The Central Bank has recently released the findings on its latest inspection of the sale of payment protection insurance (“PPI”) to Irish consumers.
The Central Bank recently carried out a review of sales files for PPI policies sold to Irish consumers, focusing on instances where the consumer had made a claim under their policy for reasons of unemployment or redundancy and where that claim was declined. On 27 June 2012, the Central Bank issued a letter to each of the firms which it had reviewed outlining the areas of concern and the actions that the Central Bank required those firms to take in light of its findings.
When reviewing the sales files, the Central Bank sought to determine the level of compliance with the Consumer Protection Code 2006 (the “2006 Code”). The Central Bank’s letter also outlines the relevant equivalent provisions of Consumer Protection Code 2012 (the “2012 Code”) with which firms are now required to comply. On identifying the various areas of concern, the Central Bank reminded firms of the following specific obligations:
- Provisions 5.16 and 5.17 of the 2012 Code require firms to ensure that a product or service offered to a consumer is suitable for that consumer based on facts about the consumer of which the firm is aware. Firms are also required to seek such facts and information from customers. If PPI is being sold in conjunction with another product, the firm must determine the suitability of both the PPI policy and the primary product being sold for that customer;
- Provision 5.19 of the 2012 Code requires firms to prepare a written statement setting out why the product is suitable, to provide a copy of this statement to the consumer and to retain a copy of the statement;
- Provision 5.24 of the 2012 Code states that, in order for sales to be made on an execution only basis, the consumer must have specified the product and the product provider and the consumer must not have received any advice;
- In accordance with general principle 2.6 of the 2012 Code, firms should ensure that all relevant material information, including the terms and conditions of PPI policies, is provided to customers prior to the sale of the PPI policy;
- Provision 4.1 of the 2012 Code requires firms to bring key information to the attention of the consumer, including exclusions and / or limitations on policies, costs and benefits and also the fact that any changes to a consumer’s employment status during the lifetime of the policy may impact on their ability to make a claim under the policy;
- Provisions 11.5 and 11.6 of the 2012 Code require firms to ensure that any records, including documents, files or information, are maintained for the required period; and
- Firms are obliged to comply with the provisions of the general principles set out in chapter 2 of the 2012 Code, including the obligation to act with due skill, care and diligence in the best interests of customers and the obligation not to exert undue pressure or undue influence on a customer.
The Central Bank has now met with, and written to, the inspected firms requiring them to carry out a detailed review of all of their PPI sales since August 2007. Further, the Central Bank has stated that it is also considering possible enforcement actions in respect of a number of firms and will be contacting firms directly in due course.
A copy of the letter issued to the inspected firms is available here.