Permanent TSB to pay €25,000 refunds to tracker customers
Refunds averaging €25,000 each could be paid to a large number of Permanent TSB mortgage holders as soon as next month, it has emerged.
More than 2,000 homeowners are in line for the refunds and to be put back on valuable trackers.
Permanent TSB has to compensate the mortgage holders and put them back on trackers after it had initially refused them the low-rate home loan deals.
Central Bank intervention prompted the bank to drop a Supreme Court attempt to deny the homeowners the return of the trackers.
The regulator is taking enforcement action against the bank, a move that prompted it to put in place a process to restore the customers to trackers and compensate them.
It had been thought the redress scheme would take months. It began in February, but now it has emerged letters to the affected homeowners could start being delivered as soon as the first week in June, although there is no certainty that this deadline will be kept. And the average amount of compensation is likely to be around €25,000 - much higher than originally thought.
A spokesman for the regulator said: "The Central Bank can confirm that we are pursuing an active and on-going enforcement investigation into issues arising from certain customers of PTSB losing their contractual entitlement to a tracker mortgage as a result of them breaking out of a fixed-rate interest period early. The Central Bank cannot comment on on-going enforcement investigations."
The bank, which is run by Jeremy Masding, faces a fine of up to €10m from the Central Bank for failing to restore the customers to trackers. Interest rates on trackers are a fraction of other mortgage product rates.
Other banks are likely to come under pressure to make similar concessions to people who were not warned properly they could not return to trackers if they chose a short-term fixed rate.
But this is likely to be strongly resisted, especially as banks are coming up against huge pressure to cut variable rates.
Permanent TSB had originally refused to allow some customers who had switched from a tracker rate to a fixed-rate mortgage to revert to the tracker.
A glitch in the IT system of Permanent TSB meant customers were able to come off the fixed rates early, at a time when interest rates were falling, without a penalty. But the bank would not allow them to revert to trackers, despite promising this. It argued that they had breached the terms of their deal by exiting the fixed rates early.
Customers took cases to the financial ombudsman services, which found in their favour. Permanent TSB appealed this decision to the High Court, lost, and then appealed to the Supreme Court.
It dropped the Supreme Court challenge when it emerged that the Central Bank was taking enforcement action against it.