Bank settles with customers over mis-selling of insurance
Refunds of over €3,000 in landmark case Hundreds of other claims are lodged
BORROWERS who bought Payment Protection Insurance (PPI) policies have successfully sued their bank for the first time in the Irish courts.
In a series of settlements that could have far-reaching implications for other customers who claim they were mis-sold the controversial insurance products, sub-prime lender GE Money has settled the first of more than 100 lawsuits issued against it over the sales of PPIs.
GE, one of 10 lenders under review by the Central Bank over the sale of the controversial insurance products, has agreed to refund the premiums, plus interest, to two customers who alleged that GE had made "secret profits" from the sale of PPIs.
The test cases alleging negligence in the sales of PPIs were settled at Dublin's District Court yesterday as GE was hit with a fresh 130 claims by consumers, with another 100 writs to be issued in the coming days.
Cases are also pending against all the major banks.
GE, which did not comment on the settlements, has already been fined in the UK over PPI.
PPI is a type of insurance cover that repays your loan, mortgage or credit card should you lose your job, have an accident or die.
But thousands of policies were sold to people in Ireland – including the self-employed – who could never make a claim under the terms of the insurance they bought.
Some 340,000 people bought the products between 2007 and 2011.
Banks have been ordered by the Central Bank to carry out independent reviews of the sales of PPIs to find out the scale of the problem and pay compensation if they were wrongly sold to customers.
Ten banks are currently undertaking reviews of their PPI sales since 2007.
They are Bank of Ireland; AIB, EBS, GE Money, Permanent TSB, Ulster Bank, Bank of Scotland (Ireland), Danske, RaboDirect and KBC Bank.
This week, some 13,000 customers will receive letters from their lenders on foot of a review by the Central Bank, which says it is too early to comment on the number of customers that will receive refunds or the potential amount to be refunded.
Michael Fennessy, from West Newcastle in Clonmel, was one of two men who each got more than €3,000 from GE.
Now an unemployed carpenter, Mr Fennessy was self-employed when he bought PPI.
He said after the settlement: "It's good news for the small man and my case might help someone else."
Expert evidence in Mr Fennessy's action claimed that the PPI sold by GE was not a suitable product for the market and was "significantly flawed".
London-based asset-management expert Daniel Mouen Makoua said the product had been "overpriced" and that commissions were paid to the bank which was also selling the insurance product.
Last night, Eoin McGlinchey, a solicitor at Lavelle Coleman who represented Mr Fennessy and another GE borrower, said: "These actions will point the way for thousands of clients for whom we act."