Tracker Mortgages: KBC Bank

I welcome Mr. Verbraeken and his colleagues to this meeting.

I wish to advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable.

I invite Mr. Verbraeken to make his opening statement.

Mr. Wim Verbraeken

We thank the Chairman and the members of the committee for the invitation and opportunity to represent KBC Bank Ireland here today. I would like to introduce the delegation from the bank. I am accompanied by two senior members of the bank’s management team, Ms Dara Deering, executive director retail banking, and Mr Barry D'Arcy, chief risk officer. The committee will have received our written responses to the questionnaire. With the agreement of the committee, I will proceed to read my opening statement, following which we will respond to any specific questions the committee would like to ask.

In our appearance before this committee on 28 September 2017, we were not in a position to provide the committee with the number of impacted mortgage accounts because we had not concluded our review and engagements with the Central Bank on a number of customer cohorts that we were investigating. However, I told the committee then that I hoped and expected to be in a position to give it considerably more information when we met next. Such disclosure has now been included in our completed questionnaire.

Since that meeting we have engaged with the Central Bank to conclude the identification phase of this review and we have fully understood the need to progress at pace for our customers. We have endeavoured in all our assessments to understand the full customer journey, as conveyed by the facts and considerations of reasonable expectations, to determine if a customer or a group of customers should be or should have been on a tracker rate and, therefore, be considered as impacted and receive redress and compensation.

The committee will be aware that in late October following engagement with the Minister of Finance and the Central Bank, the bank identified as impacted 417 mortgage accounts that should have been on a tracker rate or were on the incorrect tracker margin. Redress and compensation payments to those customer accounts commenced in November 2017 and full payments have now been made to all those customers.

Following supervisory engagement and challenge from the Central Bank, the bank concluded its analysis on other customer cohorts in late December and confirmed in a public statement as of 20 December 2017 that a further group of approximately 2,557 mortgage accounts were identified as impacted for a variety of reasons. This number includes approximately 1,907 mortgage accounts that up to July 2008 converted from a tracker rate to a fixed rate product post-drawdown, and ultimately rolled off to a non-tracker rate product. The documentation and terminology was not clear for these customers.

This number also includes circa 650 PDH mortgage accounts that were identified as impacted, as they related to new mortgage applicants in the period from November 2006 to February 2008 who had drawn down their mortgage on a fixed rate, with a roll-off to a standard variable rate. While they were never on a tracker mortgage rate and did not have a contractual right to such a rate, the bank has decided to offer these PDH customers a tracker mortgage rate product if the account is still open.

Overall, the bank has identified circa 2,974 mortgage accounts as impacted as part of the tracker mortgage examination. We have written to all of these customers to advise them that their individual mortgage account is being or will be reviewed, with a status update before the end of March, if the review is not completed. If they are going through a legal enforcement process, this is put on hold. If they are in the process of or considering selling or surrendering their property or applying for a form of debt resolution, we encourage them to discuss their options with their financial and-or legal advisers prior to committing.

I reiterate my apologies to all impacted customers for the harm and distress caused by the bank's error or failure. So far, it has made rate rectifications and redress and compensation payments to 501 customer accounts. Furthermore, the remaining mortgage accounts will be restored to the correct tracker mortgage rate by the end of February, if the account is still open, and receive redress and compensation payments as soon as possible but no later than the end of June. The bank has made a provision of €120,300,000 to account for redress and compensation payable to the impacted accounts since the start of the examination. In line with the tracker mortgage examination framework, it has established an independent appeals panel for customers who are not satisfied with the level of redress and compensation offered.

Regrettably, some customers have lost their homes or their investment properties as a result of not having been on a tracker mortgage rate. So far, we have concluded that six customers lost their homes as a result of not being on a tracker mortgage rate. We have also determined that 27 customers lost their buy-to-let properties for the same reason. We expect this number to increase as the individual causation assessment and calculations are completed in the recently identified cases. In determining causation, by which we mean establishing the link between the loss of ownership and the bank's error or failure, we have formulated our decision model to be as customer focused as we can in assessing these cases. The question we have tried to answer is whether the customer could at the time under the most lenient restructuring arrangement available to them have managed to make his or her mortgage payments if he or she had been on a tracker mortgage rate. If the answer to that question is in the affirmative, we conclude that he or she lost his or her property because of the bank's error or failure.

We appreciate that the financial compensation offered cannot compensate for the emotional stress caused by the loss of a home. For this, I sincerely apologise once again. We cannot undo what happened in the past, but we can provide for remediation and learn from mistakes. The bank has conducted the review under the examination framework in the interests of achieving a fair outcome for customers, identifying circumstances where the interaction between the bank and customers has been seriously deficient or the handling of customer cases has not been of a standard required under the framework. While taking into account its legal and contractual commitments in making its determinations, the bank's approach has been to ensure the balance of consideration is in favour of the customer. As we restore impacted customers to the correct tracker mortgage rate, make redress and compensation payments, respond to customers' questions or requests and, ultimately, the facilitation of the independent appeals process, the bank shall maintain this approach.

As a sector, financial institutions need to take meaningful incredible actions to regain the trust of all customers. Since the events leading up to the review, the bank has strengthened processes and procedures that are supported by a strong and more robust regulatory environment. We will continue to work towards the conclusion of the examination in all its facets. The bank's parent, KBC Group, has also taken the review very seriously. We are very supportive of the establishment of a banking standards board and an agenda to bring about cultural change in banking.

Mr. Deering, Mr. D'Arcy and I will respond to questions. I thank members for their attention.

Do the delegates believe there is a problem with the culture of KBC Bank?

Mr. Wim Verbraeken

I believe the circumstances that led to the examination have uncovered a number of practices that do not meet the standards to which we hold ourselves today.

Does that apply to individuals or the systems in place in the bank?

Mr. Wim Verbraeken

I would not use the word "systems". As regards this phase of the examination, I can only speak for my institution. I have not seen evidence or indications that there was a deliberate effort made by individuals in the bank to deprive customers of a tracker mortgage rate. However, it is clear from the case reviews we have conducted that a number of circumstances and practices were deficient, as I indicated in my opening statement, either in the correspondence to customers or the documentation used or other influencing factors. That is next to a number of errors we have uncovered during our forensic review of cases.

Is Mr. Verbraeken trying to tell the committee that it was due to practices as opposed to culture?

