Given the number of people impacted by the tracker mortgage scandal, which the most recent Central Bank report puts at 33,700, one could not be accused of being overdramatic by deeming it to be one the biggest robberies in the history of our state.The Central Bank report this week shows that an additional 13,600 cases have been identified since September 2017, a truly staggering increase. The fact that banks have already paid out almost €300m with many millions more yet to follow tells us everything we need to know about the scale of the scandal.

The fact that all Irish banks followed the same strategy at the same time does nothing other than point to collusion at the very top level within the banking sector.  Many are now calling for the establishment of a tribunal of enquiry. Questions need to be asked to ascertain who drove this policy and to hold those who did so to account.

The government, as one of the largest shareholders in the Irish banking sector, must play a role in driving this agenda, as should the Central Bank, whose role it is to regulate the banking sector. Whilst the Central Bank are upping the pressure on the banks, many are saying its far too late. The Central Bank must accept some of the blame as they were seen to stand idly by while those they were supposed to protect were bullied and wronged by the banks. Many bank staff were themselves victims of this scandal where tracker rates were incorrectly denied to them.

What happened?

During the height of the recession, customers were either stripped of their tracker rate mortgages or denied the opportunity of returning to tracker rate mortgages when entitled to do so after the expiry of fixed interest rate periods.

Some customers who were struggling financially approached their banks to request a short-term reduction on the level of mortgage repayments. In many cases this would have been an interest only period of 6-12 months or else reduced or fixed repayments. Most planned to make up the reduction in capital repayments over the remaining term of the loan when their financial situation improved.

Sounds reasonable and a realistic solution to a temporary problem? Unquestionably to most people, however the Irish banks thought otherwise and saw it as an opportunity to improve their profits by eliminating loss making tracker rates and to strengthen their balance sheets.

What did the banks do?

The Irish banks used this opportunity to change the terms of the original mortgage contracts of the impacted customers. This was done by stripping the tracker rate from customers and forcing them on to variable or fixed rates in return for the bank agreeing to restructure the repayment terms of the mortgage. Some banks even went as far as to withdraw tracker rates where mortgages moved from sole names to joint names. The net result of this move meant some borrowers were being charged interest rates of 3.5% - 5.5% in comparison to a tracker rate which, for periods of time was under 1%, even when the tracker margin was included. This included family homes as well as buy to let investment properties.

What happened to customers?

Unfortunately, many customers suffered the biggest impact of all and lost their homes as a result of not being able to meet the increased mortgage repayment. Where customers managed to keep their homes, many were put to the pin of their collars to meet the higher repayments.

Having heard the horror stories of many of the victims, the impact on the lives of those affected was simply horrendous. Those impacted have reported mental health issues, health problems as well as marriage and relationship breakups. Many children were also impacted by the stress and strain placed on their parents. In many cases, people suffered in silence and carried an enormous burden.

What happens or is happening now?

At the request of the Central Bank, the banks in the last couple of years have been auditing every one of their files and then reporting to the Central Bank, as to whether there was a problem with the mortgage. Customers would not have been aware of this review other than when there was a problem, or an error found. In those cases, the banks were then forced to rectify the error through adjusting the loan repayments, restoring the tracker rate and making a compensation payment to the customer. These reviews are ongoing with all Irish banks at present.

What is the compensation?

• A refund of any interest overcharged
• Correcting the balance on the mortgage and refunding any capital overpaid
• Refund of higher payment protection insurance payments made
• Interest for now having access to money overpaid
• Reducing the interest rate on the impacted mortgage account
• Compensation to recognise the damage caused by the overcharging
• A sum for financial or legal advice for the customer to meet with an accountant or solicitor to seek professional advice
• In cases where the impacted property was sold, residual debt on the impacted mortgage account is written off and any repayments made against this debt after the sale are refunded
• An additional compensation payment where the bank assesses that the impacted property was sold despite the mortgage being affordable had the tracker rate not been withdrawn

Complications

Whilst the banks view most cases in the same manner and apply their compensation matrix, there are fundamental flaws in the system which fails to adequately resolve the situation for many victims:

• The customer who moved to another bank to avail of a lower variable or fixed rate after their tracker mortgage had been withdrawn and who can’t be put back on the tracker rate that applied previously
• The customer and their family who suffered enormous emotional trauma and which the bank have failed to adequately compensate for
• The customer who made other financial decisions to meet the increased mortgage payments and suffered financial loss as a result (encashment of investments at losses that have since recovered, retiring early to secure tax-free lump sums and missing out on future earnings as a result etc.)
• The customer who had business debt which involved an overall debt restructure which included the family home debt which it now turns out had a tracker mortgage withdrawn prior to the agreement of the debt restructure 

The above complications are only a sample of the issues that have come across our desk in the cases that we have advised on and which the banks are not addressing adequately as part of their compensation calculations.

What should you do if you have already received your compensation payment?

Even though you may have already received your calculated compensation, you have 12 months from the date of the compensation award to appeal the level of compensation offered by the bank. Submissions have been made to extend this 12 month window, however there has not been any announcement of same to date.

What if you have not yet received a letter or compensation from your bank but feel that you may have been affected?

Write to your bank and ask them whether your file has been reviewed under the mortgage redress scheme. Make a Data Access Request to your bank which will entitle you to receive a copy of your entire file since the loan was created. You will need to make a payment of € 6.35 to your bank for this request. This will allow you to full access to your file including the letter of loan offer, contracts, all correspondence, discussions and all relevant details including any changes that were made to your mortgage from the original sanction letter. If you feel you have a case that the bank needs to answer you should seek advice as regards how best to approach this.

How does the appeal process work?

There are two Tracker Panels:

1. Independent Appeals Panel who deal with appeals from impacted customers who have lost ownership of properties, or whom are currently or previously involved in legal proceedings in relation to repayment arrears or cases that have escalated from the Independent Redress Panel
2. Independent Redress Panel who deal with all other impacted customers

The appeals process is in 3 stages:

1.Through the banks external panels made up of:

1. One member with legal qualifications,
2. One member with accountancy qualifications,
3. One member with appropriate experience of dealing with consumer affairs
4. Subject matter expert (who works for the bank) who assists the Appeals Board but does not have a vote on appeal decisions.

2.Financial Services Ombudsman (FSO)

If customers are unhappy with the decision or additional compensation being offered by the tracker panel then they can refer the matter to the FSO.

The FSO is a Government supported regulatory body and it is independent of the banks.

3.Legal Proceedings

If customers are unhappy with the decision of the tracker panel then they reserve the right to pursue the matter through the courts. Customers should watch carefully for statute of limitation clauses in the appeals rules to ensure they do not end up statute of limitation barred.  

Our Advice

The best advice that we can give to those who have been impacted or believe they may have been impacted is to seek professional opinion on the matter. The scale of complexities involved make it a necessity in our view.

Quintas have assisted numerous clients who have been impacted by the tracker mortgage scandal and are available for a free of charge consultation should you wish to avail of same.

Contact Paul O’Connell or Mark Ryan for further information.