Customers get €67m payout over 'sharp practice' by banks
Regulators criticised for failing to protect public
BANKS have been allowed to trample on the rights of consumers, a damning new report finds.
Householders have been sold out in a desperate bid to save the broken banks, a major academic study by the Free Legal Advice Centre (FLAC) has concluded.
It comes as thousands of consumers have clawed back €67m in refunds from banks and other lenders in a rare example of ordinary people getting some redress after six years of painful financial upheaval.
A total of 77,000 people were found to have been mis-sold an insurance product by lenders pursuing profits and breaching consumer protection rules in the process.
The FLAC study found that banks have been allowed to engage in sharp practices, in a desperate bid to save the financial system.
There is a massive imbalance in power between financial firms and consumers despite one of the biggest financial collapses in the world, and the €64bn bailout of the banks, the study finds.
It shows that consumers and the vulnerable are preyed on by powerful banks and other finance firms that are protected by regulators.
The report castigated the Central Bank for putting the needs of banks ahead of those of consumers.
"A systemic approach has evolved which consistently serves to prioritise the interests of financial service institutions over those of consumers," authors Paul Joyce, a lawyer, and NUI Maynooth's Dr Stuart Stamp state.
There is still a "soft-touch" approach to regulation, instead of the rigorous implementation of tough new rules promised by the Central Bank following the financial collapse, the report says.
The 218-page report, titled 'Redressing the Imbalance', makes 43 comprehensive recommendations for altering the balance of power between finance firms and consumers.
The new report comes as thousands of consumers have shared in a €67m clawback after they were mis-sold a controversial insurance product.
Average payments of €870 have been made to 77,000 people who bought payment protection insurance. The payouts follow a review ordered by the Central Bank into the selling of the insurance.
Some payments have been as high as €2,000.
Eleven banks and finance firms have been ordered by the Central Bank to refund customers who should never have been sold the insurance.
The Central Bank said the €67.4m repaid to consumers after the completion of a review includes almost €5m paid in interest to make up for consumers paying for policies they should not have been given.
A total of 353,800 payment protection policies were probed in the 11 banks, lenders and credit card providers. But the investigation could only go back to policies sold after July 2007, due to legal restraints.
The Central Bank found that 22pc of payment protection insurance was mis-sold.
This is in contrast to Britain, where far higher numbers have been told they were mis-sold the insurance.
UK banks have been forced to set aside £20bn (€24bn) to repay consumers.
The Central Bank denied that lenders here had been let off the hook. It suggested there may still be enforcement actions taken by the Central Bank over mis-selling of payment protection insurance (PPI).
The Central Bank has ordered 11 lenders go back over their books and check who was suitable for and who was mis-sold payment protection insurance. These include AIB, Bank of Ireland, Bank of Scotland, Danske Bank, EBS, GE Money, KBC Bank Ireland, MBNA, Permanent TSB, RaboDirect Bank and Ulster Bank.
The failure of the Central Bank to do more to protect consumers has been sharply criticised in the FLAC report.
"We conclude that the Central Bank's approach prioritises putting obligations on providers over conferring rights on consumers," the report finds.
Consumers have little chance of success if a complaint is made, the report claims.
Ombudsman Bill Prasifka was strongly criticised this week by TDs and senators for the fact that he finds against consumers in eight out of 10 cases.
Mr Prasifka explained that he was heavily constrained in what he can do by law.
Deputy Financial Services Ombudsman Jacqueline McCrum said: "The Financial Services Ombudsman's bureau co-operated with FLAC on the research for their report and we welcome their contribution to the discussions on all issues they wish to raise."
A spokeswoman for the Central Bank said: "Working to protect the interests of consumers continues to be key priority for the Central Bank. We welcome views on how consumer protection framework can be strengthened and will review the report in this regard."