Mr. Wim Verbraeken

In my mind, the culture is the result of the outcome of a number of practices. Let us say one can ultimately indirectly influence culture. I do not believe it is a matter of installing a number of specific practices that will directly influence the culture.

Does Mr. Verbraeken believe the bank broke the law?

Mr. Wim Verbraeken

At this stage in the examination, I have seen no such evidence.

Were there no legal contractual rights that the bank denied customers?

Mr. Wim Verbraeken

There are a number of cases in which, let us say, the customer was not on the rate that was included in his or her contract.

Would it be a legal entitlement under their contract?

Mr. Wim Verbraeken

Yes; we see it as a contractual right.

In not providing the rate, is it not the case that the bank has denied them their legal right, which is a breach of the law?

Mr. Wim Verbraeken

My understanding is we breached a number of clauses in codes and regulations, but today I am not in a position to confirm that we have breached the law.

That speaks to the culture and the problem in the bank. Mr. Verbraeken has acknowledged that some customers were denied their legal contractual rights, but bankers are unwilling to say they broke the law. Is it not fair to say they broke it? Some customers had a legal contractual right to a tracker mortgage rate, but the bank did not provide it, for whatever reason, whether it was systems, information or any other excuse. There was a legal right to a tracker mortgage rate, but the bank denied it to some customers. Why is Mr. Verbraeken not comfortable in saying this? AIB stated it. It told us that there were cases in the bank in which it was very clear, written in black and white, customers had legal rights and that the bank had denied them these rights.

Mr. Wim Verbraeken

As I said, we have uncovered cases in which the contractual rights of customers had not been complied with. The close to 3,000 mortgage accounts we have identified as impacted constitute a minority, but obviously any case in that category is one too many.

I agree with that.

Did the holders of any of the 1,097 mortgage accounts that rolled on to a non-tracker rate mortgage raise an issue with the bank after July 2008? Did they say that it was their view that they had a contractual right to a tracker rate that they would like to assert?

Mr. Wim Verbraeken

Yes. More than 40 such cases were brought to the Financial Services Ombudsman, FSO. In all but two cases, the bank's position was upheld at the time by the ombudsman, who indicated that the documentation we used was clear and unambiguous, that the bank had not failed in its duty to bring key features to the attention of the customer, and that the bank did not disguise important information. That was found at the time. Today we have found differently and we now consider that cohort to have been impacted.

Mr. Verbraeken agrees today that both his bank's own appeal mechanism, which customers would have had to go through, and the Financial Services Ombudsman were wrong in their findings and that those individuals were indeed impacted.

Mr. Wim Verbraeken

As I said earlier, I believe there were a number of practices in a number of circumstances which we would hold to a different standard today.

If 40 customers went to the FSO, how many actually made complaints to the bank or asserted their rights with it? If 40 went to the FSO and went through that process, we can expect that multiples of that figure raised concerns with the bank. That is what happens. Does Mr. Verbraeken know how many did that?

Mr. Wim Verbraeken

I do not have the exact number of cases but I do not believe that there were many cases that did not ultimately end up with the FSO.

What years are we talking about?

Mr. Wim Verbraeken

I believe we are talking about the years 2010 and 2011.

Given it is now 2018 and that KBC still has 2,000 customers who have not even been put back onto their proper tracker rates, what does Mr. Verbraeken have to say to those individuals who went to the bank to assert their legal right to their tracker rates and who were shot down by the bank and failed by the Financial Services Ombudsman? What does Mr. Verbraeken have to say to them in respect of these eight years? He speaks about practices and more information but these customers knew the bank was doing wrong; they brought the issue to its attention and the bank closed ranks.

Ms Dara Deering

I might come in on that matter if I may.

I would like to hear from the chief executive officer, CEO, on this issue. I have no problem with Ms Deering coming in as well but I ask the CEO what he would say to those who asserted their rights and who were failed by the bank over an eight-year period.

Mr. Wim Verbraeken

We have issued our apology to our impacted customers. We wish we were not in the position in which we are today, which is that we have 3,000 cases of customers we consider to be impacted. I am in a position, however, to deal with and resolve the issue in front of me, which I have uncovered with my team as we have gone through the examination. We are trying to do the right thing for customers given the specific circumstances each has lived through over these years.

Did the issue of the cases where appeals were lodged ever reach board level in the bank? Were decisions ever made in that regard? Was anybody at a senior level made aware that in more than 40 cases, people were asserting their rights to a tracker rate? Was such a person asked what should be done about it? Was that every discussed at a senior level?

Mr. Wim Verbraeken

I am not aware of any discussions on this matter at the senior level at that time. None of the directors of the bank who are on the executive committee were working at the bank at the time. Our focus to date has been on the impact at customer level and on the various patterns we have uncovered. A number of customers have gone through the same customer journey and we will be conducting a review of how these decisions came about.

Why is it that only 501 accounts have been redressed and returned to their tracker rates? Perhaps the more appropriate question is why, in February 2018, are nearly 2,500 accounts still on the wrong tracker rate?

Mr. Wim Verbraeken

They will be restored to the correct tracker rate in February.

As of today, they are still on the wrong tracker rate, however.

Mr. Wim Verbraeken

Yes.

Some 2,473 accounts.

Mr. Wim Verbraeken

That is correct.

KBC was notified of this review at the same point as all the other banks. Is that not correct?

Mr. Wim Verbraeken

I believe that all of the banks received notification of the start of the examination at the same time, yes.

Then why is KBC so far behind? Ulster Bank is one of the outliers, but KBC takes the main prize. It is the worst in terms of both redress and compensation and in putting customers back onto their tracker rates. We are talking about fine language but, as we speak, the bank is automatically deducting money it is not entitled to from its own customers' accounts every single month. There are still 2,500 customers on the wrong rate. I am a customer of KBC, my mortgage payment goes out at the start of the month. I am not an impacted customer, but if I was, on the first Monday of this month KBC would have stolen money from my account that it is legally not entitled to, despite the fact that it has known for quite some time that what it is doing to these 2,500 customers is wrong. How can Mr. Verbraeken justify that?

