Ulster Bank slapped with record €37.8m fine for role in tracker mortgage scandal

It is the largest fine issued by the Central Bank to date on the back of its investigation of the banking industry on the back of the tracker mortgage scandal.

The Ulster Bank branch on Patrick Street, Cork. Picture: Dan Linehan

Ulster Bank has been slapped with a fine of almost €37.8m in what is the largest sanction so far in the investigation by the Central Bank into wrongdoing by the banking industry in the tracker mortgage scandal.

The regulator said Ulster Bank had admitted its “serious failings” involving 5,940 of its mortgage customers, some of whom lost their family homes because they were purposely overcharged over long periods of time.

Ulster’s 49 regulatory breaches included the bank having “devised and implemented a deliberate strategy not to provide certain customers with their correct tracker mortgage entitlement unless they complained”, the Central Bank said.

And the bank “caused unacceptable and avoidable harm” over long periods that involved “significant overcharging to the loss of 43 properties, 29 of which were family homes”, it said.

The fine is the Central Bank’s largest ever and also reflects the scale of the pushback Ulster Bank launched against the regulator’s investigations.

However, the fine for Ulster Bank -- which is the third-largest bank in the market -- is likely to have much less of an effect in improving the behaviour across the scandal-ridden industry because the lender last month announced plans to pull out of the banking market in the Republic altogether.

The proposed carve-up of Ulster’s €20bn loan banks between AIB and Permanent TSB will likely worsen the levels of competition for mortgage and business customers in an already highly concentrated and expensive banking market, experts have warned.

The specific Central Bank tracker settlement and the €37.8m fine involve Ulster Bank as a regulated corporate entity and not individuals at the bank.

The regulator has consistently refused to give detailed comments on whether its investigations across all the tracker mortgage banks will lead to criminal investigations into individuals.

Under a settlement discount scheme, the fine was reduced from an initial €53.9m but is on top of the €128m that Ulster Bank has paid out to the aggrieved tracker mortgage customers in the form of compensation and restitution.

The Central Bank opened investigations six years ago into all lenders that sold the tracker home loans.

The regulator said Ulster Bank had admitted its “serious failings” involving 5,940 of its mortgage customers, some of whom lost their family homes because they were purposely overcharged over long periods of time.

In most cases, the investigations have shown that banks had acted in remarkably similar ways to deprive customers of their correct interest rates.

In the case of Ulster, the bank deliberately set out on a campaign in 2008 to get some customers off their competitive tracker rates. The bank then pushed back against the regulator when it started to make its investigations.

Many of the banks involved -- Permanent TSB, AIB, Bank of Ireland, Ulster Bank, and KBC Bank Ireland and their subsidiaries -- have either concluded their settlements with the Central Bank and have already paid out millions in compensation and restitution to customers or have set aside many millions to meet anticipated fines.

The Central Bank is working through its list of enforcement actions that will end up in its slapping fines on all the Irish mortgage lenders, as it attempts to bring some sort of accountability to banks for ripping off their customers over many years.

By not reverting to the lower rates that were linked to the ECB reference rate, customers were overcharged and in some cases lost their homes when the banks aggressively moved against their own customers in the wake of the huge unemployment caused by the banking crash.

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 but which it subsequently sold to a vulture fund. The fine was at the time the largest ever imposed by the regulator under its enforcement powers.

In May 2019, the Central Bank followed this up with a then-record 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 September last year, the Central Bank fined KBC Bank Ireland €18.3m and 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 brought “devastating and avoidable” pain on its customers, according to the Central Bank. The chief of KBC’s parent in Belgium later apologised after expressing his impatience during an analysts’ call over the focus on the Irish tracker mortgage cases.