has ordered 11 lenders to check who was suitable for and who was mis-sold payment protection insurance.
The Central Bank said an independent third party was overseeing the review being carried out by the lenders.
Director of Consumer Protection at the Central Bank Bernard Sheridan said: "To date approximately €25m has been identified for refund to those consumers whose files have already been reviewed. The Central Bank will continue to monitor the firms to ensure that their reviews have been completed by the end of 2013 and to our satisfaction."
The regulator denied there was any attempt to dampen down the compensation levels.
A Central Bank spokeswoman said Ireland was a smaller financial market than the UK.
By Charlie Weston