It has taken 13 years, but regulators now claim the monster tracker mortgage probe is finally over. However, questions remain about why the banks made it so difficult to resolve the cases, and the role of the Central Bank, which has taken so long to get to the bottom of the scandal.
The numbers behind the shameful episode are staggering.
A total of 41,000 mortgage holders have been compensated, seven lenders have paid a cumulative €278m in fines and 98 homes were lost, with 229 buy-to-let properties handed over to banks because the overcharging prompted defaults.
Overall, the sorry episode has cost the banks €1.5bn in fines, compensation and other costs.
Bank of Ireland is the last lender to be fined, but its financial sanction is also the largest at €100.5m.
The Central Bank found the bank deliberately denied thousands of its customers good-value trackers.
It failed almost 16,000 customers by denying them a tracker or putting them on the wrong tracker rate at a time when mortgage rates were shooting up.
Its failures resulted in the loss of 50 properties, including 25 homes, which would have been avoided if it had complied with the most basic and fundamental of its consumer protection obligations, the Central Bank said. The loss of two dozen family homes is simply unforgivable.
Bank of Ireland has owned up in full to 81 separate regulatory breaches. The rap sheet brings shame on it.
Regulators had to battle for years to get the bank to own up to the extent of its tracker mortgage shenanigans.
It repeatedly put its own interests ahead of its customers’ and failed to “stop the harm” when initially called on to do so by regulators.
The bank provided unclear documents to customers on their rights to a tracker rate after a fixed-rate period.
And it had an unfair complaints process, according to regulators.
In 2017, the bank lost a battle after desperately trying to exclude 5,000 tracker case customers from the Central Bank investigation.
And regulators charged that any time someone complained about being denied a tracker, the bank “picked them off” and dealt with that individual case instead of dealing with all complaints in a systematic way.
As recently as June, six new cases were identified for refunds and compensation, Central Bank officials said yesterday.
Asked about various attempts by the bank to block the regulators’ probe, the Central Bank’s director of enforcement Seána Cunningham said her office has had “significant interventionist engagement with Bank of Ireland over a number of years”.
The bank has now paid more than €186.4m to affected customers identified before and as part of the Central Bank’s Tracker Mortgage Examination.
All told, the cost to the bank comes close to €330m in fines, compensation and administrative costs, so it has been an expensive experience.
But have any lessons been learned?
Bank of Ireland interim chief executive Gavin Kelly sounded contrite after the fine was announced. He said the statement accompanying the penalty from the Central Bank was extremely critical of his bank.
“We understand – and fully accept – why this is,” he said. “What took place in relation to tracker mortgages was wrong. It should never have happened. We are very sorry that it did.”
The tracker scandal goes back to 2008 and happened at almost all mortgage lenders.
In some cases, banks incorrectly interpreted legal or contractual terms and conditions and denied some customers their right to a tracker.
Banks also failed to warn customers of the consequences of coming off their tracker mortgage to opt for a fixed rate for a period.
These people were told at the end of the fixed period that they could not get back on to their good-value tracker.
In June, the Central Bank fined AIB Group €96.7m for its consumer-protection breaches during the tracker mortgage scandal.
A tracker mortgage is a type of home loan in which the interest rate charged on the mortgage follows that of the European Central Bank rate, with a margin usually of one percentage point above the ECB rate.
The five main banks that were involved in the Irish tracker mortgage scandal are AIB, KBC, Permanent TSB, Bank of Ireland and Ulster Bank.
EBS, a subsidiary of AIB, and Springboard Mortgages, a subsidiary of Permanent TSB, were also involved.
About 40,000 customers were wrongly removed from their tracker mortgages and moved on to a higher interest rate. In many instances, people lost their homes due to the scandal.
However, after the Central Bank said the probe was finished, two things are really troubling.
The first is the fact the banks that have been fined all received big discounts on those fines because they eventually co-operated with the Central Bank, avoiding the need for lengthier and more expensive inquiries.
More annoying is the fact no individuals have so far been named and prosecuted for what is essentially a massive fraud perpetuated by lenders against their customers.
Deputy Central Bank governor Derville Rowland, under persistent questioning from this reporter, denied the bank has been asleep at the wheel or that it is afraid of going after the banks in any meaningful way.
Various reasons for not going after individuals were trotted out, such as the current regulatory framework being too weak, difficulties identifying individuals and finding sufficient evidence to convince the DPP to take a case.
The Central Bank has little to say when it comes to why it took so long to deal with the scandal.
This newspaper first broke the story that banks were wrongly denying people trackers and putting them on the wrong tracker rates in October 2009.
Ms Rowland insisted the regulator has improved since the scandal broke, is now better equipped to deal with bad bank behaviour and is due to be granted new powers to better hold individuals to account.
She insisted the regulator has learned lessons and was continuing to tighten its rules, such as those in its Consumer Protection Code.
We can only hope she is right, because the tracker mortgage rip-off has left stains on our banks, shown up shortcomings in the regulatory work of the Central Bank and led to unpardonable losses of homes, mental health issues, great trauma and suicides.
It is a sorry tale of rules being broken with abandon, akin to the behaviour in a wild west town with no sheriff.
It may be over, but the stench will linger for a long time.