Mr. Wim Verbraeken

The nearly 2,500 customers we are talking about were determined as being impacted in December 2017, that is, less than two months ago. They will be restored to their correct rates by the end of this month. To clarify the rationale or reason 2,500 customers are still on the wrong rate, the process we went through with the Central Bank stretched all the way into December 2017 when we reached a final determination about all the customers and cohorts that were considered to be impacted. That is when we started the process of writing to all of these customers, which happened at the beginning of January 2018. They will be put on the right rate within two months and they will be redressed and compensated within six months.

KBC submitted its phase 2 report to the Central Bank on time, did it not?

Mr. Wim Verbraeken

We submitted a phase 2 report in September 2016, yes.

And when was the final phase 2 report submitted?

Mr. Wim Verbraeken

In December 2017.

The bank had to have its final phase 2 report in by the end of March 2017. Did it meet that target?

Mr. Wim Verbraeken

As I explained when I was before the committee in September, the level of engagement with the Cental Bank on that report between submitting it in September 2016 and the end of May 2017 was at a very low level. It increased very substantially at the end of May, throughout the summer and all the way to December.

How many impacted customers were identified in the bank's phase 2 report in 2016?

Mr. Wim Verbraeken

Fewer than 100 cases.

Mr. Wim Verbraeken

That is correct.

And that figure went up to 2,974?

Mr. Wim Verbraeken

That is correct.

Did the Central Bank have to come in and twist the banks arms on a number of these cases or how did-----

Mr. Wim Verbraeken

As we said in our opening statement, we were challenged on our perspective on the examination by the Central Bank. This process continued through the second half of 2017 and we concluded it in December 2017, having reached a position in which there was no further dispute between the bank and the Central Bank on any cohorts.

Is it not the case that the reason the bank is screwing over 2,500 of its own customers, even at this point in February 2018, is because Mr. Verbraeken, as CEO, and his bank have been fighting the Central Bank for the past year and a half trying to make sure it does not give its customers back the money it wrongly took from them? Is that the reason, in reality, if we cut out the rest of it, the bank is so far behind the rest of them?

Mr. Wim Verbraeken

No, I disagree with that description in the sense that the team that was working on the tracker examination consistently engaged constructively with the Central Bank. We had a different perspective on certain customer journeys. I clarified, for instance, with regard to the customer journey the Deputy referred to, that we had on file findings by the FSO in the bank's favour which would have strengthened that position.

Other people will come in on this and the public will make up its own mind. How did the bank compensate individuals where there was a loss of the home with regard to the six family homes and 27 buy-to-lets? What is the compensation process for them?

Mr. Wim Verbraeken

There is a compensation proposal which is standard for all customers where we have determined that the loss of ownership was caused by the bank's error and failure, as I indicated. For an owner-occupied property, the offer to the customer would be a €50,000 lump sum payment. There would be compensation for the uplift in value of the property between the time of repossession or sale of the property and the time of compensation. There would be a write-off of all residual mortgage balances. There would be a compensation for the future value of a tracker unless that same customer took up our offer of a new mortgage loan on a tracker rate. We would also offer them legal fees to the extent of €2,000 or other reasonable vouched fees that they spent.

How does the bank gauge the impact that losing one's home has on an individual? Has the bank thought about it? Has it thought about the impact of having to tell one's children the bank is taking one's home and of packing up the toys and moving to a different area? Many people feel shame as a result of that. Irish people are very proud. How does the bank gauge all of that and put a value on it?

Mr. Wim Verbraeken

As I said in my statement, financial compensation does not compensate for the distress caused by the bank's error and failure. We appreciate and acknowledge that but we have to address, with the means we have today, the situation these customers are in and offer them compensation. Of the six owner-occupied properties that were lost as a result of the bank's error and failure, we still have five in our possession. As part of the redress and compensation engagement we have with these customers, whom we have contacted specifically and personally, we will offer them their homes back.

Will that be for free or will the bank sell them back their homes?

Mr. Wim Verbraeken

No. The home would be restored in a condition in which it can be lived in by the customer. The home would be offered back with the reduced mortgage loan on a tracker so they would be in a similar position as customers who lost their property outright. There is an equivalence of value that we offer to a customer where we still possess the property.

Basically, the bank is selling them back their homes. They will take out a mortgage with KBC to get their home back. It did not answer the question. Perhaps it did answer the question because the bank is looking at it very much in financial terms and considering the uplift and so on. All of that has to be done. In the scenario I put to Mr. Verbraeken, what price does he put on having to go in and tell the children they are leaving the house and packing up and maybe having to go into rental accommodation? Some value has to be put on it. There is no way that any type of money can undo the harm the bank has caused those people. The bank has obviously made some calculation somewhere so what is it? Has the bank actually engaged with the six customers to find out the impact? Has the bank asked them to submit a victim impact statement? I asked the banks to do this a year ago. If we were in court, that is what would happen. It would show how it impacted on the customer. Has the bank looked at that?

Mr. Wim Verbraeken

We have reached out to each of these customers individually and we will continue to engage with these customers specifically in the context of offering their properties back. I fully agree with the Deputy that any financial compensation or value offered would not compensate for the harm done. We would prefer not to be in a position of having any cases where a loss of property has occurred. We believe the process we are going through with these customers is to some extent showing we are trying to do the right thing by them given where we are today and the findings we have come to in recent in months.

Can every customer who is given an offer of redress and compensation cash the cheque and then appeal the case?

Mr. Wim Verbraeken

Yes, absolutely.

I have one final question on the 650 private dwelling homes that were deemed impacted. They are individuals who took out mortgages in the period of November 2006 to February 2008. Can Mr. Verbraeken explain to the committee why the bank has chosen those dates? I raised this over a year and a half ago with the bank. I presume it is to do with the advertisement and the leaflet that was being bandied about by all the brokers which said that customers would roll on to a tracker rate at the end of the fixed-rate period. I have numerous letters from customers of the bank who were given the same type of commitment and were aware of the flyer but who were not deemed impacted. I will give Mr. Verbraeken an example of a person who applied for the mortgage in August 2006. In January 2007, the person finalised and decided to fix the rate but were deemed by the bank not to have been impacted. It is the same commitment. I presume that is the reason the 650 homes were deemed impacted. Can Mr. Verbraeken elaborate on that?

Mr. Wim Verbraeken

I would welcome getting the details of that specific case to make sure the decision we communicated - I presume it is based on a recent decision - and the determination were correct. We welcome all customers who believe they have evidence that we did not consider to come forward. I welcome the same in this case. The 650 customers relate to new owner-occupied, PDH, customers who applied for their mortgages between November 2006 and February 2008. That coincides with a period when the bank had issued a communication to its intermediaries, the brokers, which are governed by their own specific regulatory context, for a product that was specific to new owner-occupied, PDH, customers which meant they started on a fixed rate and rolled off to a tracker.

