Despair as families are denied mortgage payouts
SMALL PRINT: Thousands refused cash on expensive insurance policies
THE failure of thousands of homeowners to get a payout on insurance policies taken out to pay their mortgages after they lost their jobs will now be probed by the Central Bank.
People who feared being made redundant took out what is called repayment protection insurance on their mortgages when the housing bubble burst.
This type of insurance is different to mortgage protection insurance which lenders demand that mortgage holders take out and only pays out if the homeowner dies.
Instead, mortgage repayment insurance covers mortgage payments for a year if the insured person loses their job through redundancy, an accident or sickness.
But many of those who took out this optional cover found that insurers refused to pay out when they were laid off.
Small print in the policy contracts allows the insurers to refuse a claim if there was any suggestion of layouts by the policyholder's employer.
John Geraghty of LABrokers said: "The mere hint that there was any possibility that you were going to lose your job meant that the insurer would not honour the claim, yet brokers sold the product with total disregard for consumers.
"It is very easy to sell something to people who are in fear."
He said that thousands who made claims after being laid off were refused payouts.
The insurance is also sold by banks. Mr Geraghty argued that it is expensive and often a waste of money.
Now the Central Bank is to probe all forms of payment protection insurance, including the insurance on personal loans, to see if it was mis-sold.
If your monthly mortgage repayments are €1,000, it costs around €65 a month for mortgage repayment insurance.
Last year in Britain more than £1bn (€1.19bn) was paid out by insurers in the form of premium refunds to people who complained about being mis-sold payment protection insurance.
Now it has emerged that AIB has been forced to repay the premiums to an Irish customer who was represented by McHale Muldoon Solicitors in Dublin.
There have also been claims of massive commissions paid to brokers and bank officials by insurers to encourage them to sell repayment protection insurance. A statement from the Central Bank yesterday revealed that it carried out a small review of the sales processes used by banks for payment protection insurance, including the protection insurance sold by credit card providers. The Bank said: "We have completed our initial review of seven lenders and are now commencing further more detailed assessments as the initial review raised a number of concerns."
It hopes to finish the probe by mid year, with the Central Bank warning that it will take regulatory action if necessary.
Regulators also intend to carry out a probe of how banks are handling the cases of householders who are in arrears.
"The Central Bank is carrying out a review to ensure that all mortgage lenders have a comprehensive strategy and framework in place."