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Timeline: How the tracker mortgage scandal unfolded in Ireland

Bank of Ireland has been fined €100,520,000 by the Central Bank for its role in the controversy.

Bank of Ireland at College Green in Dublin
Bank of Ireland at College Green in Dublin
Image: Sasko Lazarov via RollingNews.ie

BANK OF IRELAND was today hit with a record €100,520,000 fine by the Central Bank for its role in the tracker mortgage controversy.

The Central Bank has sanctioned the company for denying thousands of its customers access to cheaper tracker mortgages.

It said today that the reprimand was issued for a series of significant and long-running failings in respect of 15,910 tracker mortgage customer accounts which were impacted between August 2004 and June 2022.

The tracker mortgage controversy has seen 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 worst cases people lost their homes as a direct result of the bank’s action.

The Central Bank has already slapped major fines on other lenders for their part in the industry-wide scandal. (More on that later.) 

So, with today’s developments, let’s take a look at how this has played out since the scandal came to light…

What exactly is a tracker mortgage?

For the uninitiated, a tracker mortgage is a home loan with an interest rate set at a percentage above the fluctuating European Central Bank (ECB) rate. This type of mortgage has its pro and cons.

Let’s say your rate is set at one percentage point above the ECB rate. If the official rate drops by a percentage point, your mortgage interest bill also drops and you pay less to the bank.

However, if the ECB rate increases by a few percentage points, your rate will ‘track’ along with it and your payments will also go up to match the change.

In late 2016, it emerged that thousands of Irish mortgage customers who were entitled to a tracker interest rate on their mortgage were denied a right to one or denied the option of one.

Some customers who had been originally given tracker rates were offered alternative products, like fixed-rate mortgages or more expensive variable rates on their mortgages when they were entitled to be on cheaper tracker rates.

After a certain amount of time, these customers could have been offered the chance to switch back over to tracker rates, but no such deal was given.

More than 15 lenders, which include AIB, Bank of Ireland, PTSB, Ulster Bank, have been found to have charged some customers the more expensive rates.

Tracker mortgages were extremely popular because they have an interest rate which is set at a percentage above the European Central Bank interest rate, which fluctuates throughout the year, offering customers the best possible rate.

However, the problems with these specific tracker mortgages being forced onto mortgages which were significantly more expensive than expected placed a huge amount of pressure on homeowners.

Many customers were placed under huge pressure to pay the additional money on their mortgages, sometimes amounting to several hundred euro a month which they had not expected or budgeted for.

As a result, homeowners entered arrears – and some even lost their homes.

2012

Issues first became apparent back in 2012 when the High Court upheld a decision by the Financial Services Ombudsman in relation to complaints made by two couples who were Permanent TSB customers and who had tracker mortgage issues.

The bank launched an appeal to the Supreme Court.

2015

In 2015, Permanent TSB withdrew this appeal and announced it would review another 80 similar complaints. In total, Permanent TSB and Springboard, an offshoot of the bank, paid €43 million in redress and compensation to more than 7,000 impacted customers.

In October of that same year, the Central Bank announced an examination of across 15 institutions to assess whether the problem was more widespread.

2016

Figures began to emerge from the banks the following year – AIB said at least 14 people had lost their homes as a result of the scandal, Bank of Ireland had identified 602 accounts impacted by overcharging and the Central Bank at this time had estimated some 8,200 customers had been affected.

2017 and 2018

In April 2017, the first customer affected by the scandal went public.

The Journal reported that widowed father-of-five Raymond Flavin was being pursued by Bank of Ireland through the courts – despite the fact that it admitted he was an impacted customer. 

The appearance at a meeting of the Oireachtas Finance Committee in October 2017 of four customers who believed they were impacted was a turning point in the controversy.
They shared stories of the stress and financial hardship the scandal had caused. Niamh Byrne, an Ulster Bank customer, told the committee that it had been nine years since the bank first refused her a tracker rate that she was entitled to.

