Friday 20 April 2018

Ulster Bank sets aside €39m to compensate customers hit by new overcharging crisis

Stock picture
Stock picture
Charlie Weston

Charlie Weston

A new overcharging controversy has broken out at Ulster Bank, the Irish Independent has learned.

The lender has set aside €39m to compensate personal and commercial customers, and conduct a review of what went wrong.

It is understood the bank has told regulators that mortgage customers on variable and fixed rates are impacted, along with business accounts. It is thought mortgage customers were put on the wrong interest rates.

The handling of mortgage arrears cases at the bank is also understood to form part of the probe being carried out by the bank, and overseen by the Central Bank.

Ulster Bank closed 11 branches this year, with the same number to go before the end of the year. Five of the 88 branches that will be left will no longer carry out cash transactions.

The bank also said the number of customers who wrongly lost a good-value tracker mortgage rate has doubled to 3,500.

But now more customers, other than those who had a tracker, have been found to have been overcharged. Customers have yet to be contacted.

Ulster Bank chief executive Gerry Mallon admitted the latest overcharging issue arose as the bank trawled though its books as part of a Central Bank-mandated investigation into the taking of trackers from customers.

"As part of our work on the tracker investigation we reviewed personal and commercial customer files. We found errors on them. We need to fix the issues. It is a big project," Mr Mallon said.

Some customers were not getting the deal that is outlined to them in the documentation sent to them.

He said the issues related to mortgages and business lending, and stressed that a number of different issues were identified.

It was too early to say how many customers were affected, or the overall cost of rectifying the situation, he added.

Mr Mallon admitted the bank has now found 3,500 customers were wrongly denied a tracker rate. This is almost double the 1,800 figure the bank previously indicated.

Trackers are the best value mortgage. The interest rate charge tracks the European Central Bank rate at a set margin, usually 1pc more than the ECB rate.

Customers who are still with the bank have been restored to a tracker rate, but the bank has yet to refund them for the overcharging when they were moved to a higher rate, and yet to compensate them.

The bank is due to write to customers in the coming weeks on how it will go about refunding them.

The lender set aside €211m to cover costs associated with the redress scheme for customers wrongly denied a tracker.

The bank reported its adjusted operating profits fell by a third in the first half of the year to €104m. The lower adjusted operating profit was partly due to the fact the bank was not able to free up as much of the provisions it previously set aside to cover bad loans, and is due to low wholesale interest rates.

Aside from the tracker overcharging saga, Ulster Bank has faced accusations in the past from companies that accused it of overcharging them so much it forced them out of business.

The Central Bank said it was aware of the latest issue at Ulster Bank.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business