Banks appear to be dictating terms of tracker redress plan
AIB chief executive Bernard Byrne, like most corporate bosses, likes to use business jargon. At a briefing recently when the bank announced profits of €1bn for the first six months of the year, there was much mention of NIMs (net interest margins), capital stacks and CoCos (contingent convertible bonds).
What there was not much talk of was trackers and how the bank shafted its own customers by removing these good-value products from them when it should not have done so.
The bank is to write to up to 3,000 AIB and EBS customers in the coming weeks, telling them they are being restored to tracker rates.
The expectation was that these people would be quickly restored to a proper tracker rate, be refunded for being overcharged and get some compensation.
It is estimated that up to 60 AIB mortgage holders lost their homes because of the overcharging.
AIB has set aside €190m to cover the cost of restoring its customers to the low-cost tracker rates, refunding them overcharged interest costs and paying compensation.
It is all part of an industry-wide review that was ordered by the Central Bank last December.
No wonder Mr Byrne did not want to talk about the tracker-redress scheme at the results presentation, as it later emerged that the bank is restoring some of the affected customers to a 'tracker rate' of 3.7pc, which is higher than its variable rate.
Most tracker rates are set at around 1pc over the European Central Bank rate - effectively 1pc, as the ECB rate is 0pc. This means that people on the tracker rate pay on average €6,000 a year less on a €200,000 mortgage than those being ripped off on variable rates.
Permanent TSB has been accused of doing something similar by restoring people to sky-high tracker-rate margins. It is restoring some trackers at interest rates of 3.25pc.
Frankly, you would need to have your head examined to accept a 'tracker rate' with a margin of 3pc-plus.
Bank of Ireland has around 3,300 customers due to be restored to trackers, including 1,800 staff. Will it also set its tracker rates at levels that negate their benefit?
The banks and the Central Bank need to explain what is going on.
We need to be told why people are being informed that they were wrongfully denied trackers but are being restored to what it is effectively a variable rate.
It certainly seems that the banks are subverting the tracker-redress scheme. If that is case, then it is another case of the banking tail wagging the regulatory dog.
Sunday Indo Business