“It has been extremely stressful, it has a huge impact on my finances,” she told the committee.

Financial advisor Padraic Kissane also gave evidence to the committee that day, telling members that if everyone who was truly impacted by the errors was included in the Central Bank’s examination, the figure would pass 30,000.

It was not long before Kissane was proven correct as the figures the banks released continued to increase.

In June 2018, AIB confirmed more than 11,700 of its customers had been impacted. Ulster Bank identified more than 3,400 affected customers. More than 10,000 Bank of Ireland customers were reported to have been impacted at the time.

2019

In August 2019, Financial Services and Pensions Ombudsman (FSPO) Ger Deering revealed a number of lenders were arguing that his office should not investigate certain complaints about tracker mortgages because the consumers had waited too long to make them.

Deering told Fianna Fáil TD Michael McGrath in response to a parliamentary question that some lenders – though not all – were “rigorously challenging the jurisdiction of this office to deal with complaints where there is a question in relation to whether the complaint was made outside the time limits”.

He said his office in these cases can end up spending as much time dealing with assessments in relation to time limits as it would conducting a full, formal investigation of the merits of that complaint.

However, a week later it was reported that banks subject to the investigation of tracker mortgage complaints were expected to row back on their planned challenges after the public rebuke by the country’s financial services watchdog. More on that can be read here. 

Banks being fined

In June, AIB received a fine of €83.3 million while EBS received a fine of €13.4 million. for their part in the scandal.

In March of last year, Ulster Bank was fined almost €37.8 million, Permanent TSB was fined €21 million in 2019 and KBC Bank Ireland was fined over €18.3 million in 2020.

Back to what happened today

As noted above, Bank of Ireland was today hit with a record €100,520,000 fine by the Central Bank for its role in the tracker mortgage controversy.

The Central Bank said today that the reprimand was issued for a series of significant and long-running failings in respect of 15,910 tracker mortgage customer accounts which were impacted between August 2004 and June 2022.

Bank of Ireland admitted in full to 81 separate regulatory breaches.

The regulator determined the appropriate fine was €143,600,000, which was reduced by 30% to €100,520,000 in accordance with a settlement discount scheme.

“This is the largest fine imposed to date by the Central Bank and is in addition to the more than €186,400,000 Bank of Ireland has already paid to impacted customers identified prior to and as part of the Central Bank’s Tracker Mortgage Examination,” the Central Bank said.

Bank of Ireland’s failures resulted in the loss of 50 properties, including 25 family homes, which would have been avoided if Bank of Ireland had complied with the most basic and fundamental of its consumer protection obligations.

Bank of Ireland apologised to customers for its wide range of failings, particularly those that led to customer harm and detriment, and for the length of time it took to recognise and resolve the issues.

The financial firm noted that its regulatory breaches included the provision of unclear contractual documents to customers, failure to interpret these unclear documents in customers’ best interests, unfair complaints handling, deficient mortgage systems and controls, and wrongful exclusion of customers from the protections of the Tracker Mortgage Examination.

Bank of Ireland’s interim chief executive Gavin Kelly said: “Today’s statement from the Central Bank of Ireland is extremely critical of Bank of Ireland. We understand – and fully accept – why this is. What took place in relation to tracker mortgages was wrong. It should never have happened. We are very sorry that it did.

“We unreservedly apologise to all customers harmed by the tracker mortgage issue. The impacts were significant and wide reaching, up to and including loss of homes in the most serious of cases,” Kelly said.

The general secretary of the Financial Services Union, John O’Connell, has today called for a “seismic change” to occur in the banking sector.

“Trust will never be rebuild in the sector without a seismic change in the governance models of the banks. The voice of staff and customers need to be at the heart of the decision-making process. This can only happen if there is a consumer and a staff representative on the boards of the main retail banks,” O’Connell said. 

With reporting by Michelle Hennessy and Céimin Burke 

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