We have decided, based on the review we conducted on the period right up to December 2017, that the 650 customers who signed loan agreements to start on a fixed rate and roll off to a standard variable rate should have had the customer journey of a fixed rate rolling off to a tracker, as did 90% of all new PDH applicants who applied in the window of time in question. More than 6,000 cases originated through the broker network in the window during which the broker communication was valid rolled, as intended by the bank, from a fixed rate to a tracker. The 650 cases signed a loan agreement based on moving from a fixed rate to a standard variable rate. We have decided, as a matter of policy, to offer these customers a tracker rate and to offer redress and compensation.

The leaflet came out in November 2006. Why is the date in February 2008 listed?

Mr. Wim Verbraeken

At that stage, the broker communication was no longer applicable. That was also communicated to the brokers.

Was that even if someone had applied on the basis of that information but did not draw down until a later point?

Mr. Wim Verbraeken

We allow for the normal terms of the delay between a draw-down date and the application date. That is why we take into account the application date rather than the draw-down date. We believe that was the influencing factor. That was the moment that customers would have made their choice and would have been led by the information in the leaflet.

What about those who applied before November 2006? If I apply for a mortgage now, I might apply to ABC Bank and Bank of Ireland and ultimately decide on one. What about somebody who applied before November 2006 and who got the communication before deciding to sign the final offer, which was after November 2006? Would such people not be deemed affected?

Mr. Wim Verbraeken

We would have considered that they were not influenced by the broker communication. That is our position.

Surely their final decision would be influenced. They do not make a final decision until they make a final decision. Therefore, an inducement whereby one may move to a tracker rate at the end of the two-year fixed term has an influence. If I received a letter of offer from KBC Bank but had not decided on that bank and my broker advised me I would roll on to a tracker mortgage, I would sign even though my application preceded the advice. Surely to God it would be deemed an influencing factor.

Mr. Wim Verbraeken

We have made a policy decision based on the date of application. As I said at the start of my answer on this specific topic, we welcome the coming forward of any customer who feels he should be considered as impacted upon based on evidence he has specific to his own journey. We will obviously consider that.

They have come forward, however. Mr. Verbraeken is saying the policy is that someone who was told by his broker that he would roll on to a tracker after taking out a mortgage with KBC Bank, which would involve a final letter, should not be deemed impacted. Surely to God it had an influence. The bank needs to revisit this policy. It will force victims to go to the bank, through the internal appeals process and to the FSPO. This is an obvious matter. If before signing up with the bank one's broker is saying one will roll on to a tracker, it is obviously an influencing factor. How could it not be?

Mr. Wim Verbraeken

We have given this matter careful consideration. It has also been part of our discussion with the Central Bank of Ireland on determining the specific cohort impacted upon. Considering this on the basis of the date of application is ultimately considered to be the fair approach.

I welcome Mr. Verbraeken and his colleagues. I will continue with Deputy Pearse Doherty's line of questioning. I am conscious that people who are directly affected are watching. Members will have received correspondence in this regard.

Let me tease out the issue a little further. The 650 PDH mortgage accounts that Mr. Verbraeken identified as being affected relate to new applications. He deemed the application date to be the cut-off point. The period in question is from November 2006 to November 2008. The customers started out on a fixed rate, with a roll-off to a standard variable rate. They were never on a tracker rate. Is it correct that the relevance of the dates is based on the existence of a flyer that the brokers were using to market and promote the product?

Mr. Wim Verbraeken

That is correct.

That is the relevance of those dates. When was the flyer circulated to the brokers?

Mr. Wim Verbraeken

It was circulated at the beginning of November 2006 and it was revoked in February 2008.

Therefore, it was issued to the broker network at the beginning of November 2006 and then revoked through communication with the brokers.

Ms Dara Deering

On 11 February 2008. The specific date of issuance was 7 November 2006.

Would the mortgage documentation of the customers, as in the mortgage contract, not have made reference to any entitlement to be put on a tracker?

Ms Dara Deering

It never referred to a tracker. Exactly.

The brochure had been circulated, however, and clearly influenced the decision of many customers to go with KBC Bank and to opt for the product in question. The flyer was issued on 7 November 2006 and revoked on 11 February 2008. Of course, the bank did not have control over the communication that existed between the brokers and those individuals who were to become the bank's customers.

Mr. Wim Verbraeken

We made it very clear to our brokers that, as of a certain date, 11 February, the offer would no longer stand. I believe we could reasonably have expected that brokers would comply with that and inform their customers correctly.

Let me give a flavour of the types of issues that arise. Obviously, these relate to the cut-off date or dates either side of that. One customer said they met their broker in February 2008 to discuss the options and the broker produced the KBC Bank flyer, making it clear that the customer could roll on to a tracker on expiry. The customer placed a lot of emphasis on that advice. My correspondence does not state when the customer applied for a mortgage but they signed off on it in early May 2008 and drew the first payment down in early June 2008. They say the flyer with the tracker option was pivotal in the making of their decision. Clearly, it was not communicated to them between February and May that the flyer had been revoked. Is it true that KBC Bank was offering a tracker mortgage up to 4 July 2008?

Ms Dara Deering

For existing customers. For new customers-----

Mr. Barry D'Arcy

April 2008 for new customers.

April for new customers.

Ms Dara Deering

April for new customers and July for existing customers. If the customer in question applied after April 2008, the bank would not have had any tracker product, never mind a fixed tracker product, for example. As Mr. Verbraeken said, we tried to take a policy decision considering where we believe the flyer might have been used in conversations. Obviously, we cannot rule out where it was or was not used.

We believe, however, that it is most appropriate and reasonable to expect that it may have been used as part of the sales process and that is why we have taken an application date. There may be some cases around the edges, and clearly we will look at them on an individual basis, but the policy is to apply it where we believe it is most reasonable and consistent from a consumer perspective. As with the other 90% of customers who went from a fixed rate to a tracker, we have applied the same criteria to these customers who went from a fixed rate to a standard variable rate.

Another customer has said they drew down their mortgage in February 2008, so presumably if they had relied on the flyer they should have been deemed to have been impacted, all other things being equal. That is one case that KBC might need to look at.

