Case Studies


Payment Protection Insurance (PPI) Complaint Not Upheld

Policy sold with home loan product - complaint was that policy wasn't asked for and wasn't required, premiums weren't obvious on statements and the complainant states they weren't made aware of the features of the policy and the fact that the uptake of the product was optional.

A complaint was made in respect of a Payment Protection Policy sold in August 2008 offering cover for a Home Loan. The Complainants said that they had discovered the existence of the Policy, having never asked for it and never required it. They indicated that the features of the Policy were never explained to them, nor the fact that it was optional. They contended that they had other Policies in place at the relevant time, so that when one of them had been unable to work, a successful claim had been made pursuant to that other Policy. The Complainants indicated that the premium had never appeared on their bank statements as it had been incorporated into their monthly statements.

The Provider relied upon the Complainants' Application Form for the product recording that the product was optional and it pointed out that following drawdown of the loan, which took place four months later and after the application for cover, an Evidence of Cover Booklet had been sent to the Complainants outlining all relevant terms and conditions, including the 30 days period during which the Policy could be cancelled without cost. The Provider pointed also to the annual mortgage statements confirming the existence of the Payment Protection Insurance and naming both Complainants on the Policy. The Provider also contended that it had never been its policy to make the approval of a loan conditional upon any customer taking out Payment Protection Insurance.

In considering the complaint, the Ombudsman noted the very clear note on the Application Form that the product was optional and the instruction on the form to complete either Option 1 or Option 2 as applicable, depending upon whether or not the mortgage applicants required Payment Protection Insurance. The Ombudsman accepted that the optional nature of the product had been made clear to the Complainants and that, having opted to incept the Policy, the Complainants, after drawdown of the loan four months later, were then notified that the Policy had been put into place, with the Policy Schedule which issued to the Complainants, detailing the level of cover incepted.

The Ombudsman noted that the existence of the Complainants' other policies might well indicate now, looking back retrospectively, that they had held sufficient cover at the relevant time. He noted however that in addition to those other policies, the particular Policy complained of, had also offered valuable benefits in the event of a valid claim. The Ombudsman noted that the evidence did not bear out the Complainants' contention that they had been obliged to accept this insurance product or had been put under pressure to do so.

Payment Protection Insurance (PPI) Complaint Upheld

Business complainant - policy was put in place to cover start-up loan - subsequent claim on policy was rejected - challenge of mis-sale of policy due to fact that benefit would never have been payable and whether eligibility was considered and appropriate from the outset.

In mid 2007 the Complainant Company drew down a Start-up Business Loan and the Directors agreed to give the Provider personal guarantees in relation to that borrowing. The Provider's records indicated that a Payment Protection Policy to cover the Start-up Loan was to have been incepted at the relevant time but was in fact put in place late, approximately 18 months after the Loan Agreement had been entered into. The Directors of the Company subsequently made a complaint that the Policy had been sold on the basis that it was intended to protect their exposure on foot of their personal guarantees. They had understood that for an additional cost representing 10% over and above the loan repayments, they would be personally protected in the event of the business failing. The Provider maintained that the terms and conditions had been explained at the time of selling the Policy and that all relevant Policy Documentation had been furnished in accordance with its standard practice. The Provider also submitted that the Policy had been suitable in the circumstances although it pointed out that any benefit for involuntary unemployment due to “Business Failure” had not existed in 2007 at the time of the drawdown of the Loan. The Provider acknowledged however that when the Policy came into being, later than originally intended, a more up to date booklet had been sent to the Complainants which included “Business Failure” as a benefit.

The evidence showed that when the Directors of the Complainant Company had sought to claim on foot of the Policy, they had been sent a Claim Form for Compulsory Redundancy. This was explained by the Provider on the basis that there was no specific “Business Failure” claim form at the time.

