AIB facing 3,000 claims over wrongful denial of trackers
AIB is facing the prospect of having to restore 3,000 mortgage holders to tracker rates, a leading expert has calculated.
It comes in the wake of Permanent TSB having to restore almost 1,400 people to trackers and to compensate them.
The Central Bank now says it is probing lenders where it suspects mortgage holders were denied a tracker they were entitled to have restored to them.
Financial expert Padraic Kissane, who specialises in tracker-restoration cases, said AIB has around 3,000 customers wrongly denied a tracker after a period on a fixed rate.
He has written to AIB boss Bernard Byrne outlining the scale of the problem at the bank, the Irish Independent has learned.
Mr Kissane has worked on tracker cases for six years, is currently doing a report for the Central Bank on disputed tracker cases at all the banks, and works with lenders as well as homeowners.
He said the AIB customers fixed their mortgages for a defined period, but when that period expired they were denied their right to return to a valuable tracker product.
Tracker mortgages, which have an interest rate that is a set a margin over the European Central Bank (ECB) benchmark interest rate, have proved incredibly valuable in the last five years as the ECB dropped interest rates to record lows.
Tracker rates are four times lower than variable rates.
Mr Kissane, who has specialised in tracker restoration cases for the last six years, said: "AIB has at least 3,000 tracker issue cases," he says.
Restoring thousands of customers and compensating them for being overcharged over a number of years could cost the bank millions of euro.
"They need to hear from an independent practitioner to tell them what the situation is and get it sorted out," he said.
Asked about AIB, a spokesman for the Central Bank said yesterday it had concerns of more tracker-denial cases.
"The Central Bank continues to examine a number of issues with lenders where we have concerns that lenders have not been sufficiently clear with their customers who have, in the past, switched from a tracker rate to a different rate."
Mortgage arrears support groups such as the Irish Mortgage Holders Organisation and New Beginning have both claimed the State-owned bank has a massive problem with AIB failing to give back trackers.
The gap between the cost of a tracker mortgage and a mortgage on a standard variable interest rate is so dramatic that families need to earn an extra €12,500 a year to pay the difference, research has found.
David Hall of the Irish Mortgage Holders Organisation said: "The Central Bank should immediately investigate all banks which had tracker products to establish if customers were overcharged and not given access to the appropriate rate."
Bank of Ireland had to restore more than 2,000 customers who had wrongly lost their trackers in 2010.
AIB has refused to comment.
The Central Bank was warned by the then-Financial Services Ombudsman in 2009 that there was a need for a probe across all the banks.
He was concerned at attempts to deny mortgage holders the option to return to their trackers after being on fixed rates - the same issue that has arisen at Permanent TSB.
But the Central Bank waited years before acting on the issue.
It is now taking enforcement action against Permanent TSB.