Ms Dara Deering

Sure. Of course.

At the other end of the cut-off there are customers who made the application in September 2006 so it was before the existence of this flyer. They challenge that KBC has used the application as the cut off. They make the legitimate point that it is not complete until fully signed and reviewed by all parties, legal advice is sought and when the mortgage is executed. If it was within the window during which this flyer was in circulation, then I believe they have a very arguable case that they should be included. The bank, however, has taken a different view.

Ms Dara Deering

We have taken the view on the basis that the broker flyer may or may not have played a role in the sales conversation. As has already been outlined, we are minded that these customers would have received a loan offer letter that clearly stated they were fixed, standard variable. That would have issued to their brokers before they signed and issued to their solicitor. That is part of that concluding process the Deputy speaks about. We will look at any individual cases where customers may feel it is in-----

How much of the business at that time would have come through the broker network?

Ms Dara Deering

The vast majority, more than 90%.

More than 90%, close to all of it really, came through the broker network. This flyer was circulating during that period. I can see why the bank has drawn the line it has but it is very unfair on some of those who are directly affected. There are people who relied on the flyer but who may not have fallen within the cut-off dates that KBC has set, especially those who may have applied post-February 2008 and who relied on that flyer leaflet. KBC says it was revoked but cannot be sure that this was communicated to those customers.

Mr. Wim Verbraeken

I believe that we were very clear in our communication to the broker network on 11 February 2008 that the product was no longer on offer. I believe it was reasonable for us to expect brokers, who are professionals and who are regulated, to adhere to it.

Can customers who are deemed to be not impacted go to the KBC appeals panel?

Ms Dara Deering

They can come to the bank individually first if they want to do that and we will have a look at any individual circumstances they want to share with us. We will discuss that on an individual basis with them of course.

Okay. If the committee members get the full details of cases can we pass them on?

Ms Dara Deering

Please do.

We will take an interest in them.

I will turn to the other cohort. In October, KBC revised down the 490 customers to the 417 mortgage accounts. This was the very first group that had been identified as not rolling on to a tracker rate after a fixed rate period or were moved off their tracker rate following a change to the terms of their loan or were on the incorrect tracker margin. Were those cases clear cut? They had a contractual entitlement to a tracker rate at a particular margin, or at least an entitlement to be offered such a tracker.

Mr. Wim Verbraeken

Within the cohort of 417 cases that were announced in the October public statement, there were certain cases where, through our forensic review of cases, we had identified that they were not on the rate as per their contract. The large majority, 358 cases, were cases that had been on a tracker rate and then had an agreed change to their mortgage contract in the sense they went on to an interest-only period, and ultimately they rolled off to a variable rate. In October, we determined that the terminology used in the instruction letter for the interest-only period could have been confusing as to its intent and that the customer may have reasonably expected to return to a tracker rate. Although the correspondence stated, in most cases, that the customer would move to a variable rate, we determined that it was not clear to the customer-----

Okay, but whatever about the correspondence issued, was their contract clear?

Mr. Wim Verbraeken

I am talking about the instruction letter that is part of the contract.

Ms Dara Deering

Their initial contract was clear and then something changed thereafter. The documentation may not have been as clear as it could have been.

Turning to the additional 2,557 cases, within that figure we have already discussed the 650. The balance of 1,907 mortgages were accounts that were converted from a tracker rate to another rate product post drawdown, up to July 2008. These have now been identified as impacted cases. This was a big change. Will the witnesses explain those mortgage accounts to me?

Mr. Wim Verbraeken

These customers' mortgages originated on a tracker rate or on a fixed rate that subsequently changed to a tracker rate. All of them at some stage moved to a fixed rate and rolled off onto a standard variable rate. We came to a definition and to the policy decision that the journey was potentially confusing and that customers were not fully made aware that they were giving up their tracker by moving to a fixed rate. These customers had originated on a tracker rate or before moving to the fixed rate they were on a tracker rate. They rolled off to a standard variable rate but after a review, we ultimately took the decision that they had potentially not fully aware they were giving up their tracker rate by entering the fixed rate.

Was communication with them not clear or did their contract entitle them to a tracker through the duration of their mortgage even if they had a few journeys within that period?

Mr. Wim Verbraeken

They signed a fixed rate instruction form, which is part of their contract and which would modify their contract. It was the combination of that form, the language used in that form and the surrounding documentation, for example, the handbook, that would have given rise to the confusion.

KBC, however, clearly resisted the inclusion of these customers. This was two years into the tracker investigation.

Mr. Wim Verbraeken

Yes. As I explained to Deputy Doherty earlier, these are the cases where we had a number of complaints early on many years ago - more than 40 went to the Financial Services Ombudsman - and all of the decisions of the ombudsman at the time found in favour of the bank, as I have already outlined.

If we consider that group of customers, it is possible that some of them have been on the wrong rate for a decade. Most of them, presumably, were on-----

Mr. Wim Verbraeken

They would have gone on to a fixed rate first for one year, and maybe two years subsequently. The period they would have been on a standard variable rate is, potentially, eight years.

When was the earliest that the mortgages in this group of 1,907 mortgages were taken out?

Mr. Wim Verbraeken

It is the date they moved to a fixed rate, which was up to the middle of 2008, which was the start of their fixed-rate periods.

Was that a fixed rate for one or two years?

Mr. Wim Verbraeken

Typically one year.

Maybe, therefore, these customers have been on the wrong rate for nine years as opposed to ten years. Are those customers, generally, on variable rates now?

Mr. Wim Verbraeken

They are on the standard variable rate, yes.

Would that be 3.5% or 4%?

Mr. Wim Verbraeken

It is 4.25%, or 4.05% if they have an account.

That is 4.25%, or 4.05% if they have a current account with KBC.

Mr. Wim Verbraeken

That is correct.

What is the tracker margin they are entitled to?

Mr. Wim Verbraeken

We had a range of tracker margins depending on the period in which the mortgages would have originated.

The typical tracker margin would be 1.25% over the ECB rate. All of the impacted customers, regardless of the cohort of which they are part, are being restored to the original tracker rate. We do not have a concept of prevailing tracker rate. They will all go back to the tracker rate that was part of their contract at the time that they had a tracker rate.

Ms Dara Deering

Whatever they were on prior to fixing they will go back to.

