Tuesday 25 October 2016

Q&A: The PTSB overcharging controversy

Published 29/07/2015 | 02:30

Permanent TSB on St. Stephens Green
Permanent TSB on St. Stephens Green

Q. Why were these PTSB customers overcharged?

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A. The overcharging row dates back as far as 2008, when the bank was still called Irish Life and Permanent and offered insurance as well as banking.

Affected customers had taken out tracker mortgages with either Permanent TSB or its subsidiary company Springboard Mortgages Limited.

Some of them availed of an offer that allowed them to move to a fixed-rate mortgage for a set period – with the agreement that they could move back to their trackers after the time had expired.

Midway through, interest rates started falling. Some customers contacted the bank to see if there was a way to escape their fixed rate early.

Crucially, they were told they could do this with no penalty.

The bank failed to inform them that leaving the fixed rate early would mean they could not go back on to a tracker, but would

get a standard variable rate instead. So the customers unknowingly lost their tracker mortgages – just as the value of these products was becoming clear.

Q. Why has the bank taken so long to fix this?

A. Resolution of the error has been delayed by a series of appeals Permanent TSB decided to take through the courts. The Financial Services Ombudsman found against it as far back as 2010.

But the bank appealed to the High Court and then, in 2012, to the Supreme Court.

In February of this year it abruptly dropped its appeal, as the Central Bank launched an investigation into the matter. But while all this rumbled on, affected customers were forced to continue paying at the standard variable rate – whether they could afford it or not.

Q. How much will the affected customers get?

A. The damage this caused to the affected customers’ lives is hard to quantify. Forced to pay higher interest rates on their mortgages, some lost their homes, some saw their credit rating affected, some experienced health problems their doctors blamed on stress from financial worries.

The bank hasn’t yet told individual customers how much compensation they will receive, but has said the average payout will be €25,000. People who lost their primary homes directly linked to the bank’s actions will get €50,000 in compensation, while those who lost investment properties will get €25,000.

They will also get a write-down of the remaining balance on their mortgage. All 1,372 affected customers will be contacted by letter over the next two weeks. In the meantime, a reduced interest rate will be applied to their mortgages.

Q. How much will this cost the bank?

A. Up to €86m – mostly paid for by taxpayers, since the State owns 75pc of PTSB. The compensation bill will total €76m, Finance Minister Michael Noonan said, while another €10m in fines could be imposed by the Central Bank.

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