Central Bank ‘failed in duty’ over tracker mortgage

The Central Bank has been accused of a “dereliction of duty” after advising customers in dispute with banks over the tracker mortgage scandal to contact the financial services ombudsman or take legal proceedings themselves — despite believing the banks in question are in the wrong.

Central Bank ‘failed in duty’ over tracker mortgage

Governor Philip Lane told the Oireachtas finance committee that he expects to see more people affected than the 23 previously confirmed to have lost their homes because of the scandal, with 79 more buy-to-lets lost.

Mr Lane said 13,000 customers have been confirmed to be wronged, up from 9,900 it confirmed in March — adding that he expects the number to grow.

Approximately 60% of these cases arose as a result of customers not receiving a tracker product, Mr Lane said. The remaining 40% relate to them not receiving the correct tracker margin.

The scandal occurred when banks incorrectly charged tracker customers higher rates for their loans. The financial adviser who exposed the scandal, Padraic Kissane, said he expects the number to be more than 30,000 when the review is complete.

Cases date back to the financial crash of the last decade. The watchdog’s review includes an examination of 2m mortgages across 15 lenders.

Just 3,300 customers have been repaid the money wrongly charged to them, as well as compensation. Some €120m has now been paid, up from €78m in March. The €120m is in addition to the €36.8m redress and compensation provided by Permanent TSB and €6.2m by Springboard Mortgages before the tracker examination began.

Mr Lane said if the watchdog itself initiated legal enforcement proceedings against banks guilty of wrongly charging tracker holders since its own powers were beefed up in August 2013, it could be “too cumbersome” and would lead to lengthy delays in the overall scandal being unravelled fully.

Mr Lane said “the reality of enforcement powers” mean “a lot of delays” if it is to build a case against a bank disputing a tracker mortgage case. Furthermore, the Central Bank has no power to order compensation for cases pre-August 2013. Most cases date to before that date.

He said it would be “much better to persuade banks” to resolve issues with customers instead of engaging in an adversarial process, and that he hopes “moral persuasion” and public perception will suffice.

This is despite Mr Lane admitting some of the banks within the Central Bank’s review of the tracker mortgage scandal are not as forthcoming with the watchdog as others.

Mr Lane said: “We have two enforcement cases open, two more are in train, and I expect more to follow. We will continue to provide updates to the public on our examination and enforcement actions as this work continues.”

Mr Lane said 26 staff of the Central Bank — it has more 1,600 in total — are working on the scandal, described by TD Michael McGrath as “one of the biggest consumer rip-offs in the history of the State”.

TD Pearse Doherty said it is “shocking” and a “dereliction of duty” that the Central Bank is advising customers who may be affected to take legal proceedings instead of the watchdog: “It is a terrible signal to lenders. It’s like a dog that won’t bark.”

Mr Lane said he expects all lenders to begin redress and compensation by the beginning of 2018.

He said he is “keeping an open mind” on whether the banks had engaged in collusion or cartel-like behaviour when the scandal began but that there is no evidence of that as yet.

The culture of putting the bank first before the customer is, however, a very real problem, he added.

As regarding a change of culture, Mr Lane said “some banks get it” and see co-operating with the review as the most efficient way to do business, whereas other are taking a “minimalist” approach.

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