The Central Bank has named six banks that it is investigating for wrongly selling insurance products to thousands of customers.

The banks have been ordered to carry out independent reviews of the sales of the payment protection insurance to find out the scale of the problem, and pay restitution.

Payment protection insurance or PPI repays a loan or credit card if a person becomes sick or unemployed.

Since August 2007, over 300,000 PPI policies were sold in Ireland.

But it has now emerged that many of those policies were sold to people who should not have qualified for them, and would not be entitled to claim if things went wrong, because of their employment status or residency status.

Bank of Ireland, AIB, EBS, Permanent TSB, Ulster Bank and GE Money are all being investigated by the Central Bank.

Customers of those banks are advised that they do not need to do anything at this point. The Central Bank says many have been contacted by claims management companies, who may charge fees of up to a quarter of any refund due.

Instead, it is advising people that the banks involved will be writing to them in the coming weeks to outline their approaches to the review and how they intend to compensate them.

The Central Bank is investigating PPI sales by other banks and credit institutions. It is also considering enforcement action, or fines, for those responsible.

The Director of Consumer Protection at the Central Bank has said compensation and refunds for customers affected by banks wrongly selling insurance products would depend on the individual circumstances and whether the product was mis-sold or not.

Bernard Sheridan said if it is found that PPI was mis-sold the lenders would be required to either refund the premium paid or give the customer the option of retaining the insurance at the current price.

Mr Sheridan said compensation would arise in terms of restitution and he said that would mean getting the premiums back plus interest - which a person could have earned if they had not bought the insurance in the first place.

He said the six banks that are being investigated for wrongly selling insurance products have been asked to carry out a review of past sales practices going back to August 2007. Mr Sheridan said the banks are co-operating fully with the Central Bank by commencing the reviews.

He said the bank's customers would be kept updated by the banks regarding the reviews and he said a large proportion of the reviews would be completed by the middle of next year.

Mr Sheridan said the banks were required to be proactive and contact customers about the issue.