Written answers

Tuesday, 28 May 2013

Department of Justice and Equality

Proposed Legislation

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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515. To ask the Minister for Justice and Equality if he will outline, in respect of banking consumers who suspect that they have been mis-sold financial products in recent years, he has any immediate plans to implement the recommendation of the Law Reform Commission and reform the limitation period applicable to contract law in respect of the Statute of Limitations which may have a bearing on the mis-selling of financial products by financial institutions; and if he will make a statement on the matter. [25146/13]

Photo of Joe McHughJoe McHugh (Donegal North East, Fine Gael)
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528. To ask the Minister for Justice and Equality his views of the mis-selling of payment protection insurance and linked products by all lenders; if he will consider moving the statute of limitations that applies in this respect; and if he will make a statement on the matter. [25558/13]

Photo of Alan ShatterAlan Shatter (Dublin South, Fine Gael)
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I propose to take Questions Nos. 515 and 528 together.

The mis-selling of financial products has been a matter of ongoing public concern and has been raised by consumer groups and the media as well as in successive reports of the Financial Services Ombudsman whose Office has previously noted that "the current economic climate has affected many consumers across the range of complaints received, however it is most pointedly seen in the complaints regarding investments products. The main area of complaint with regards to investments is the alleged mis-selling of these policies. This complaint type accounted for over 37% of investment complaints for the period 2007-2010. The majority of complaints relate to the consumers' contention that they were sold unsuitable products."

More recently, in its bi-annual review for July to December 2012, the Office of the Financial Services Ombudsman has again highlighted the mis-selling of financial products in noting that, "Payment Protection Insurance (PPI) complaints, representing 32% of all insurance complaints in 2012, have increased by 216% on 2011 figures" (from 405 in 2011 to 1280 in 2012), and that, "in general, the main feature of the complaints concern the suitability of PPI for the consumer and the consumer's knowledge or lack thereof that they agreed to and paid for the product in the first instance." I am also aware that the Central Bank has sought a review by banks of the sale of PPI and the refund of customers who could never claim under that insurance as purchased.

While not under the aegis of my Department, the Financial Services Ombudsman was established under the Central Bank and Financial Services Authority of Ireland Act 2004 and became operational on 1 April 2005. It is a statutory body funded by levies from the financial service providers. The Financial Services Ombudsman can investigate, in an impartial and independent manner, complaints from individual customers and small businesses who have unresolved disputes with Financial Service Providers who are either regulated by the Financial Regulator or are subject to the terms of the Consumer Credit Act 1995.

Under current law, the Financial Services Ombudsman may not investigate a matter which occurred more than six years before the complaint is made. This is in line with the limitation period for most civil claims in the courts, including contract. This limitation period is provided for under section 57BX of the Central Bank Act of 1942, as amended by section 16 of the Central Bank and Financial Services Authority of Ireland Act 2004. The relevant provision states:

"(3) A consumer is not entitled to make a complaint if the conduct complained of--

(a ) is or has been the subject of legal proceedings before a court or tribunal, or

(b ) occurred more than 6 years before the complaint is made, or

(c ) relates to a matter that is within the jurisdiction of the Pensions Ombudsman, or

(d ) is of a class prescribed by Council."

I would also point out that the statutory functions of the Financial Services Ombudsman Council include the keeping under review of the efficiency and effectiveness of the Office of the Ombudsman and advising "the Minister for Finance, either at the Minister's request or at its own initiative, on any matter relevant to the Ombudsman's operation". It would seem, therefore, open to the Council to make any relevant recommendations concerning the current limitation period that it considers appropriate to the Minister for Finance - who will be best placed to consider the appropriateness of such a change in relation to overall Government policy as it applies to financial services. I am also aware that a different approach has been taken to this issue in the United Kingdom. While consumers in that jurisdiction must bring complaints to the Financial Ombudsman Service within six months of the final response letter from the business concerned, no limitation period applies to the matters on which the complaints are based.

The Law Reform Commission has made recommendations in relation to enhancing the coherence of the broader limitation of actions regime in its Report on the Limitation of Actions of December 2011 and in relation to the limitation period applicable to contract law which could have a bearing on the matters raised. I will be happy to take account of these recommendations in any proposals for legislation that I may develop on periods of limitation in the future. In relation to directly addressing the issue of mis-selling raised by the Deputies, this will, in the first instance, have to take account of any relevant developments in core sectoral policy between the Office of the Financial Services Ombudsman, its Council, and the Minister for Finance. To date, I have not been made aware of any developments or proposals in this regard. However, I will take the opportunity to raise the Deputies' concerns with my colleague in Cabinet, the Minister for Finance, as regards the policy position of his Department in relation to a change in the limitation period applicable to the mis-selling of financial products.

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