Fears of new banking charges scandal as interest may have been overcharged on insurance products
Irish banking faces another overcharging scandal, as EBS investigates the way it has bundled charges for building and life insurance payments and mortgage protection insurance into its monthly mortgage bills.
The investigation into the overcharging issues at the lender, which is part of the Government-owned AIB, is at a very early stage, the Irish Examiner understands.
It will likely be many months before the full multi-million costs are assessed and for affected customers to be informed whether they are due to receive redress and compensation.
It comes at the end of a week in which the questionable behaviour of Irish banks to their customers was again thrown into sharp focus after the chief executive of rival KBC Group in Belgium — which owns KBC Bank Ireland — was forced to apologise for remarks in which he expressed impatience over the industry-wide probe by the Central Bank into the tracker mortgage scandal.
As part of the rescue plan that involved almost €22bn in public bailout cash for AIB, former mutual lender EBS was absorbed into the much larger bank at the height of the financial crisis.
EBS has long charged its customers for building insurance and mortgage protection premiums directly and bundled the payments into the single monthly mortgage repayment.
The investigation involves cases where EBS charged customers for payments on premiums on insurance products that had closed but that the lender nonetheless continued to add interest to the mortgage repayments.
As was the case in the tracker mortgage scandal, cases in which EBS customers who fell into arrears and continued to be charged insurance premiums, will raise concerns.
The lender has around 100,000 mortgage borrowers but the investigation will likely include borrowers who are no longer customers because they have paid off their home loans.
Experts say that bundling insurance premiums into the single monthly mortgage payment acts against the interests of consumers.
It means it is difficult for customers to detect overcharging or any other issues that may arise with their monthly mortgage repayments.
However, news of the investigation will also raise questions over the reasons it has taken so long for the mortgage repayment issues at EBS to come to light despite the intense spotlight facing all Irish banks, including AIB and EBS, due to the tracker mortgage scandal.
“As in any large financial organisation legacy issues will occasionally arise,” an AIB spokesperson said in a statement to the Irish Examiner.
“Our policy, in so far as we can, is to tell customers first and put things right in the most simple and efficient way possible for our customers.”
Padraic Kissane, who did much to reveal the extent of the tracker mortgage scandal 10 years ago, told the Irish Examiner that EBS, as a lender formerly owned by its members, would have in the past been viewed by its customers “as a family member”.
Mr Kissane was appointed to the Irish Banking Culture Board set up by the Government this year following the behaviour of Irish banks uncovered during the tracker mortgage probe.
Michael Dowling, a leading mortgage broker, said that EBS was one of the few lenders to include all payments in the single direct mortgage repayment.
The news of the investigation at EBS comes at an embarrassing time for the banking industry even as the Central Bank’s unprecedented probe into the overcharging of tracker mortgages winds down.
The controversy was rekindled after Johan Thijs, chief executive of KBC Bank Group in Belgium, said earlier this week that the Central Bank needed to move on from the “annoying” tracker inquiry.
Yesterday, Mr Thijs admitted that his comments were insensitive.