In considering the parties' dealings, the Ombudsman noted that the entity which had drawn down the borrowing was entirely separate from the Directors of that Company who had personally guaranteed the borrowing in question. No evidence was available to establish how the Provider had complied with its regulatory requirements to furnish the Policy Documentation to the Policyholders, nor indeed as to which particular Policy Document had been issued, if at all. The Ombudsman also noted that it remained entirely unclear as to how benefit would ever have become payable in respect of any claim for “Business Failure”. He was also concerned, having reviewed the “Terms of Eligibility” section of the Policy that no provisions were noted to indicate how any corporate entity, as opposed to a natural person, would in fact satisfy the eligibility criteria of the Policy which had been complained of.

The insurable interest in the Policy had rested with the Complainant Company, rather than with the Guarantors who held only a contingent liability in the event of non-payment by the Complainant Company, but who had nevertheless been given to understand that they were “covered”. He was not satisfied therefore that the Complainant Company's needs had been met by the sale of the Policy and he was of the opinion that the Provider failed in its obligations pursuant to the Financial Regulator's Consumer Protection Code to ensure the suitability of the product to the Complainant Company and/or its Directors. He noted the Complainants' expectations at the time they had agreed to incept the Policy retrospectively, that they would be personally protected in the event that the Complainant Company had “failed” affecting its ability to repay the liability to the Provider.

It was unclear in the event as to why the Provider had sought to have the Complainants make a claim for Compulsory Redundancy in circumstances where they were merely guarantors for the monies drawn down by the Company.

The Ombudsman was satisfied that the Policy had been mis-sold and he directed

  • (i) Notification to the insurers of the cancellation of the Policy ab initio and the reimbursement of the premium to the Complainant Company's account, together with all associated interest accrued on the premium from the date of payment.
  • (ii) The crediting by the Provider of the Complainant Company's account with a figure representing 12 months' benefits at the expected level.
  • (iii) Payment of a further compensatory payment of €1,000 to each of the guarantors personally.
  • (iv) The writing off of all interest on the Complainant Company's account from the date of the claim to the insurers, until three months from the date of the Ombudsman's Finding, in order to facilitate the parties in the negotiation of suitable repayment terms, for the remaining liability.

Payment Protection Insurance (PPI) Complaint Partly Upheld

Mis-selling complaint re PPI added to Credit Card account - documentation showed that complainant had option to add or decline PPI when applying for product and had opted to make the purchase - mis-selling aspect not upheld , however provider had not retained records appropriately, hence a partly upheld finding.

A complaint of mis-selling was made to the Ombudsman in respect of a Payment Protection Insurance Policy incepted on a Credit Card Account in December 2008, on the basis that the Complainant had believed that the Policy was compulsory. The Provider indicated that the Complainant had applied online for the Credit Card facility and in the course of the application, she had selected an option to have PPI added to the account.

In reviewing the documentation the Ombudsman noted that the online Application Form indicated that the applicant must complete either Option 1 or Option 2 and it was clearly noted that the Payment Protection Plan was an optional product; he noted that the Complainant had opted to put the Policy in place. With particular reference however to the Provider's obligations pursuant to the European Communities (Distance Marketing of Consumer Financial Services) Regulations 2004, which apply to every distance contract for the supply of a financial service, the Ombudsman was not satisfied that the Provider was in a position to provide adequate evidence that the Policy Documentation had been sent to the Complainant on the inception of the Policy in December 2008, or that it had subsequently issued updated Policy Documentation to her. The evidence submitted to the Ombudsman was in the form of blank and undated template correspondence which in the Ombudsman's opinion was unsatisfactory and contrary to the Provider's regulatory obligations.

The Ombudsman took the view that the substantive complaint that the Policy was mis-sold to the Complainant in December 2008, could not be upheld on the basis of the evidence before him. In circumstances however where the Provider was unable to provide evidence that it had fully met all of its obligations in respect of retention of records, he considered that it was appropriate to partly uphold the Complainant's complaint and he directed compensation of €150 to be paid to the Complainant within 30 days.

Payment Protection Insurance (PPI) Complaint Not Upheld

Complaint that policy not put in place to protect borrowings - claim that responsibility of provider to insist on alternative repayment facility in the event of non-payment of loan from normal means. Not upheld as complainant was aware of PPI policies being available but had made informed decision not to avail of this optional product

The Complainant in this case drew down a Loan in December 2008 with Payment Protection Insurance in place to provide cover. Approximately a year later a further borrowing was agreed with the Provider but, in this instance, no Payment Protection Policy was put in place.