Typically, Mr. Verbraeken is saying 1.25% above the ECB rate. Some of them today are paying 4.25%, a difference of 3% on their mortgage, nine years later. If they have a mortgage of €200,000 in simple interest terms, not annuity but simple interest, that is €6,000 a year of a difference in the interest. The impact of that over a period of up to nine years on those people is savage.

Mr. Wim Verbraeken

The differential between the standard variable rate they are on today and the tracker rate, which is today approximately 3%, I would agree with that, has not always historically been the case.

I appreciate that.

Mr. Wim Verbraeken

It is indeed today approximately 3%. That is correct.

Today, if a person has a mortgage of €200,000, that is €6,000 a year.

Mr. Wim Verbraeken

Correct. That is true.

That is €500 a month extra which is still being taken. By when has KBC committed that they will all be on the correct rate?

Mr. Wim Verbraeken

By the end of the month.

Ms Dara Deering

The end of February.

By the end of February, that is the commitment. There is a lot of work to do in February if it is going to make that deadline.

Mr. Wim Verbraeken

Yes.

Does the €120 million cost include the cost of the 100 staff?

Ms Dara Deering

No.

Mr. Wim Verbraeken

The €120 million we have provided for is going entirely to the impacted customers and does not account for any expenses we will incur in the process.

What is the administrative cost to KBC of staff time and resources?

Mr. Wim Verbraeken

Existing staff of the bank are already part of the contingent working for the bank and we do not specifically account for staff that have been seconded into this programme. We have approximately 100 professionals engaged on this process. We have brought in additional external resources to supplement our own staff. We accrue for these costs as we move through the programme. That is what I am in a position to say about that.

Already 33 homes have been lost and Mr. Verbraeken says he expects that number to increase.

Mr. Wim Verbraeken

Yes.

On what is he basing that expectation?

Mr. Wim Verbraeken

We have not considered all of the cases. We had paid and rectified 501 mortgage accounts by the end of January. We still have to review a good number of cases in the coming weeks and months and we will do that as fast as possible but we will apply the same principles of causation as for the cases we have already treated.

How many of the total number of accounts relate to people who no longer are customers of KBC?

Mr. Wim Verbraeken

I would like to bring it to loan agreements and most of the communication we have done around the programme is about mortgage accounts. In the setting of KBC, a loan agreement can have multiple accounts. We are talking about a total of 2,600 loan agreements related to approximately 2,500 customers. Approximately 615 of these loan agreements are no longer open.

Approximately 615 of the 2,974 are extinguished.

Mr. Wim Verbraeken

Correct.

In response to the question about the number of files for affected customers which are incomplete or missing, Mr. Verbraeken states there are approximately 14 for which the bank is missing documentation and where the mortgage account was deemed impacted as a result. Is it because the documentation is missing that the bank is assuming they have been impacted?

Mr. Wim Verbraeken

Absolutely. I want to clarify that it is not the case that the documentation is missing but a specific relevant piece of information is missing from the file and therefore, we have taken the decision to consider the customer as impacted.

Ulster Bank, which is in the same position as KBC in delaying dealing with redress and compensation, put most of its customers back on the correct tracker rate in 2014, if my memory is correct. Why did KBC not do likewise? Why did it not do this much earlier? What was the earliest point at which the 3,000 customers were identified? Was it the end of December?

Mr. Wim Verbraeken

As we said in our public statement in October, we identified 417 mortgage accounts at that stage. With the agreement of the Central Bank we commenced redress and compensation in November. All of these customers were put on the right rate and given full redress and compensation by the end of January. All the remaining 2,500 cases were identified as impacted in December 2017.

How difficult is the physical process of putting people back on the correct tracker rate? Can the bank just say what the rate was and update them automatically using its software? I am referring to the rate, not redress or compensation.

Ms Dara Deering

First, we need to determine that rate and make sure they go back to that rate as it was articulated originally. We are not doing average or prevailing rates. Second, we have to set the loan back up as a tracker, because it now tracks ECB. That process is to make sure the calculation is correct on a go-forward basis. That is the basis on which we then calculate redress. There are two stages in a process involving someone who makes and someone who validates the change.

That does not really answer my question. Why, at the end of December, could the bank not have put a time period aside early in the new year to put everyone back on the correct tracker rate?

Ms Dara Deering

That is what I was trying to explain. There are several steps in the process. One is to go through all the original contracts to make sure the customer gets the original rate and then, second, to do the calculations. I assure the Deputy if we could have done it in early January it would be done by now. We are doing it as fast as is practicable, while also ensuring that we meet our customer obligations in terms of getting payments out to customers who also have been impacted by this.

Does Mr. Verbraeken believe this is the final number for KBC? Have there been further discussions with the Central Bank on the full cohort?

Mr. Wim Verbraeken

As I indicated earlier the processing in December with the Central Bank concluded on cohorts, that is, larger groups of customers that were part of the same customer journey. We have concluded that phase of the review with the Central Bank in the sense that there is an agreement with the Central Bank on those cohorts but we continue to perform quality control and quality assurance and we are still going through various cases. As we indicated earlier, we invited certain customers to submit to us the relevant information or evidence to verify whether their case would be impacted. We are not closing the identification phase of the examination. This is ongoing. We are trying to redress and compensate all customers we have identified. We are not finished. We expect that the additional cases will be individual cases with circumstances that were not captured by some other cause.

How large does Mr. Verbraeken think those extra cases are?

Mr. Wim Verbraeken

I am unable to put a number on it. It will be what it is because we apply very stringent, detailed principles to the review because we want to be fair to all customers who are potentially impacted.

I have been informed by a constituent, a customer of KBC Bank, that when he took out his mortgage, he was given the option of having a fixed rate and then reverting to the prevailing variable rate and that he is currently unable to get a response from the bank on whether the prevailing variable rate at the time was a tracker mortgage or a standard variable rate.

Mr. Wim Verbraeken

I cannot comment on a specific case. I am not familiar with the circumstances of the case described by the Senator, but if he provides me with the details, I will look into it.

Am I correct that at the time when tracker mortgage rates were available, KBC Bank operated a fixed rate, a tracker mortgage rate and a variable standard rate?

Mr. Wim Verbraeken

Correct. Without looking at the specifics of the case, I conclude that the prevailing variable rate was the standard variable rate because otherwise the contract would have specifically mentioned the tracker mortgage rate.

