Irish banks have acknowledged having erred by overcharging customers over tracker mortgages. However, a multitude of victims is yet to receive compensation for having been wrongly denied low-cost loans or wrong rates. The tracker mortgage scandal, stretching back as far as practically a decade, is estimated to have impacted over 30,000 homeowners. If a good number have already received compensation, others may have to wait until June 2018 for same.
Banks have been scheming against customers
The tracker mortgage scandal was unveiled in 2015 when the European Central Bank launched an industry-wide examination of tracker mortgages. In 2010, it had first obligated Bank of Ireland, Permanent TSB, and KBC to shift their customers to appropriate tracker mortgages rates. At that period, banks were trying to find tactics to reduce the number of clients on ECB-tracker loans because their own borrowing costs had increased during the crisis.
The ECB-tracker mortgage is a mortgage where the interest rate paid on the loan by the client is the principal borrowing rate of the ECB plus about 1%. This percentage greatly depends on what the banks themselves are offering. However, banks started urging tracker customers to move to fixed-rate options, explaining that fixed rates for a certain period of time would allow them to benefit from a certain level of certainty in terms of repayment. Customers were dismayed when they were not shifted back to their original tracker mortgage rate once the fixed-rate period was over. Customers were, instead, moved on higher fixed-rate and variable-rate loans.
Five banks are in the focal point of the scandal
Irish banks have to keep giving updates regarding the action being taken and their situation following this scandal. Figures compiled at the end of December amounted to 33,700 cases. So far, the banks implicated in this scandal are AIB, Bank of Ireland, KBC, Permanent TSB and Ulster Bank. This is how they have been handling this chaotic situation up to now:
Reputed as the country’s largest mortgage lender after acquiring EBS in 2011, AIB revealed in December last that the number of victims caught up in this scandal was 9,402. Approximately 75% of the victims have received compensation. AIB equally acknowledged charging 956 borrowers a higher rate than they should have.
Bank of Ireland
Since October last, Bank of Ireland is under the control of a new chief executive in the person of Francesca McDonagh. In 2010, the bank identified 5,100 customers who were being wrongly charged and were subsequently shifted to the ECB-tracker mortgage rate. The total number of victims identified in December last amounted to 3,400. The latter were paying 0.15 percentage points above the required rate. As at December 2017, 80% of victimized customers received compensation. The bank stated that the process of compensation should continue in 2018.
KBC Bank of Ireland revealed the number of impacted customers only in October last. In December, the figure was 3,545, including 571 cases identified and resolved in 2010. Redress compensation started in November 2017 and June 2018 has been set as the target date to conclude all payments. KBC equally stated that it is going to set aside €61.5 million as a provision to cover costs entailed with the compensation programme. As such, the total sum earmarked has been set as €120.3 million.
Once reputed as the country’s largest mortgage bank, Permanent TSB identified 1,980 customers who were wrongly charged over tracker mortgages. The bank was amongst the first to be scrutinized publicly in July 2015 when it revealed that about 1,372 customers were overcharged. Permanent TSB stated having redressed and compensated every impacted customer.
Ulster Bank disclosed that 3,500 of its customers were overcharged, maintaining the figure revealed earlier in summer last year. The bank, nonetheless, added that this figure could change as it was still working to identify any additional victims. As at December 2017, all identified customers were shifted back to their tracker rate. Redress and compensation were paid out to 1,070 out of them. Ulster Bank expects to complete payments by end of June 2018.
Six former mortgage lenders, comprising Danske Bank, Bank of Scotland (Ireland) and ACC Loan Management, have altogether identified some 300 affected customers. Irish Bank Resolution Corporation, on its side, registered fewer than 20 cases and went into liquidation.
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