The Complainant contended that it was incorrect for the Provider to provide him with the loan facilities without taking into account his ability to repay the loans in the event of unemployment and without advising on or providing him with Payment Protection Insurance in respect of the borrowing. He maintained that the Bank had failed in its duty to inform him of the risks involved in proceeding with the loans without PPI in place and that therefore he was essentially mis-sold the loans, because PPI had not been put in place to cover those borrowings. He sought to have PPI cover retrospectively applied to his borrowings, to enable him to make a claim pursuant to the cover which he considered should have been in place.

The Provider maintained that the Complainant had not wished to protect either loan and it noted that the Complainant had initially held PPI in respect of one of the borrowings but had subsequently made a decision to cancel it. The Provider contended that on taking out the second loan the Complainant chose not to purchase PPI and he signed the relevant payment protection waiver, at that time.

In considering the Complainant's grievance, the Ombudsman noted the Complainant's contention that based on his salary at the time and given that he had no other means to repay the loans, the responsibility was on the Provider to ensure that he could make the repayments if he became unemployed. The Ombudsman did not however accept that the Provider bore this responsibility. He noted that the Complainant had accepted the loans which he had applied for and indeed his written application to the Provider had confirmed his expectation of an increase in salary in the short-term.

The Ombudsman was satisfied that at the relevant times, the Complainant had made a fully informed decision to enter into both borrowings with the Provider and he was of the opinion that the Complainant had been made aware on both occasions as to the availability of PPI cover. In circumstances where PPI was an entirely optional product, the decision as to whether or not to incept the Policy was one for the Complainant alone to make and, in this event, he had elected to proceed without PPI in place.

Mortgage Request for "Interest Only" Repayments Complaint Partly Upheld

Provider refused a request for ‘interest only' repayments on Mortgage account on the basis that similar requests had been allowed in the past but despite this, the situation had deteriorated further. Only option now was to consider voluntary sale or surrender of the property. Ombudsman cannot direct the Provider to exercise its commercial and lending discretion in any particular manner, but can ensure that the Provider abides by the Code of Conduct on Mortgage Arrears. In this case the Code was complied with, however the reasoning behind the decision was not communicated appropriately to the complainant and the complaint was partly upheld with compensation of €300 being directed, as a result.

A complaint was made to the Ombudsman in relation to a Mortgage Account in circumstances where the Provider refused to facilitate a request by the Complainant to be placed on “interest only” repayments for five years. The Complainant's proposal was to facilitate a repayment of other debts and some works to the mortgaged property and he indicated that after the five year period his intention was to repay the entire mortgage debt or alternatively, repay the principal by way of periodic lump-sum payments.

The Provider pointed out that previous forbearance had been granted to the Complainant and given the period which had elapsed since the repayment difficulties had first come to light, it was unwilling to approve any ongoing forbearance. It suggested instead that the Complainant consider voluntary sale or surrender of the property.

The Ombudsman noted that the loan was drawn down on a repayment basis but the Provider had previously, on six prior occasions, offered forbearance to the Complainant in the form of interest only periods or a moratorium. He also noted that the Complainant had sufficient income to meet the full repayments, but was unwilling to do so, as this would necessitate the freeing up of other assets held. The Ombudsman noted that the Complainant was in effect seeking to enlist the Provider as a joint investment partner in the maintenance and restoration of the mortgaged property. He took the view that the Complainant was not entitled to hold the Provider responsible for his personal circumstances which had delayed the necessary works to the property during recent years and he was not entitled to insist that the Provider forego its legal right to full repayments for a period, so as to enable the Complainant to renovate the property whilst protecting his other investments and allowing him to discharge other debt.

