Compensation for 10,000 as tracker loan scandal likely to cost banks €1bn
Almost 10,000 mortgage holders will have their tracker mortgages restored and get thousands of euro in compensation.
In what is now the biggest overcharging scandal in the history of the State, it has emerged that up to 15 lenders are being forced to restore the valuable trackers and make pay-outs.
Banks started denying people trackers when interest rates began rising from 2006, as these people opted to fix their mortgage rate, but then could not get back their trackers.
In an exclusive interview with the Irish Independent, Central Bank Governor Philip Lane revealed that the probe is proving so extensive, the deadline to complete it has had to be extended.
Prof Lane revealed the probe by banks into their tracker books has thrown up "wide-scale" abuses.
Average compensation amounts per customer are thought to be around €25,000.
And the final bill for the banks and other lenders caught up in the probe could top €1bn.
This is made of refunds lenders are being forced to make to overcharged homeowners, compensation, fines and the cost of banks having to engage extra staff and consultants to probe their mortgage books.
Already, about 8,200 homeowners who were overcharged or had their tracker removed have been contacted by lenders. The final total could be more than 10,000.
This includes those who should have been on trackers but weren't, as well as customers who were overcharged.
Yesterday, Bank of Ireland made a new admission of overcharging its tracker customers. The bank had already restored 2,100 customers to good-value tracker rates in 2010. Now it says it has found another 600 cases where homeowners were wrongfully denied a low-cost tracker rate.
And the bank said another 4,000 mortgage customers have trackers, but they were paying too much interest.
It is understood that most of the mortgage holders either denied a tracker or charged the wrong tracker margin were bank staff. However, the bank would not say how many of the latest cases relate to staff.
Governor Lane said that the tracker problem was "wide-scale" across lenders and holds important lessons for consumer protection.
"This has proven to be a wide-scale problem," he said. "It's not random, it's not idiosyncratic, it was a very wide-scale problem but not universal. Not every person on a tracker was affected, so it's important to be proportionate. But it was just not acceptable . . . and so it's important that banks fully redress and compensate those affected."
Prof Lane has not ruled out further action against financial institutions and individuals in what was a record year for enforcement. The Central Bank issued more than €12m in fines.
Financial adviser Padraic Kissane, who specialises in tracker restoration cases, said average combined refund and compensation amounts were likely to average €25,000 across all the lenders.
"The total cost of this to the 15 banks and other lenders will easily exceed €1bn, when you factor in refunds, compensation and fines. People have lost homes.
"This was systemic. Banks knew what they were doing because they set out to deny people their trackers," Mr Kissane said.
Bank of Ireland said: "The Bank of Ireland group would like to sincerely apologise to each of these customers for these failures. The correct rate should have been applied to these accounts and we sincerely apologise for not applying the correct rate in these cases."
AIB has around 3,000 tracker-denial cases, with 2,000 at Ulster Bank. Permanent TSB has had to compensate 1,400 customers over the tracker scandal. Its subsidiary, Springboard, was fined earlier this month over the issue.
The Central Bank probe includes AIB (including EBS and Haven), Bank of Ireland, Permanent TSB, Ulster Bank, KBC, ACC, Bank of Scotland, Danske Bank, IBRC, Dilosk, Leeds Building Society, Pepper Asset Servicing, Springboard, Start Mortgages and Stepstone.