THE main banks are facing thousands of claims for misselling payment protection insurance (PPI) to people who did not need it, after a landmark court settlement in Dublin.
Banks made massive profits selling the insurance, but GE Money last week settled the first of more than 100 lawsuits taken against it as a result of mis-selling the product.
“In many cases the banks made more profit from selling the payment protection insurance than they did from the loans themselves,” said Brady Collins of Stanton Fisher, the Irish financial claims agency that is advising clients who paid for payment protection even though they did not need it.
Michael Fennessy, of Clonmel, Co Tipperary, last week brought the first of what is expected to be an avalanche of claims against Ireland’s banks and other financial institutions.
Mr Fennessy, who was represented by solicitors Lavelle Coleman, had taken out PPI costing €70 a month with GE Money.
In his statement of claim he said the company had taken “secret commission” and his financial institution was “negligent” in selling him a product he did not need.
Mr Fennessy, who recovered €2,660 in the settlement, had demanded immediate repayment of all premiums and “secret profits” made by the company and repayment of all the sums that had been collected on his behalf.
About 350,000 people bought these products from banks and other financial institutions.
According to Mr Collins, they took the case because the banks refused to discuss settlement terms. “The test case and those who have already come forward demanding repayment of PPI is only the tip of the iceberg,” he said.
Ten banks and financial institutions are currently undertaking a review of their PPI sales between 2007 and 2010.
About 13,000 customers who bought the insurance will receive letters from their banks in the coming weeks, but the Central Bank has said it is too early to say how many will receive refunds.
Mr Collins said yesterday that “even when the banks were told to do something about this they dragged their heels and didn't comply”.
Similar claims in the UK have been settled in 83 per cent of cases, whereas here the rate is at about 10 per cent.
Experts believe there will be a huge number of PPI claims coming into the courts in the coming months as people who bought the insurance join class actions against the institutions.