A surprise decision by AIB to set aside an additional €300m to help compensate 5,900 more tracker mortgage customers has reopened the scandal ahead of the general election.
Padraic Kissane, the financial adviser who played a major role in uncovering the overcharging 10 years ago and who now represents consumers on the Irish Banking Culture Board, said the decision means there is still a long way to go for Irish banks to clean up the industry.
Mr Kissane estimates the number of other tracker customers who failed to win compensation at other banks — Permanent TSB, Ulster Bank, KBC Bank, and Bank of Ireland — runs into the hundreds.
AIB’s decision came after some of the group of 5,900 tracker customers brought and won their cases at the Financial Services and Pensions Ombudsman, led by Ger Deering, that the bank should have, under the terms of their loans, offered a tracker mortgage rate. The ruling was made two weeks ago, but had been kept confidential until now.
Many of the group of customers had previously received payments from AIB help to meet advisory bills of around €1,600, which helped them to bring their cases to the Ombudsman.
The individual compensation levels under the new €300m set aside by AIB will be decided in the coming weeks.
Mr Kissane said that before Irish banks can start mending their ways, that they must acknowledge the practices and behaviours that require “cleaning up in the first place”.
“That is where the culture board will evolve to, where they will identify the areas that are critically important to correct,” said Mr Kissane.
He said banks favoured “soundbites” over dealing with fundamental problems at their institutions.
“If the banks truly wanted to resolve this, it would have been resolved 10 years ago. The reason it is ongoing is due to the banks’ resistance to reason,” said Mr Kissane.
“In terms of changing mindsets, there is a long way to go.”
A spokeswoman for the Banking and Payments Federation of Ireland, an industry group, said it was not appropriate to comment at this stage because the Ombudsman’s ruling was a preliminary one.
AIB shares closed 4% lower as analysts estimated the effects on the bank’s dividend payout.
The bank had previously set aside €272m to cover the compensation for wronged customers following the Central Bank’s investigation into the scandal.
Following the Ombudsman’s ruling, AIB’s total bill for compensation, redress, and internal administration costs to deal with its tracker customers has climbed to €572m.
AIB had also put aside a provision of €35m to meet the anticipated bill for a fine from the Central Bank.
The 5,900 new cases involved an argument between the customers and AIB over the definition of the meaning of a “prevailing rate” in tracker mortgage loan contracts from February 2006.
Brendan Burgess, a customer advocate who had worked on the AIB cases, said that although there was no direct link between the Ombudsman’s AIB ruling and other aggrieved people with outstanding cases at other banks, those people will feel be encouraged that they will get a fair hearing if they bring their cases to the Ombudsman.