Former PTSB chief executive breached consumer code to act in best interest of customers

UK Barrister Peter Hinchliffe, said 'on the balance of probabilities, Mr Guinane participated in PTSB’s failure during the relevant period, to ensure that it acted fairly in the best interests of its customers'

Former CEO of Permanent TSB, David Guinane.  Photo: Sam Boal/Collins Photos.

Former chief executive of PTSB David Guinane has been found by a Central Bank inquiry to have participated in the bank's failure during in 2009 to ensure that it acted fairly in the best interests of certain customers on tracker mortgages, breaching the Consumer Protection Code. 

Under the Consumer Protection Code 2006, PTSB is required to ensure that all dealings with customers are done “honestly, fairly and professionally” in the best interests of its customer and the market.

Sole member of the inquiry, UK Barrister Peter Hinchliffe, said on Wednesday that "on the balance of probabilities, Mr Guinane participated in PTSB’s failure during the Relevant Period, to ensure that it acted fairly in the best interests of its customers."

Speaking in his opening statement, Mr Hinchliffe added: "PTSB adopted a process that avoided offering the original tracker rate to which certain customers were entitled, unless the customer queried or complained about the rate they were offered. 

"Mr Guinane’s participation arose, by way of summary, as a result of his failure to consider the implications for customers when signing off on a proposal to adopt that process."

However, the chairman said that there was "no finding" of dishonesty against Mr Guinane and that the former CEO did not form an intention to harm or take advantage of customers.

Mr Hinchliffe added that Mr Guinane was entitled to receive better support from within the Irish Life and Permanent Group and that the ultimate responsibility for regulatory compliance in PTSB during the relevant period lay with the board of Irish Life and Permanent Group, of which Mr Guinane was not a member.

The chairman said potential sanctions to Mr Guinane include a caution or reprimand, a direction to pay a penalty of up to €500,000, a direction disqualifying the person from being concerned in the management of a regulated service provider for a specified period, and/or a direction to pay the Central Bank all or a specified part of the costs incurred by the Bank in holding the inquiry and investigating the matter. 

David Guinane, who served as CEO of PTSB up until 2012, is the first individual to be put before a public inquiry as part of the Central Bank’s investigation into the tracker mortgage scandal.

Public hearings were held early last year, with the inquiry focusing on whether the former CEO participated between January 2009 and April 2010 in an alleged regulatory breach when the lender offered a low, original tracker rate to customers coming off a period of fixed rates after they specifically requested it or complained about it. 

By not offering more favourable rates to customers that did not request or complain, Mr Guinane was found to have breached the Consumer Protection Code 2006 by not acting in the best interest of the bank's customers. 

The inquiry centred around a special condition, known as SC706, which was included in the paperwork of some PTSB tracker mortgages.

The special condition customers that moved for a period to a fixed rate to instruct the bank as they came off this rate to put them back on a tracker rate or another fixed product. Otherwise, they would default to a standard variable rate.

Since the tracker mortgage scandal emerged, which engulfed the five main banks at the time, the Central Bank has levelled around €1bn in fines.