Millions kept by the banks who mis-sold policies
Complaints from before 2008 cannot be examined
Published 24/02/2014 | 02:30
BANKS who mis-sold payment protection products to customers have escaped sanction in about 1,000 cases from last year because of a six-year rule, it will be revealed later this week.
As a result, they are able to retain tens of millions of euro from customers.
Thousands of customers mis-sold premium products like payment protection insurance for credit cards are being "denied access" to redress because of "highly restrictive" legislation.
The figures are contained in correspondence from Bill Prasifka, Financial Services Ombudsman, to Fianna Fail's finance spokesman Michael McGrath, seen by the Irish Independent.
Mr Prasifka's office is set to formally release the figures later this week. In his letter, sent last Tuesday, he said his office received about 8,000 complaints each year.
Of those, 12pc or 1,000 complaints each year fall outside the jurisdiction of his office because of a six-year limit, which precludes his office from examining cases before 2008.
"About 12pc of complaints received – about 1,000 complaints each year, are simply outside our jurisdiction on account of the six-year rule. The majority of these complaints relate to payment protection insurance," Mr Prasifka wrote.
Speaking to the Irish Independent, Mr McGrath said it was not acceptable that "thousands of customers are being denied redress" from banks who knowingly sold them premium products they knew they would never use.
"Banks who mis-sold these products are not only escaping from refunding these customers but are also escaping sanction because of this highly restrictive legislation," he said.
Mr Prasifka also alluded to practices in other jurisdictions, including where people have two years from the time they become aware of the issue, no matter when it happened.
Mr McGrath said he was bringing legislation to do away with the six-year rule and replace it with a system which gives customers three years from when they discover the problem to seek resolution.
The Ombudsman said it was not for his office to set the policy but rather enforce it, suggesting it would have "no objection" to a rule change.
However, he did say a rule change would increase the workload of his office and it would have implications for resources. He also said a rule change should be "relatively easy to administer and not require an extensive factual investigation to make a determination on a preliminary issue".
He also said that the additional workload could lead to delays in his office resolving complaints.
Last October, it emerged that €25m was being returned to customers of 11 financial institutions after it was found that one in five of the policies had been sold in breach of Central Bank rules. The Central Bank was reviewing 350,000 PPI policies that had been sold in the country since mid-2007.
Average amount returned to affected customers was about €750, although some could receive €2,000. Some €12m has already been distributed to 22,500 customers, with a further €13m in the process of being refunded to a group of 21,500 individuals. The refunds cover premiums paid plus interest.
Daniel McConnell Political Correspondent