Thousands in line for refunds after being mis-sold insurance
THOUSANDS of people can expect refunds on payment protection insurance after the Central Bank told seven firms, which are mainly banks, to conduct a trawl through their books to weed out mis-sold policies.
The regulator may end up fining firms for selling the insurance to people who were excluded from making any claim.
Payment protection pays out on your personal loans, mortgage or credit card if you become seriously ill or are laid off. But many of those sold policies would not have qualified for a payout as they were not working in the first place.
Bank of Ireland and AIB have already refunded 13,000 customers, but they may yet have to make more refunds, it has been learned.
This means that millions of euro could be repaid to consumers by the seven firms that are under the spotlight of the Central Bank.
A detailed probe of the sales data of the firms, which are understood to mainly be banks but also include credit card companies, has found evidence of mis-selling.
These firms have now been told to go back to 2007 to check if people were sold insurance that was of no use to them. The reviews will have to be conducted by an independent third party.
Some 340,000 payment protection insurance policies were sold between 2007 and 2011. These are different to mortgage protection insurance, which is a life policy that pays out if the mortgage holder dies.
Many of those mis-sold the payment protection product were not working, or working in the home. Contracts state that only those working over a certain number of hours a week in a paid job can make a claim.
The Central Bank found that firms did not gather enough information about their clients to work out if payment protection insurance was suitable for them, despite being required to do this under the statutory consumer protection code.
Poor record-keeping and incomplete files were also discovered by the regulators.
A number of firms are claiming that consumers opted for an "execution-only" purchase.
This means they would not have to be assessed to see if the product was suitable, but the consumer would need to specify the name of the product and the exact company name to conduct an execution-only purchase.
It is understood regulators are questioning if this is what really happened.
Director of consumer protection at the Central Bank, Bernard Sheridan, said: "The Central Bank is also considering possible enforcement actions in respect of a number of firms as a result of this inspection, due to our concerns regarding the level of compliance with the requirements of the 2006 code.
"We will be contacting the firms concerned directly in due course."
It could be next year before the third-party reviews are conducted at the seven firms.