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Saturday 2 December 2023 Dublin: 3°C
banking error

Explainer: How people on tracker mortgages were shafted by financial institutions

There have been calls for gardaí to investigate the tracker mortgage scandal.

onestep24 / YouTube

I DON’T KNOW what a tracker mortgage is.

You probably remember that phrase from THAT Celtic Tiger advert back in the day.

Well, tracker mortgages are in the headlines once again - and for all the wrong reasons.

What’s the controversy?

Late last year, 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.

How many people have been affected? 

Last summer it was originally thought about 1,400 customers were overcharged by Permanent TSB when this first became known.

However, in December, Fianna Fáil finance spokesman Michael McGrath queried other cases and it then emerged that over 8,200 mortgages could be affected by the overall scandal.

Since then, more information has come to light last December and it is now estimated that up to 15,000 mortgages could be impacted.

How many people lost their homes?  

Sinn Féin’s Pearse Doherty claims that over 100 people have lost their family homes because they were unable to afford the higher mortgage rate they were forced to pay, while others were bankrupted.

So far, we know that Ulster Bank has admitted that 15 families lost their homes, while AIB has admitted the 14 families faced repossession due to their error.

What’s happened since all this came out?

The Financial Regulator carried out a review and the Central Bank asked all banks to review their tracker mortgage portfolios. The scandal has resulted in a number of court cases, with banks committing to a redress scheme for customers.

Some of Ireland’s top bankers have appeared before the Oireachtas Finance Committee.
In one exchange in November 2016, Pearse Doherty said:

You watched these individuals lose their homes, you actually took the homes off these people. In my view, this is daylight robbery of their own customers.

The Sinn Féín said when the tracker problem was pointed out to the bank, officials initially denied anything was wrong. / YouTube

If there is a redress scheme in place for customers? And what’s happening this week?

Doherty is going one step further and calling for the tracker mortgage scandal to be considered a criminal matter.

He says that the bankers who oversaw the removal or denial of tracker mortgages should be “investigated for common theft”.

Doherty is putting down a private members motion in the Dáil today calling for a strict deadline for redress and compensation to the victims and is also calling for cooperation between the gardaí, the Central Bank and the Office of the Director for Corporate Enforcement to hold those responsible for the scandal to account.

He also wants the government to bring forward legislation to ensure that individuals working within financial institutions, as well as corporate entities, can be held accountable for white-collar crime.

He said the motion “expresses solidarity with the thousands affected”.

“We know that up to 15,000 families have been victims of this abuse by banks across the board yet these banks are still stringing the families along with pro-forma letters each month with no new information,” he said.

For me this whole scandal brings back into the light how weak our laws are when it comes to tackling white-collar crime.

Will it be supported?

That’s still unclear. A government spokesperson said there is still no definitive government position on the motion.

However, it’s understood the government will not be backing the motion as it stands in its current form as the criticisms levelled towards the Central Bank pose an issue.

Government sources said there was wrongdoing by the banks, but it’s believed the people best to oversee the investigation and redress scheme is the Central Bank.

It’s believed there have been vigorous discussions surrounding the tracker scandal held at government level, with sources stating the government will be watching it very, very closely.

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