I will revert to the individual concerned on whether he would like me to pursue the matter through the committee. I will also pass on the correspondence to Mr. Verbraeken.

Mr. Wim Verbraeken

Absolutely.

On the flyer-leaflet distributed, am I correct in saying that if there are cases in which there are issues to do with the margins, KBC Bank will look at them?

Mr. Wim Verbraeken

Yes.

Ms Dara Deering

Correct.

Mr. Wim Verbraeken

For this customer or other customer journeys.

In the light of the emails we receive, I want to be absolutely clear on the response. Mr. Verbraeken is saying any customer who believes there is an issue specific to his or her case that changes the view of the dates can bring forward that information and that it will be considered by the bank.

Mr. Wim Verbraeken

Yes.

On buy-to-let properties, in cases in which properties were placed in the hands of a rent receiver, not sold for one reason or another and fell into disrepair, is the history of the customer's journey taken into account? In other words, does the bank consider all aspects of his or her journey, including his or her experience with the bank and what happened to him or her, and then determine if compensation in respect of any specific part of that journey requires to be paid? Is that correct, in general terms?

Mr. Wim Verbraeken

In general terms, absolutely, but a distinction is made between buy-to-let and owner occupied properties. We have put in place a specific scheme in that regard. We also make a distinction with customers who did not lose their properties.

If such customers come forward, are they assigned a particular individual in the bank with whom they can engage?

Mr. Wim Verbraeken

Yes. We have a team that has specific information on the case or can retrieve it. It has been briefed on all of the specifics of how to engage with these customers. If they ask for a meeting, we try to accommodate them as soon as is practicable.

On the timelines mentioned in the opening statement, I agree with members that the process is extremely slow and frustrating for customers. How confident is Mr. Verbraeken that the bank will meet each of the timelines set down?

Mr. Wim Verbraeken

We appreciate that it has taken the bank longer than other lenders in the market to come to final determinations. For KBC Bank it was December 2017. We would not have given the commitment we have made publicly and also to each customer in restoring him or her to the correct rate and paying the redress and compensation due by the timelines indicated, if we did not believe we could deliver on it. We hope the timeline of June will compare favourably to the journey other lenders may have potentially travelled between the conclusion of the identification of customers as impacted and the making of final payments.

Deputy Michael McGrath gave an example of how a customer might be impacted on. I have received an email from a customer who was impacted on to the tune of €500 per month in the nine-year timeframe, which means that he was overcharged by a considerable amount. This customer has still not resolved the issues involved with the bank. He has been trying desperately to have the matter sorted because it is having an ongoing impact on him. For someone like him, the timelines appear to be too far down the line. It is important that cases such as this be concluded early. The individual in question has been in contact with the bank dating back to the beginning of the discovery of the error. It is not a source of great comfort for this customer that the issue is being dragged out and remains unresolved. The last letter he received on 5 January was the standard one. He is seeking the support of the committee to bring his case to an early conclusion and highlight his poor customer experience with the bank. I am informing Mr. Verbraeken of the content of the email.

Mr. Wim Verbraeken

I accept that and hope the customer received a letter soon after the one to which the Chairman referred indicating that he had been impacted on. If that is the case, the subsequent engagement with the team working on these cases will I hope demonstrate that we want to do the right thing and do it as soon as possible.

Is the rate to which they are being returned the original rate?

Mr. Wim Verbraeken

Yes.

Ms Dara Deering

Correct.

What lessons has the bank learned?

Mr. Wim Verbraeken

I have been with the bank for only a few years and I am also new to the Irish market. I draw lessons at a macro and a micro level. At the micro level within the bank, 90% correct is not good enough. Very often we have failed to be precise in our communication and correspondence on the clarification we have provided for customers and need to bring it up to a higher standard. I believe the processes we have put in place to date in the bank will help us to achieve that standard. At a macro level, I understand there was a lot of competition in the years leading up to the financial crisis and this event. I believe lenders did not consider the potential long-term impact of new products such as tracker mortgage rates on their customers. They should learn the lessons of designing and managing products which have the potential to have a very negative impact on customers in the long run.

In his opening statement and responses to questions from members Mr. Verbraeken stressed the importance of the customer, the customer journey and experience and how important it was to recognise the rights of the customer.

I ask the bank to apply that line of thought to the customers who were affected by the issue relating to IIB Homeloans. There is a need to exercise some flexibility and the bank should look at how many individual cases are involved. It is important to do so before there is another row about the matter. In line with the opening statement we have heard, the bank should give some relief to these people. It is clear from some of the letters I have received that they took legal advice but it took time to sign contracts. None of us can calculate the impact the November 2006 flyer had when it came into play. We do not know how it would have affected their view of things going forward into the future. The bank needs to be flexible in its approach to this issue.

How many requests has the bank received from customers looking for reviews of decisions as to whether they are in scope? How many of those has the bank denied?

Ms Dara Deering

We have 56 cases in which customers believe they should be in scope for the examination but in respect of which we have determined they are not in scope. Some originated prior to last year. Where we deem they are not in scope and, therefore, not impacted upon by the examination, we will give them a final letter and tell them that the mechanism applying to them thereafter will be the Financial Services Ombudsman. We did not deem them in scope or impacted by the examination.

Other customers have kept in touch with us throughout this process. Some may have been in scope because the in-scope population was a lot larger. We will write to them to advise them that, despite the fact they were in scope, they are not impacted. We will advise them of the process through which they can go to provide information to us, or to advise them of their rights under the independent process of the Financial Services and Pensions Ombudsman.

There are individuals who have been communicating with members of this committee and who have told us that their final entry into a legal agreement with the bank was after the date of the flyer. Ms Deering said she wanted to hear their cases. Should we send the details to Ms Deering?

Ms Dara Deering

The committee may send them to me and we will have a look at them. We would do so in any case.

There are 27 buy-to-lets which have been deemed impacted upon whereby the owners lost ownership of their properties. If an individual were to have taken out a mortgage with KBC for their own home and, as a result of the tracker scandal and not being able to keep up with payments once they were overcharged by the bank, or for other reasons such as having to leave the country for Perth, Canada or other places, they then let their house, does it change from a PDH to a buy-to-let?

Ms Dara Deering

For the purposes of the calculation of redress and compensation, if it was the only property they owned in this country and they had to leave, they will be treated as a PDH customer.

