Explainer: The tracker mortgage scandal — who has been fined?

It is estimated that around 40,000 customers were wrongly removed from their tracker mortgages and moved onto a higher interest rate. In many instances, people lost their homes due to the scandal.
Explainer: The tracker mortgage scandal — who has been fined?

The five main banks that were involved in the Irish tracker mortgage scandal are AIB, KBC, Permanent TSB, Bank of Ireland, and Ulster Bank. Picture: Leah Farrell/RollingNews.ie

The fine handed to AIB by the Central Bank for its involvement in the tracker mortgage scandal is not the first, but so far, it is the biggest.

The latest fine, which totalled €96.7m with the inclusion of €13.4m that was given to AIB-owned EBS for its consumer-protection breaches during the tracker mortgage scandal, is the largest fine given by the Central Bank during investigation into tracker mortgage accounts. 

A tracker mortgage is a type of home loan where the interest rate charged on the mortgage follows that of another publicly-available rate, typically the interest rate set by the ECB.

The five main banks that were involved in the Irish tracker mortgage scandal are AIB, KBC, Permanent TSB, Bank of Ireland, and Ulster Bank. EBS, a subsidiary of AIB, and Springboard mortgages, a subsidiary of Permanent TSB, were also involved.

Wrongly removed

It is estimated that around 40,000 customers were wrongly removed from their tracker mortgages and moved onto a higher interest rate. In many instances, people lost their homes due to the scandal.

In AIB’s case, the bank introduced the tracker product to its suite of mortgage offerings in October 2002. When AIB withdrew the tracker product in October 2008, it also stopped offering a tracker rate to its existing customers, who were contractually entitled to get or return to a tracker rate in their mortgage agreements, in addition to regulatory entitlements.

The withdrawal of the tracker product was consistent with decisions taken across the banking industry, which saw a number of other lenders withdraw tracker products from their offering. It was not until December 2013 that AIB re-introduced a tracker rate for certain customers on a go-forward basis only.

The latest AIB and EBS fines bring the total sanctions imposed on lenders for tracker mortgage failings to €174m.

The latest AIB and EBS fines bring the total sanctions imposed on lenders for tracker mortgage failings to €174m. Picture: Leah Farrell/RollingNews.ie
The latest AIB and EBS fines bring the total sanctions imposed on lenders for tracker mortgage failings to €174m. Picture: Leah Farrell/RollingNews.ie

The first of the tracker mortgage fines imposed by the Central Bank was for €4.5m in late 2016 for Springboard Mortgages, a former subprime mortgage lender set up during the boom years by Permanent TSB, which it subsequently sold to a vulture fund.

In May 2019, the Central Bank followed this up with a fine of €21m for PTSB itself for its part in the industry-wide tracker mortgage probe. The elevated level of the fine reflected “the distressing and, in some instances, devastating consequences” of PTSB’s actions on its customers, the Central Bank said at the time.

In March of last year, Ulster Bank was fined almost €37.8m in what was then the largest sanction by the Central Bank for  wrongdoing by the banking industry in the tracker mortgage scandal.

In September 2021, the Central Bank fined KBC Bank Ireland €18.3m and issued a scathing reprimand. At the start, KBC had insisted it could report only 93 overcharged accounts, while the investigation in the end unearthed 3,741 accounts, revealing a “deeply unsatisfactory” approach that had wrought “devastating and avoidable” pain on its customers, according to the Central Bank.

Bank of Ireland has yet to be fined, but over €90m has been set aside by the banking regulator for this matter. This is the last remaining investigation open in the tracker mortgage probe by the Central Bank.

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