Wednesday 28 September 2016

Bank faces court case over tracker mortgage scandal

Published 29/03/2016 | 02:30

Trackers are priced at a set margin over the ECB rate Photo: DANIEL ROLAND/AFP/Getty Images
Trackers are priced at a set margin over the ECB rate Photo: DANIEL ROLAND/AFP/Getty Images

Huge numbers of people who lost valuable tracker mortgages are likely to challenge Permanent TSB's compensation offers in the courts, a leading financial adviser has said.

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The customers in question have been restored to tracker mortgages - but at interest rates far in excess of what they thought they would be getting.

PTSB has admitted it still has to restore around 1,400 property owners back to tracker rates.

This follows an investigation started last summer, when the Central Bank ordered the bank to put in place a redress scheme.

PTSB has to put the affected customers back on trackers, refund over-charged interest and pay them compensation.

These customers were unfairly denied a return to tracker mortgages after fixing their loan rates for a period.

Tracker mortgages are priced at a set margin over the European Central Bank rate.

The margin is usually 1pc, and the ECB rate is 0pc at the moment, meaning trackers are good value.

But financial adviser Pádraic Kissane, who has been working on tracker-overcharging cases for seven years, said around 500 of the affected PTSB customers were restored to a much higher tracker margin of 3.5pc.

"This is the biggest concern I have with the PTSB redress scheme - some 500 people have been offered tracker rates that are far higher than they expected. It now appears they will have to go to court," he said.

Because of this, Mr Kissane claimed the redress scheme that the bank is conducting was failing hundreds of those affected customers.

All banks are conducting probes into customers wrongly losing their tracker rates.

AIB is expected to have to restore around 3,000 customers to the low-rate mortgages. It has set aside €190m in its latest accounts in order to cover the cost of restoring tracker rates, refunding overcharged interest and paying compensation to those who wrongfully lost their trackers, and to account for lower levels of interest that it will earn from the affected customers in future.

Mr Kissane has now called a public meeting in a bid to put a pressure group together to get higher levels of compensation for PTSB customers who overpaid because they lost their trackers. The meeting is in the City West Hotel, Saggart, Co Dublin, next Thursday, at 8pm.

The financial adviser also questioned why PTSB was making people complete what he called a "victim impact statement" to calculate what level of compensation they will get.

He said this was unfair and very difficult for ordinary people to calculate.

A spokesman for PTSB defended restoring tracker customers at a margin of 3.5pc, which, it said, reflected customers' "contractual entitlement".

Meanwhile, Bank of Ireland had no comment on claims that it will be forced to restore 1,800 of its own employees to tracker rates, along with another 1,200 customers.

The employees had been put on staff variable rates after coming out of fixed rates, but were denied the option of returning to a tracker. The bank has already restored 2,000 customers to tracker rates in 2011.

Mr Kissane maintains that there could be an additional 1,200 customers due for redress, in addition to the bank staff.

Bank of Ireland would only say that it was co-operating with the Central Bank tracker probe.

Irish Independent

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