Elderly customers repaid for product mis-selling

Several Irish financial institutions have been forced to repay money to elderly customers who were allegedly mis-sold investment products.

The Ombudsman for the Credit Institutions, Mr Gerry Murphy, has made a number of findings against financial institutions in recent weeks. Most relate to the sale of high-risk or long-term investment products to elderly or infirm people. "You have cases where elderly people are being asked to invest their life's savings into what, in any view, are totally inappropriate products," said Mr Murphy.

Mr Murphy, who is unable to identify particular transgressors but can award compensation of up to €100,000, said he had taken a particularly hard line on banks that had been caught inappropriately selling derivative-based products.

"The worst incidences that we have come across are those based on derivatives where you have a person being effectively advised to have a punt," said Mr Murphy. "These investors think they are buying a share, when all they are doing is having a bet."

The number of complaints about mis-selling of investment products has risen substantially in recent times, accounting for a third of the 1,064 complaints to the Ombudsman last year.

While his recent findings relate to complaints that would have been made in 2004, Mr Murphy said the trend in complaints relating to the alleged mis-selling of investment products was still rising.

A spokesman for the Irish Financial Services Regulatory Authority said it had had an increase in calls from the public in recent days following the revelation that AIB had overcharged customers by up to €25 million on certain foreign exchange transactions.

"A number of these relate to concerns regarding potential mis-selling of products," he said.

IFSRA is waiting for new powers that will include a statutory ombudsman scheme for the financial services sector.

The main banks, with the exception of AIB, were unable yesterday to indicate the scale of complaints in this area. AIB has been named in several reports on product sales to elderly customers. A spokesman for the bank said that its staff had received 13 complaints last year on this issue.

Bank of Ireland, which could not break down the figures yesterday, said it had specific policies in place to protect elderly customers from such practices.

Anyone over 80 looking to buy an investment product have to sign an additional form acknowledging that they understand the nature of the investment being undertaken. The applications are also processed by a senior official in the bank, a spokeswoman said.