Sinn Féin TD Pearse Doherty has accused banks of profiteering from the pandemic by charging interest accrued on mortgage payment breaks.
The party's finance spokesman made the comments as the Central Bank of Ireland and the European Banking Authority (EBA) confirmed that banks were not required to charge additional interest on Covid-19 mortgage breaks.
Since March, nearly 80,000 mortgage-holders impacted by the pandemic have taken payment breaks which will see additional interest charged by as much as several thousand euro over the lifetime of the loans.
@brianhayesBPFI are you still sticking to the story that banks only found out yesterday that they don’t need to charge interest during payment break period. Here is a letter from Central Bank to me published on their website 3 weeks ago. I’ve highlighted it for you. ???? pic.twitter.com/mB9Xb34UOQ— Pearse Doherty (@PearseDoherty) July 8, 2020
Mr Doherty said it was an issue where the Government should step in as banks across European countries had not charged customers interest on mortgage breaks.
“Charging interest accrued on loan payment breaks during Covid-19 is the banks profiteering on the pandemic,” he said.
“The idea here from the banks or indeed the Government that these new guidelines are a bolt from the blue … does not add up. I have a letter from the Central Bank where they told me that banks don’t have to charge interest rates on the breaks.”
In the Dáil on Wednesday, Labour leader Alan Kelly looked for assurances from Taoiseach Micheal Martin that customers would not be liable for thousands of euros worth of interest if they availed themselves of a mortgage break.
"The Irish payment break moratoria including the accrual of interest is, always has been and remains fully in line with EBA Guidance" statement from BPFI CEO @brianhayesBPFI on the matter of payment breaks and accrued interest https://t.co/XngKyzJMnL— Banking & Payments Federation Ireland (@BPFINews) July 8, 2020
Mr Martin said Finance Minister Paschal Donohoe would engage with the banks on the matter in relation to this latest clarification from the EBA.
“About 140,000 payment breaks have been issued in this country so these have been popular initiatives that a lot of people have availed of and have found very helpful,” Mr Martin said.
Brian Hayes, CEO Banking and Payments Federation of Ireland (BPFI) said mortgage customer were made well aware by banks that interest would accrue if they took a payment break.
“The banks were very upfront from day one on this issue. On the very first day we spoke about it, we said there were costs associated with payment breaks for mortgages because they are no different to the previous payment breaks people were given before Covid-19,” he told RTE radio.
I want to be absolutely clear about this, the Irish banking sector produced these payment breaks in good faith and to help customers going through a rough time - those breaks were in line with EBA guidance
“The payment break we put in place to deal with the 140,000 customers of Irish banks was clear.
“The clear guidance that was given by the EBA in April couldn’t have been any clearer – it said you can change the sequencing of the loan repayments but you can’t change the interest rate, if you did, that would be classified as a forbearance event.
“I want to be absolutely clear about this, the Irish banking sector produced these payment breaks in good faith and to help customers going through a rough time – those breaks were in line with EBA guidance.”
Mr Hayes said there was a cost to the industry when it came to payment breaks and it was fair that customers who availed of them should pay interest.
“There is always a cost in this and we have been transparent about it,” he added.