Tracker mortgage scandal could cost €500m

The eventual bill for compensation in the tracker mortgage scandal could be €500m, the governor of the Central Bank has said.

Philip Lane told the Oireachtas Finance Committee that it was reasonable to assume that the lenders being probed in the scandal could have a combined €500m to pay for redress, fines, and compliance by the time the examination is concluded.

In response to Fianna Fáil TD Michael McGrath, who asked if he thought the wrongdoing was “systemic and widespread”, Mr Lane said there was “no doubt” there was such an aspect to the practice.

He said that, ultimately, the culture within lending institutions meant contracts were interpreted in favour of the lender and not the customer, adding that he hoped those responsible would have “intense regret” at what had happened.

The scandal publicly surfaced two years ago, when the State-controlled Permanent TSB set aside tens of millions in its accounts for a potential redress scheme in the run-up to a shares sale.

Permanent and its former Springboard unit were subsequently fined by the Central Bank.

In addition to Springboard Mortgages Limited and Permanent TSB, the Central Bank has also begun an enforcement investigation into tracker mortgage-related matters at Ulster Bank, Mr Lane said.

“We may also commence other investigations as appropriate,” he added.

It is now believed that upwards of 15,000 customers were affected, some of whom lost their homes as a result.

Just short of 10,000 customer accounts have officially been identified by the end of February.

About €78m has been paid in redress and other compensation to about 2,600 customers identified as part of the examination.

The €78m does not include €5.8m paid to more than 200 customers of lender Springboard, which was fined because of wrongdoing over seven years.

Then owned by PSTB, Springboard was fined €4.5m, the heaviest penalty ever imposed by the Central Bank.

PTSB has since sold the Springboard unit.

Some 2m mortgages were originally ordered to be reviewed as part of a probe of 15 lenders that were written to as part of the examination.

Of those 15 lenders, six are still in the process of their own review and will report to the Central Bank by September, at the latest.

AIB has set aside €190m, Bank of Ireland €25m, Permanent TSB €140m, and Ulster Bank €211m for redress and other costs associated with their review.

Mr Lane said the number of affected accounts should be known by September but he told the committee that he was legally unable to name the lenders, the number of mortgage accounts affected in each and how much compensation each was being forced to pay out.

During his opening statement, Mr Lane said that apologies to customers were empty words unless action was taken to rectify it.

“I note that several lenders have recently apologised to the customers whom they failed,” he said.

“Let me be very clear on the Central Bank’s position — a lender’s apology is meaningless unless the lender both stops the harm to all impacted customers and provides appropriate redress and compensation for the suffering caused.

"Lenders now need to demonstrate that they are doing everything possible to ensure this happens.”