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Sunday 18 November 2018

BoI boss forced to defend tracker mortgage refusals to chiefs at Central Bank

Bank of Ireland chief executive Francesca McDonagh arrives with officials this week for a meeting with Finance Minister Paschal Donohoe. Photo: Mark Condren
Bank of Ireland chief executive Francesca McDonagh arrives with officials this week for a meeting with Finance Minister Paschal Donohoe. Photo: Mark Condren
Derville Rowland Photo: Gareth Chaney/Collins
Charlie Weston

Charlie Weston

Bank of Ireland boss Francesca McDonagh has been forced to explain to regulators why her institution is refusing to hand back trackers to thousands of customers.

She met yesterday with regulators in the Central Bank who believe her bank should return trackers to around 2,000 customers.

The bank denies it should put these customers, most of whom are staff or ex-staff, back on a tracker, refund them for overcharged interest and compensate them for being out of pocket.

The bank has owned up to around 9,400 tracker cases so far, with most going back to 2010 when it put mortgage holders back on the low rates.

Director general for financial conduct at the Central Bank Derville Rowland pressed Ms McDonagh to return more customers to trackers. Bank of Ireland is facing an enforcement investigation being carried out by the Central Bank over its handling of the tracker issue. And it is now holding out on returning 2,000 staff members to trackers, and refunding them.

The bank is arguing that the bank staff should have been financially literate enough to know what was at stake. It is also making the point that the mortgage contracts are legally ambiguous.

When the property market collapsed from 2007 on, European Central Bank interest rates were as high as 4.5pc.

Thousands of staff in Bank of Ireland opted to fix for a period, on the understanding they could return to a tracker rate once the fixed-rate period ended. The bank did not allow them to return to trackers.

Financial adviser Padraic Kissane, who has been fighting the case for a number of Bank of Ireland staff, said there was clear understanding they could revert to a tracker. Instead, they were put on a variable rate.

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The difference in payments between a tracker and variable rate can be up to €500 a month.

Mr Kissane said: "The staff were assured they were going to revert to their tracker mortgages once their fixed term ended.

"But when the crash came that did not happen. Because of the roles these people play and because they are staff, they have been afraid to do anything. But these are customers of the bank as well as employees - and that can be forgotten."

Documentation given to the staff in 2008 shows the bank had committed to returning those on fixed rates to the tracker once the fixed-rate period ended. In a later letter, the bank went back on this.

The bank said in this letter it had withdrawn the tracker product, and it apologised "for any confusion this has caused".

It is understood the Central Bank has identified between 1,900 and 2,100 Bank of Ireland staff it feels should have a tracker rate restored to, get refunds of overcharged interest and receive compensation.

Irish Independent

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