PTSB victims may be ineligible for refund
Bank faces pressure on overcharged customers who may have to forfeit their compensation because they went bankrupt
Three customers who were overcharged by Permanent TSB surrendered their homes and went bankrupt, casting doubt on whether they will see a cent of the refund and compensation promised by the bank.
Two customers went bankrupt earlier this year and one late last year, largely because of the mortgage debts to the bank, according to David Hall, of the Irish Mortgage Holders Organisation.
He claimed that all three surrendered their homes under threat of legal action from Permanent TSB.
"We are analysing to what extent they could have made their correct mortgage repayments if the correct interest rate had been applied to their loans and whether they could have avoided bankruptcy," said Mr Hall, who is advising all three.
"I am 100 per cent satisfied that, at a minimum, the inappropriate rate applied to their mortgages was a contributory factor in their going bankrupt - if not the sole reason."
The bank has offered upfront compensation of €50,000 to 39 people who lost their homes,.
However, bankrupts are required by law to surrender their finances to their bankruptcy supervisor. The only exception is personal injuries awards.
This means that any refunds paid to the three customers pushed into bankruptcy will be surrendered to the official bankruptcy assignee, Chris Lehane. He will be obliged to put it towards repaying their debts to Permanent TSB, along with other creditors.
Mr Hall held preliminary talks last week with Mr Lehane to find a way around the problem.
Mr Hall, who is assisting the three bankrupted customers, said his clients were in an "exceptional" situation that was "fraught with complications". They won't see a cent of the overcharging refund, he said, and they will only be entitled to keep the compensation if Permenant TSB reclassifies it as an award for personal injury rather than the loss of a home.
"It is a personal injury in an emotional sense, in that they have lost their homes, unable to pay their creditors. They could have got the overpayment money and used that to pay other creditors earlier in the year."
He said that having lost their homes, they are now stuck in a three-year bankruptcy process they are powerless to reverse. "The only way that you can reverse your bankruptcy is if all your creditors release you," he said. "That is the only way you can be released from bankruptcy."
Although the customers had other debts as well as their mortgage, Permanent TSB was by far the majority creditor, according to Mr Hall.
The bank's chief executive, Jeremy Masding, refused to resign over the scandal that followed a Central Bank investigation. It found that 1,372 Permanent TSB customers were entitled to tracker mortgages but were forced by the bank to pay much higher standard variable rates.
The bank has promised a refund of the amounts overcharged and compensation and upfront payments of €50,000 and €25,000 to those who lost properties.
The bank has appointed a three-person panel that will review cases where people have lost their properties as a result of the over-charging, or where they are taking legal action against the bank.
A spokesman for Permanent TSB confirmed that the panel can award sums of up to €250,000 in compensation but anything higher than that will have to be passed by the bank's board.
In a statement to the Sunday Independent this weekend, Permanent TSB said: "We are aware of five cases where a home loan or buy to let customer who lost ownership of their property is now involved in bankruptcy or a PIA (Personal Insolvency Arrangement). In one of these cases, the mortgage rate issue was a key factor in the loss of ownership."
The statement continued that in the five cases it is not clear at this stage whether the bankruptcy or the personal insolvency arrangement is linked to the mortgage rate issue.
"We are engaging with both the impacted customers and the Official Assignee as appropriate in these cases. We suspended all legal action in respect of impacted customers earlier this year. "
Jerry Beades, of Friends of Banking, called last night for the Central Bank to extend its investigation to overcharging of customers by all the main banks. "Friends of Banking was established to expose the practices of overcharging and bad practices by the banking sector. What has gone on with tracker mortgages is over charging and nothing else."