Friday 21 September 2018

AIB tracker lawsuit the only hope for thousands

AIB chief executive Bernard Byrne. Photo: Bloomberg
AIB chief executive Bernard Byrne. Photo: Bloomberg
Charlie Weston

Charlie Weston

The reluctance of AIB to restore thousands of people to tracker rates will have to be resolved in the courts.

The Oireachtas Finance Committee was told there are 5,800 people known as "prevailing-rate" customers.

AIB admits the customers were wrongly denied the option of moving to a tracker contract when their fixed-rate contracts expired from 2008 on, but the bank won't put them back on a low-cost tracker rate.

It claims the "prevailing" tracker rate they would have been entitled to at the time was 7.9pc due to high funding costs.

This is much higher than the prevailing variable rate at the time.

The prevailing-rate customers had no tracker rate specified in their contracts that they would revert to when they came off a fixed rate. Instead, their contracts refer to a "prevailing rate".

This has allowed the bank to argue that the prevailing rate at the time was as high as 7.9pc.

Most tracker rates are contractually set at around 1pc above the European Central Bank rate, which is 0pc at the moment.

The affected customers have been offered cheques for €1,615, with €615 of this to cover the cost of taking professional advice. It claims the customers were not financially disadvantaged when AIB failed to offer them a low-rate tracker.

Fianna Fáil finance spokesman Michael McGrath asked AIB chief executive Bernard Byrne if the matter was closed, as far as the bank was concerned. Mr Byrne said: "Based on the information we have and where we are, it is closed."

He added that the prevailing-rate customers who were not satisfied with the bank's response had the option of appealing their case to the financial services ombudsman, or to take a case in the courts.

Mr McGrath responded the issue was down to interpretation, but it seemed the matter would now have to be resolved in the courts.

The banking group, which includes EBS and Haven, has already owned up to close to 12,000 tracker-denial cases.

This includes some 500 tracker-denial cases at its subsidiary EBS, which it said this week it was prepared to deal with by putting them back on a tracker rate and repaying them overcharged interest.

But it is refusing to put prevailing-rate customers on to a low-margin tracker rate.

AIB had withdrawn its tracker mortgage products, which tracked the European Central Bank's base rate, in October 2008 just before these customers emerged from their fixed-rate contracts.

Despite agreeing to pay them €1,000 in compensation and €615 towards professional advice for breach of contract, the bank claims they suffered no financial detriment by being denied a low-rate tracker.

The TDs and senators on the Oireachtas committee were told in documents supplied by AIB: "Between October 2008 and December 2013, AIB had withdrawn the prevailing tracker rate and, as such, this choice was not available.

"Had the bank maintained a prevailing-tracker rate during this timeframe it would have been more expensive than the variable rates available at that time, as such these customers were not financially disadvantaged," the bank said.

Tracker expert Padraic Kissane said the AIB response to the prevailing-rate customers was waffle.

He said the bank was still failing to put the customers first, despite claiming to do so.

Mr Kissane claimed the bank had concocted the so-called prevailing rate, and it made no sense.

AIB is one of several Irish banks caught up in a mortgage overcharging controversy.

This has led to banks identifying about 37,000 accounts which had the wrong interest rate applied to their loans, or were not offered tracker mortgages, closely tied to the European Central Bank's key rate, when entitled to them.

Rectifying the overcharging is expected to cost banks €1bn.

Irish Independent

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