PTSB failures expose weak controls

Senior opposition politicians said the failures at Permanent TSB that led to mortgage customers losing their homes and saw financial hardship inflicted on many others has once again put the spotlight on soft controls over the banking industry here.

PTSB senior directors yesterday offered their sincere apologies for the bank’s failures in not informing customers when they switched mortgages.

The bank revealed a scandal involving 1,372 mortgage accounts from 2006 to 2011.

Some 61 customer accounts involved a loss of properties. Of those, there was a good chance that at least 22 customer accounts had lost their properties.

At PTSB, and at its Springboard Mortgages unit, the banking group admitted it had wrongly informed customers about their rights under their contracts when customers requested changes to their mortgage terms.

It said some customers had the right to move to tracker rates from fixed-rates when the fixed-rate period ended.

“Many customers” had contacted the bank early — as they were entitled to do — seeking to break from the fixed-rate and many were transferred to standard variable rate. They lost their right to return to a tracker mortgage rate subsequently.

At its Springboard unit, the bank said customers were not put on a tracker at all or were given the wrong tracker rate when their fixed rate period ended. Customers remained on the standard higher variable rate.

That PTSB was strenuously fighting some of its own customers over disputed tracker mortgage rates over many years in the High Court, and recently in the Supreme Court, was well known. PTSB had already set aside €112m to meet potential “legal legacy and compliance” liability costs.

However, the bank revealed yesterday it received an “enforcement letter” from the Central Bank in June 2014, ordering it to review the treatment of customers.

The Irish Examiner has established that PTSB ended its legal actions in February this year. At least one PTSB customer subsequently “voluntarily surrendered” their property to the bank as recently as a few months ago.

The bank said its “complex” scoping study ordered by the Central Bank, discovered the numbers and amounts in redress and compensation it must pay.

Costs for the State-owned bank, including a potential €10m Central Bank fine, could amount to €70m.

Fianna Fáil finance spokesman Michael McGrath said changes need to be made to banking regulations to make it easier for customers to get redress from their lenders. He said the Financial Services Ombudsman is precluded from investigating complaints after a certain time period and the law needs to be reformed to alter those rules.

Mr McGrath said the bank had to be dragged “kicking and screaming” to make amends and offer redress.

Reacting to the overcharging of mortgage holders, Sinn Féin’s Gerry Adams said the State-owned bank had ripped off borrowers and issues with loans had been raised in the Oireachtas two years ago.

“A State-owned bank ripping off mortgage holders. Some people lost their homes,” said Mr Adams. “The minister was warned of this. Pearse [Doherty, the party’s finance spokesman] raised this in a committee way back in 2013. So the minister can’t say he didn’t know. The people affected were also raising this.”

Consumer advocate Brendan Burgess of askaboutmoney.com said the scandal involved cases across the country — in Co Wexford, Dublin, Louth, and Donegal. PTSB still has questions to answer about the new mortgage rates it is offering wronged customers, he said.

PTSB said that its total payment to customers between redress and compensation will average €25,600 at PTSB. At Springboard, the average redress and compensation comes to €23,300.