Punishment: PTSB ordered to pay €21m by the Central Bank
A string of banks is set to be heavily fined over the tracker mortgage scandal after a record punishment was handed down to Permanent TSB.
The regulator has reprimanded and fined Permanent TSB €21m. It said this was due to "serious failings to 2,007 tracker mortgage customer accounts which were impacted for the period between August 2004 and October 2018".
Being denied trackers was behind the loss of 12 family homes, and there were 19 buy-to-let properties taken by the bank as a result of the tracker failure.
The Central Bank said the bank did unacceptable harm to its tracker mortgage customers. Along with the fine, Permanent TSB has had to pay €54.3m in redress and compensation and put the 2,000 customers back on the attractive tracker rates.
It is the first of six banks to be fined over the handling of tracker cases.
Bank of Ireland, AIB and its subsidiary EBS, Ulster Bank, and KBC Bank can also now expect hefty penalties, which could mean more than €100m will be paid by the lenders in fines.
It will also raise fears that ultimately customers could pay in the form of extra fees.
The cost of fines and redress for 40,000 customers of all banks is set to top €1bn.
The Central Bank said the original fine for Permanent TSB was €30m, but this was reduced by 30pc as the bank made a settlement with the regulators, effectively accepting the fine.
Permanent TSB was reprimanded as it failed to warn some of its customers about the consequences of decisions they might make relating to their mortgage. This was when customers chose to opt out of their tracker rates for a period, but were not told they might lose the valuable tracker rate if they did this.
The bank, which is 75pc owned by the State, was also accused by the Central Bank of operations and systems failings. The Central Bank said: "PTSB made a decision to deny certain customers their entitlements to the correct lower tracker rate between 2009 and 2010 unless the customer specifically requested it, or queried or complained."
It was also accused of an incorrect legal interpretation of contractual terms and conditions.
The Central Bank's director of enforcement Seána Cunningham said a mortgage is the single most significant financial commitment most people will make in their lifetime.
"Consumers must have confidence that lenders are acting in their best interests, particularly given the complexity of mortgage documents they need to understand in order to make the best decision.
"Firms must fully adhere to all legal and regulatory obligations, including the Central Bank's Consumer Protection Codes that we have put in place to ensure that consumers are treated fairly by the firms we regulate."
Reacting to the fine, Permanent TSB chief executive Jeremy Masding said: "On behalf of Permanent TSB, I apologise unreservedly to all customers affected by the tracker mortgage issue, and for the distress caused as a result."
Mr Masding was not in charge at the time the breaches happened, from 2004 onwards. But he denied the bank had been dragging its feet over remedial action and said customers would have been compensated even without Central Bank intervention.
David Guinane was chief executive from November 2007 to February 2012, according to his LinkedIn account.
Calls to Mr Guinane for a comment were not answered.
It is understood the Central Bank has not ruled out individual fines.
Fianna Fáíl finance spokesperson Michael McGrath said culture change is needed in the country's banks.
He added: "The most striking thing about today's announcement from the Central Bank is that yet again there is no individual accountability for Permanent TSB's scandalous treatment of some of its customers.
"There are many outstanding tracker cases that remain unresolved. Some of them are in what might be described as a grey area, given the ambiguity in the mortgage documentation. I would like to see the Finance Minister and the Central Bank explore the option of using the revenue from the tracker fines to establish a fund to support the customers in that category.
"We also now need Government to prioritise the legislation to give effect to the recommendations in the Central Bank's 'Behaviour and Culture of the Irish Retail Banks' including the introduction of a senior executive accountability regime."