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Monday 4 December 2023 Dublin: 3°C
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Central Bank

AIB and EBS hit with fines totalling almost €100 million over tracker mortgage scandal

AIB received a record fine of €83.3 million while EBS received a fine of €13.4 million.

THE CENTRAL BANK has fined AIB and EBS almost €100 million for the role of the two banks in the tracker mortgage scandal.

The fines follow an enforcement investigation by the regulator that has been ongoing for five years.

AIB received a record fine of €83.3 million while EBS received a fine of €13.4 million.

The tracker mortgage controversy saw tens of thousands of customers being overcharged by their lenders when they were either denied a tracker rate they were entitled to, or charged the wrong rate of interest on their mortgage.

In many cases, the overcharging ran into tens of thousands of euro – in the worse cases people lost their homes as a direct result of the bank’s action.

In a statement following the fines, the Central Bank said that AIB had “failed in its obligations towards its customers”.

“AIB’s failings caused unacceptable harm and loss to those impacted customers over the course of nearly 18 years. Thousands of customers were overcharged and, at the worst end of the scale, customers lost 53 properties, 13 of which were family homes,” said the Central Bank in a statement.

AIB said it “profoundly regrets” its tracker mortgage “failures”.

“The group apologises unreservedly for the impact on our customers’ lives, particularly the devastating consequences for those people who lost their homes,” AIB said in a statement this morning. 

Chief executive Colin Hunt said the scandal “represents a very large stain on the reputation of the bank”.

“We are deeply sorry for the distress and the financial losses caused by the Tracker Mortgage issue,” Hunt said.

AIB said it is focused on building a positive consumer-focused culture to “prevent such detriment ever happening again”.

Seána Cunningham, the Central Bank’s Director of Enforcement and Anti-Money Laundering, said that the fine was in respect of the “serious and long-running” failings in meeting its obligations to tracker mortgage customers.

“The consequences of AIB’s prolonged failings were serious and included significant financial strain and distress for those affected and their families,” Cunningham said.

Our investigation found that when AIB withdrew its tracker mortgage offering there was no proper regard or concern for the impact on its customers.

“What followed was a litany of failings where customers were wrongly denied their tracker entitlements and others lost their tracker rates due to AIB’s deficiencies in its provision of day to day mortgage services.

“In respect of many of its failings, AIB had opportunities to act in order to address those failings and prevent further breaches of its customers entitlements – AIB failed to take these opportunities.”

Cunningham added that the failings were underpinned by not properly considering and recognising the rights of AIB customers.

“The fine imposed today reflects the gravity of the failings identified by the Central Bank’s investigation and the impact of these failings on AIB’s customers.”

Findings from the investigation into EBS found that the bank did not properly manage its mortgage services, which then lead to breaches in both consumer protection rights and contractual rights.

The bank also failed to “adequately warn” customers of the impact of decisions related to their mortgages, with key information not being brought to their attention, particularly on changing mortgage terms.

Derville Rowland, the Central Bank’s Director General of Financial Conduct, said the scale of today’s fines reflects the “seriousness of these issues” and the harm they caused to banking customers.

“We recognise that the fines cannot undo the damage and distress caused to customers,” Rowland said at a press briefing.

“In essence these failures happened because AIB put their own interests before the interests of their customers.” 

She said banks have paid financially and in terms of having “reputations in tatters” as a result of their actions in the tracker mortgage scandal. 

Cunningham said that EBS had “serious deficiencies” in their mortgage services and systems, despite mortgage lending being the core of the bank’s services.

“These deficiencies meant that EBS did not comply with its obligations to customers and many customers lost their tracker product/interest rate margin as a result, and were overcharged for sustained periods of time,” Cunningham said.

EBS withdrew its tracker mortgage products in 2008, at which time EBS took no steps to assess the financial, contractual and regulatory implications of this for its existing tracker mortgage customers. Our investigation found that the cumulative effect of the failure to assess the impact of the withdrawal of tracker mortgage products and the existing deficiencies in the provision of mortgage services resulted in significant harm for EBS’s customers.

Cunningham said that EBS failed to address the tracker mortgage deficiencies, despite being aware of them and that it led to significant damaging consequences for its customers, including the loss of 84 properties, of which eight were family homes.

“This investigation has highlighted that even the simplest error, left unresolved, can have far-reaching consequences in the lives of customers,” Cunningham said.

Finance Minister Paschal Donohoe said today that the scale of the fine that has been imposed by the Central Bank on these two banks “shows the strength of our regulatory system and how seriously the unacceptable behaviour in respect of tracker mortgages is being taken by the Central Bank and the State”.  

Sinn Féin’s Pearse Doherty criticised the Government for not prioritising a Bill that would hold senior bankers to account.  

Donohoe said the legislation has taken some time to draft and required pre-legislative scrutiny.

“I will be bringing the final proposals to Cabinet next week and the legislation will be published before the summer recess,” he said.

In a final report on its examination of the scandal in 2019, the Central Bank said 99 homes were lost as a result of lenders’ failings as well as 216 buy-to-let properties.

More than 30,000 customers of the country’s banks were overcharged by their lenders, including over 9,300 AIB customers.

A total of 14 AIB customers who were impacted by the bank’s decisions around tracker mortgages lost their homes, all of whom were later compensated.

Additional reporting by Orla Dwyer. 

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