The Ombudsman noted that the Provider cannot be compelled to exercise its commercial and lending discretion in any particular manner; the Ombudsman can simply consider whether the Bank has complied with its legal obligations to the mortgage holder and in particular under the Code of Conduct on Mortgage Arrears. In this instance the documentation illustrated ongoing and detailed engagement by the Provider with the Complainant in relation to his request for an extended interest only period. The Ombudsman was satisfied that the Provider had met its obligations pursuant to the Code of Conduct on Mortgage Arrears and in those circumstances the substantive complaint was not upheld.

In circumstances however where the evidence before him disclosed a failure by the Provider to properly communicate its reasoning to the Complainant, and a particular letter had recorded an incorrect conclusion in respect of the level of income available, the Ombudsman took the view that a compensatory payment of €300 should be made to the Complainant, to be offset against the arrears on the mortgage account.

Mortgage Arrears / Inappropriate Lending Complaint Not Upheld

Two mortgages in respect of a home had fallen into arrears. Complaint was that the provider had not entered into a mutually acceptable solution, had been reckless in its lending in the first place and that options had not been explored under the Central Bank Code of Conduct on Mortgage Arrears. After examining the evidence before him the Ombudsman was unable to uphold any of the complaints cited.

The Complainants in this case held two mortgages in respect of their principal private residence, both of which had fallen into arrears. A complaint was made to the Ombudsman that the Provider had failed (i) to enter into a proposed resolution / mutually acceptable solution, (ii) to take responsibility for its part in enabling the Complainants' loans (due to an overvaluation of the property) and (iii) to explore and document all options for alternative repayment arrangements pursuant to the Central Bank's Code of Conduct on Mortgage Arrears and the associated Mortgage Arrears Resolution Process. The Complainants requested that the Provider “write-down” the balance on their accounts, taking into account the reduction of the value of the mortgage which the Complainants suggested was primarily caused by the initial inflated valuation placed on the security by the Provider's auctioneer and valuer. The Provider indicated that it was not its policy to accept any sum less than the full redemption balance and on appeal by the Complainants, its Appeal Board reiterated that it does not adjudicate on debt forgiveness. The Provider contended that it had complied with the Provisions of the Code of Conduct on Mortgage Arrears and had engaged with the Complainants pursuant to its MARP.

In examining the evidence before him the Ombudsman noted that the valuation referred to by the Complainants dated from 2006 and on its face, indicated that it was for mortgage purposes only, and that no inspection of the property had been undertaken. The valuation also indicated that it was not for the use or benefit of any third parties, whether they had an interest in the property or not. He also noted that the General Mortgage Loan Approval Conditions made it clear that the valuer's report was required by the Provider solely for its own use.

The Ombudsman was satisfied on the basis of the evidence that the valuer's report had been procured by the Provider solely for mortgage purposes, and for its own use only. With regard to the Complainants' submissions in respect of the facilitation of their borrowings, he noted that this was in essence an allegation of reckless or inappropriate lending. Although the Financial Services Ombudsman's Bureau is a non-judicial forum for the investigation, mediation and adjudication of certain complaints, the Ombudsman noted that the existence or not of an actionable wrong of “reckless lending” had been the subject of a High Court decision in January 2010, when the Court had indicated, inter alia, that “...more fundamentally, the argued for tort of reckless lending does not exist in law as a civil wrong. It is not within the competence of the Court to invent such a tort. ....”. The Ombudsman noted that prior to borrowing the monies, the Complainants had been advised to take legal advice and this was noted in their signed acceptance of the loan offer, in 2006. He was satisfied therefore that the evidence available did not support the Complainants in their assertion of any wrongdoing on the part of the Provider in respect of the facilitation of the borrowings.

The Ombudsman also considered the conduct of the Provider in the context of the Code of Conduct of Mortgage Arrears which outlines the necessary steps to be taken by a Provider in considering any forbearance requests from a borrower. He took the view that the Provider had endeavoured to assist the Complainants and had agreed to certain forbearance measures over a number of years in relation to the particular borrowings. The Ombudsman indicated that the consideration of any write-down was entirely at the Provider's discretion and fell outside the Mortgage Arrears Resolution Process. He was satisfied that the Provider had complied with the Code of Conduct on Mortgage Arrears and that the evidence disclosed no wrongdoing on the Provider's part.