Insurance: French Banks Face Demand from 50,000 Customers to Repay 120mn euros

French banks face demands to reimburse more than €120 million euros to mortgage holders and personal loans customers following a class action launched by an Internet-based claims company, Le Parisien reports. actioncivile1 The website sent French banks 46,208 enforcement notices from individuals registered on their site demanding reimbursement for allegedly overcharged insurance premium costs.

The claims relate to captive in-house insurance contracts borrowers were obliged to take out when applying for mortgages and personal loans between 1996 and 2012. The policies, which are normal practice in the banking world, cover the non-repayment of the loan in case of death, disability or incapacity.

But until a law change in 2012 customers had no option allowing them to shop around for the cheapest cover, they were tied to the bank’s often in-house insurance company at the rates the insurer chose to impose.

After a campaign by the French consumer rights group UFC-Que Choisir the law was changed allowing consumer choice and competition to enter this market. The consumer organisation urged borrowers to reclaim some of the excess profit the closed circuit system had made for banks before 2012. UFC-Que Choisir said in principle policyholders should be reimbursed a portion of the profits made on loans insurance contracts prior to the law change.

As of Monday July 21 nearly 50,000 people had taken action via the website. The website offers an easy automated claim file system and handles the dispatch of claims letters (via registered, recorded mail delivery) at no initial cost.

However claimants agree to pay a 15% commission on the amount eventually repaid (the average claim is some of 500 euros per household) if the action is successful. The company posted the flood of claims on Monday July 21 just two days before the deadline set following a decision of the Council of State issued on April 23, 2012.

Should a bank contest the claim the website provides for the dossier to be sent along to the District Court closest to the claimant’s home for processing by hussiers or bailiffs.

Le Parisien reports that more 115 000 people have registered with the site seeking information about the claims process.

Story: Ken Pottinger

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