Last month, the Central Bank announced that six financial institutions – Bank of Ireland, Allied Irish Bank, EBS, GE Money, Ulster Bank and Permanent TSB – must go through their files and undertake reviews using independent third parties who will identify those who took out payment protection insurance on personal loans, mortgages and credit cards and establish whether the contract was a valid one. Where it was not, they have to work out a proper refund and/or compensation process.
This is all going to take time, but in the end, the total amount of PPI compensation could be considerable – some reports suggest as much as €300 million.
Of course this figure is woefully underestimated due to the six-year statute of limitation that applies on all complaints to the Central Bank and financial Ombudsman’s office. Many thousands of PPI policies were sold in the days, let alone years, prior to the October 2006 complaint cut-off date.
Dermot K, a self-employed taxi-driver, is in exactly this position: “I’m self-employed, a sole trader, and I bought a new car in 2006, got a loan from my bank and was told it was a good idea to buy payment protection insurance.
“I paid back my five-year loan last year, the payment protection ended and I didn’t give it another thought until I heard you on the radio and in your columns about how self-employed people do not qualify for PPI and should never have been sold it.
“I wrote to my bank and told them I thought I was missold this policy. They wrote back and said that I signed the contract and ticked the box stating I understood the terms and conditions. They said I never took up my right to cancel the policy within 30 days of signing and they even said that if I had made a claim, well, they would have paid out the benefit.”
Whoever wrote that letter – Mr K also had phone conversations with the bank – was either being intentionally misleading or misinformed themselves.
The selling of PPI to the unemployed, and not explaining the terms and conditions of these policies in simple language, are going to be two of the main reasons why tens of millions in refunds and compensation will be paid here, and why billions of compensation was paid out here.
In Mr K’s case, his bank would never have paid out a benefit: as a self-employed person, this type of insurance simply did not pertain to him. If he had made an illness-based claim, the bank would have obfuscated and delayed telling him why it was not being dealt with and then eventually they would have refused it, probably on some other ground. If he then found out about it being missold, they might have settled complaint with some form of compensation in the hope that would be enough to prevent him taking the case to the Ombudsman.
PPI should never be sold to the self-employed but also never to anyone who works less than 16 hours a week, or to the unemployed, to people working on contract, to those to whom the terms and conditions are not explained and certainly not as a condition of getting the loan. Even someone with a pre-existing medical condition needs to be informed that benefits will never be paid if the claim is related to that condition.
Mr K’s bank clearly wants him to drop his complaint.That loan and policy, they are saying, is closed. Unfortunately for him, his bank, as usual, has a government-devised loophole to slip through: the six-year statute of limitations rule under which the Central Bank and Ombudsman operate.
Tens of thousands of PPI contracts were sold in the months leading to the October 2006 cut-off date; they apply, unfortunately, to all financial product complaints taken to the Ombudsman in this in this country, not just PPI. It is a blunt mechanism that lets the big financial institutions avoid the official complaints procedure if misselling occurred more than six-years previously. These include cases that amount to outright theft (such as overcharging).
In the UK, the six-year statute applies from the date the buyer realises they may have been missold a product and makes their first complaint.
Mr K and anyone else who falls outside this arbitrary rule can still take legal action against their bank. The Small Claims Court is the place to go if the amount involved is less than €2,000. It costs €25 to argue your case.
There are also many legal firms prowling around, offering to deal with the bank on a “no foal, no fee” basis in exchange for a 25% cut from any refund or compensation. Both the Central Bank and the National Consumer Agency (who say that everyone should at least inform the Ombudsman of their misselling experience even outside the statute of limitations) suggest waiting for the official CB investigation to end before giving up 25% of any refund/compensation.
The PPI scandal is bad enough – it is another indication of the corruption of the banks and the incompetence of regulators – but letting them get away it via a statute of limitations is even worse.
I’ve become almost unbearably cynical about politicians and the political process, but they are the only ones, short of a full-blown revolution, that can change existing laws that are…well, just wrong.
I recently met Brian Hayes again. He’s the junior minister in the Department of Finance and while he has been known to say the most incredibly stupid things on occasion, he has also made some relatively intelligent and sensible comments about the state of the banks (in particular) and our bust economy.
I intend to raise this matter with him. I’ll ask him his views about the six-year rule and I’ll let you know whether he thinks it should be changed on the grounds that it is the right thing to do, no matter how it negatively affects the finances of the banks.
Meanwhile, if you support this change – perhaps you’ve been a past victim of a missold financial product – I’d be happy to do include your views when I speak to Brian Hayes.
Just email me at firstname.lastname@example.org.