Banks' refusal to lower tracker mortgage rates 'could be 500m euro scandal'
The refusal of banks to give borrowers cheap tracker mortgage rates could be a 500 million euro scandal, a parliamentary inquiry has heard.
The Central Bank revealed that 78 million euro has been paid out by banks to 2,600 customers affected by decisions not to offer lower cost rates following Ireland's property market collapse and banking meltdown.
Another 42.6m euro of redress and compensation was paid out by Permanent TSB and Springboard Mortgages Limited to 1,374 affected customers.
Following stinging criticism at the Oireachtas Finance Committee late last year over the watchdog's handling of the crisis, Governor Philip Lane said the controversy is a systemic and cultural problem.
"There's no doubt there is a systemic and widespread aspect to this," Mr Lane said.
"Underneath it all ... this is a cultural issue which is interpreting contracts in favour of the lender and not in favour of the customer."
The committee was told 7,800 account issues related to trackers were identified from 2008 to 2015 and 7,100 of those had the issues resolved.
Subsequently a review of the mortgage books of 15 lenders was initiated, including one financial institution which purchased a loan book from another. It has found 9,900 customers affected by banks' refusal to offer or allow them the lower tracker mortgage interest rate.
More than 2 million accounts are being examined.
Michael McGrath, Fianna Fail finance spokesman, said: "You are looking at a half billion euro problem here."
Mr Lane said the number of affected accounts should be known by September but he warned he was legally barred from naming and shaming the responsible banks, the number of mortgage accounts affected in each and how much compensation each lender is being forced to pay out.
Also, lenders cannot be forced by the Central Bank to compensate home owners for tracker issues prior to 2013, the committee heard.
The refusal of banks to allow customers to move on to tracker rates first emerged as far back as 2010 - the year taxpayers were lumbered with a multibillion-euro bailout.
In the six years since banks have repossessed more than 7,500 homes and apartments.
The Central Bank also told the committee its officials have had discussions "in general terms" with the Garda over the tracker mortgage affair.
No criminal complaints have been made, the watchdog's head of enforcement Derville Rowland said.
The committee was also told the average redress and compensation payment to affected customers so far was about 30,000 euro.
Sinn Fein finance spokesman Pearse Doherty said he has long called for the Central Bank to engage with gardai on the scandal.
"I hope the engagement is a genuine and thorough exchange of information and not just a box-ticking exercise in the face of so much public anger," he said.
The Central Bank told the committee it has concluded inquiries into just one lender, Springboard, which saw it impose a 4.5 million euro fine, the largest on record.
That money is on top of the 5.8 million Springboard paid to affected customers as part of a redress scheme.
The Central Bank said it has also launched an enforcement investigation into tracker mortgage-related matters at Ulster Bank and it warned it may take action against other lenders.
"We may also commence other investigations, as appropriate, into other lenders and persons concerned in the management of such entities where there is evidence of non-compliance with regulatory requirements," Mr Lane said.
"In this regard, enforcement activity will be influenced by the outcome of the reviews currently being conducted as part of the tracker examination."