In several countries in recent years, public and media attention has been focused on the mis-selling of payment protection insurance (PPI). In 2012 the Central Bank of Ireland directed that a widespread review of PPI sales be undertaken, which resulted in refunds of €67.4 million (including interest of €4.9 million) being made to approximately 77,000 policyholders. Notwithstanding this, a huge volume of disgruntled policyholders have maintained that they were mis-sold PPI and have either submitted a complaint to the Financial Services Ombudsman (FSO) or issued legal proceedings. To date, both the FSO and the Irish courts have largely found in favour of credit institutions and ruled that PPI was not mis-sold to policyholders. However, this has not discouraged claimants and challenges to PPI sales persist.
Central Bank PPI review
In 2012 the Central Bank instructed 11 credit institutions to conduct an extensive review of their PPI sales to identify instances where the Consumer Protection Code 2006 was not complied with. Where breaches were found, a straightforward mechanism was established for premiums, plus interest, to be refunded to customers. The PPI review focused on the sale of PPI from July 1 2007, the date that the code came into effect. Before commencing the review, each credit institution was required to submit detailed plans for how it would conduct the review and to engage an independent third party acceptable to the Central Bank to oversee the review. Each credit institution's review was closely monitored by the Central Bank on an ongoing basis.
Overall, it was found that the credit institutions could not demonstrate compliance with the code in 22% of the sales reviewed. The most common reasons for the failure of PPI sales included eligibility, suitability and poor record keeping. The statistics which emerge from the Central Bank PPI review demonstrate that the vast majority of PPI sales complied with the regulatory requirements set forth in the code.
Financial Services Ombudsman
In 2013 the FSO received 1,736 complaints relating to PPI, which constituted 45% of all complaints relating to the insurance sector. Of 622 findings reached in the third and fourth quarters of 2013:
- 479 were not upheld (ie, the policy in question was not mis-sold);
- 125 were partly upheld; and
- 18 were upheld (ie, the policy in question was mis-sold).
Just 23% of PPI complaints determined by the FSO in that period were upheld (partly or fully), which tallies with the rate of non-compliance found under the Central Bank's PPI review.
Legal proceedings
To date, only a small number of cases have been heard by the Irish courts and in those cases which have been heard in recent months, the courts have found that there was no mis-selling of PPI.
This article first appeared in the International Law Office Insurance newsletter, 26 August 2014.
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