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Irish bank fined record €21m in mortgage scandal

Edmund Heaphy
Finance and news reporter
Permanent TSB cash machines in Dublin. Photo: Artur Widak/NurPhoto via Getty Images

One of Ireland’s largest banks has been fined a record €21m (£18.5m) by the country’s central bank for “serious failings” relating to more than 2,000 customer mortgage accounts.

The Irish Central Bank said on Thursday that the fine was indicative of the “unacceptable harm” that the bank, Permanent TSB (IL0A.IR), caused to its customers.

Significant overcharging of customers with tracker mortgages led to 12 families losing their homes, as well as the repossession of 19 buy-to-let properties, it said.

The bank has also been required to compensate the affected customers to the tune of €54.3m (£47.9m).

"Our investigation found that [Permanent TSB] failed to put their customers first, with distressing and, in some instances, devastating consequences,” said Seána Cunningham, the Irish Central Bank’s enforcement chief, in a statement.

Tracker mortgages, unlike some other types of mortgages, have variable interest rates because they “track” the interest rates set by a central bank.

In the case of Permanent TSB, more than 2,000 customers who signed up for tracker mortgages were overcharged because they either were not given a tracker mortgage or they were not put on the correct rate.

This happened as a result of a number of failings by the bank, including it failing to warn customers of the consequences of decisions they might make relating to their mortgage.

It also decided to deny certain customers their correct tracker rate between 2009 and 2010 unless the customer “specifically requested it, or queried or complained.”

Permanent TSB also incorrectly interpreted the terms and conditions of mortgages and did not have adequate systems or controls in place to allow them to meet their contractual and regulatory obligations to certain customers.

The Irish Central Bank said that Permanent TSB admitted to 42 separate regulatory breaches during the course of its investigation.

It determined that the bank should be fined €30m, which was reduced by 30% in accordance with a settlement discount scheme. Even with the discount applied, the fine is the largest ever imposed by the Irish Central Bank.

“Taking out a mortgage is the single most significant financial commitment most people will make in their lifetimes,” said Cunningham.

“Consumers must have confidence that lenders are acting in their best interests, particularly given the complexity of mortgage documents they need to understand in order to make the best decision.”

In a statement, the CEO of Permanent TSB, Jeremy Masding, said that he wanted to “apologise unreservedly to all customers affected by the Tracker Mortgage issue, and for the distress caused as a result.”

“We are confident that we have fully addressed the operational and procedural weaknesses which have been identified in this exercise and, we remain committed to improving our policies and procedures for all customers.”

Permanent TSB is not the only bank found to have overcharged tracker mortgage customers. The scandal has also implicated five other mortgage providers, with almost 40,000 customers thought to have been affected.

Financial institutions in Ireland have set aside almost €1bn to date to cover the costs of the scandal, with more than €600m paid out in refunds and compensation thus far.