Tracker mortgage scandal set to cost banks close to 1 billion euro
Victims claim the controversy has led to suicides and health problems while 100 borrowers lost properties.
Some 316 million euro has been paid out to borrowers who were wronged by banks which denied them access to low interest rate tracker mortgages, the Central Bank has said.
The scale of the scandal has soared from about 20,000 affected consumers being identified by last October to a total of 33,700 to date.
The compensation and redress bill will increase as more suffering homeowners have claims processed.
By the end of 2017, lenders have been forced to pay €316 million in redress and compensation to those affected, with more to follow. This is as a direct result of the work of the Central Bank’s tracker mortgage examination. pic.twitter.com/OevYmjurtR— Central Bank of Ireland (@centralbank_ie) January 18, 2018
Central Bank governor Philip Lane said the unprecedented controversy, where some borrowers were denied the right to go back on to a tracker rate and others were denied access to the correct rate on a tracker, is estimated by banks to cost them about 900m euro – 600m euro for compensation and redress and 300m euro for costs.
The near 1 billion euro bill does not include fines that may be imposed on banks for their treatment of borrowers.
It also does not include costs for the regulatory inquiry which will be charged to lenders.
“Lenders are counting the cost of this scandal,” Mr Lane said.
Three quarters of the 13,000 customers first identified have been compensated. Most of the rest will get their money by the end of March.
The 13,600 customers accepted since last October as being wronged can expect to get their money by the end of June.
Another 7,100 borrowers had been discovered in a previous trawl.
In an update to the Oireahctas Finance Committee on inquiries into the scandal, Mr Lane said some of the numbers were only coming into his offices yesterday.
He said the controversy exposed unacceptable failings on an industry-wide basis and devastating impact on people, some who lost homes.
The committee previously heard about the human cost of the scandal including suicide and long-term health problems.
Mr Lane said: “I acknowledge that this work has taken time to complete and I am conscious of the devastating impact that lenders’ failures have had on customers, up to and including the loss of their homes and investment properties.
“I acknowledge also that no amount of money will ever fully compensate a person or family for the trauma involved in losing their home.”
Mr Lane said the Central Bank was not ruling out individual culpability among bankers for the scandal.
He also warned that board members and senior personnel have significant legal obligations to report possible breaches of regulations to the Central Bank and suspected criminality to gardai.
Top bankers are now being asked to sign and confirm they know their obligations, Mr Lane said.
“The culture of a firm is the responsibility of that firm,” he told the committee.
“In particular, the members of its board should constantly be asking questions of themselves and their firm.”