If a couple had two separate properties and they decide to let one, would that house be deemed a buy-to-let? If they had known a tracker rate applied to one of the houses, they would probably have moved into that one.

Ms Dara Deering

Is the Deputy asking about a case where one property was with us and the other with another institution?

They could both be with KBC.

Ms Dara Deering

I would have to look at any specific instances of that. The question on people leaving is easier because our framework regards it as their PDH but I would have to look at the case where a couple was involved. I will do that and get back to the Deputy.

What criteria does the bank use to determine if somebody is deemed to have lost ownership of his or her home as a result of the tracker mortgage issue?

Mr. Wim Verbraeken

As I said in my opening statement, we consider the most lenient restructuring option available at the time for that customer, whether he or she was an owner-occupier or a buy-to-let customer. We verify whether the customer would have been able to meet the payments if he or she had been on a tracker. Maybe we can take the Deputy through a specific example.

Ms Dara Deering

A chart I have made available to the committee shows a real home loan customer and the rate they were on, which was our standard variable rate of 4.25%. The repayments the bank was seeking were just under €1,500 per month. The correct tracker rate was 1% so the repayment the bank should have sought was €970. Based on our affordability assessment of this customer, who was in financial distress, they could afford to pay just under €490. We then look at what was the lowest restructuring or resolution option which we could have offered to a distressed customer at that time. We do not look at what their tracker mortgage should have been but we assess what we would have offered to this distressed customer, which was a 50-50 split mortgage, meaning their repayment would have been €368. In this case, the customer's affordability was greater than the lowest restructure option we had and we deem that they could have afforded that. Causation for loss of ownership in this case was, therefore, that of the bank.

The bank looks at what is the best case for the customer at a point in time.

Ms Dara Deering

Yes. We determine the point at which we would have made a decision on the outcome of the case, in this case March 2014. We would have had all the information at that time and we consider whether, had the customer been on a tracker at the right rate, and bearing in mind the lowest restructure rate and the lowest repayment, they would have had the affordability to meet that payment. We should have offered the customer that lowest repayment option so the decision to determine the mortgage as unsustainable was incorrect on the part of the bank. We believe in this case that we caused the loss of ownership.

There are a lot of grey areas and the bank is winding back the clock to some extent. Somebody may be marginally over the threshold and may have had to borrow from family members, etc. I assume there will be a lot of appeals.

Ms Dara Deering

When a bank makes a decision as to whether a mortgage is sustainable, it takes everything into consideration. We ask what we would have done at a specific point in time, had the customer been on the correct rate.

It is a real example. Had their tracker mortgage payment been correct, it would have been just under €1,000. While they could not afford that, we would have offered them a lower repayment option. If they can afford to meet that, we deem we have caused the loss of ownership.

Has the bank committed to the committee that all the 2,500 customers who are currently on the wrong tracker rate will be restored to the correct tracker rate by the end of this month?

Ms Dara Deering

That is correct.

Why has KBC not made the same commitment to its own customers?

Ms Dara Deering

We have confirmed this in any of our communications. For example, the 501 to which Mr. Wim Verbraeken referred are already back on the rate. In any of the conversations we are having with customers, our commitment has been to bring them back on the rate for the end of February.

Is it correct that KBC sent out letters on 5 January?

Ms Dara Deering

We did. We sent out the letters to let people know that they were now deemed to be impacted. That is the letter to which the Chairman also referred. We informed them payments would be made by no later than the end of June. If they had not heard from us before the end of March, we would write to them again. That was the letter to say the customer was impacted.

Has KBC written to them since stating they will be restored to the correct tracker rate?

Ms Dara Deering

No, because we are writing to customers on an ongoing basis as we restore their rate and do the redress and compensation.

That brings me back to my original question. KBC has made the commitment to the committee. I appreciate that but it is an absolute disgrace that KBC has so many customers not on the right tracker rate. While it has made a commitment to this committee, it has not done so to the 2,500 impacted customers. It wrote to them on 5 January stating clearly that if the bank had not concluded a review of the customer's mortgage account before the end of March 2018, it would provide them with a further status update at that stage. Why did KBC not tell them they would put them back on the proper rate at the end of month?

Ms Dara Deering

To be fair there have been many challenges around customers and customer expectations. As soon as we concluded the review, which we did on 20 December, and we made a statement about impacted customers, our first priority was to make sure those customers knew they were impacted. Our second priority is around getting the payments out for the customers who had been identified back in October. That has been done. The third priority was to move towards how quickly we could get these accounts back on a rate. The quickest we can get them is by the end of February at the latest. Clearly, customers are talking to us every day. That is part of the ongoing engagement.

The letter stated if the customer had any queries on this to contact the bank's dedicated team at a dedicated number between 9 a.m. and 5 p.m.

KBC has told this committee and the public that it will restore its customers by the end of February. However, it does not have the decency to tell its customers. There are no ifs or buts about it. That is completely and utterly wrong. We are trying to hold the banks accountable for Irish citizens. We are trying to force the banks to change their culture and give people back their money. As much as giving them back their money, the banks should also give them respect. It is nothing personal but it is Ms Deering's name on the letters.

Ms Dara Deering

I know.

Why not have the decency to tell them the bank will put them back on the proper rate at this time?

Ms Dara Deering

I understand the Deputy's point. However, we are trying to manage customer expectations. Customers are massively frustrated by the length of time this is taking. I am not trying to exacerbate this problem. On 5 January, when we issued those letters, we were not in a position to make a categorical confirmation to customers that they would be back on the correct rate by the end of February. I did not want, therefore, to exacerbate the already high levels of frustration for customers because, naturally, for many of those customers, we had only deemed them to have been impacted in December. We thought the best next step for those customers would be to say they are impacted. As their rates are rectified, they get communications from the bank. We understand the frustration. That is why we said initially that we would try to have communication by the end of March, which is in the letter to which the Deputy is referring. Since then, we have put all efforts into getting those customers back on their rate for the end of February. At least, their repayments are lower going forward, recognising the payment of redress and compensation will continue to the end of June.

Will some of the 2,500 customers who are still not on the proper rate be getting letters this week?

Ms Dara Deering

Every customer who is still on the incorrect rate will be on the correct rate by the end of February.

I understand that. That was not my question. Will some of those 2,500 customers be getting letters this week telling them that they are back on the proper tracker rate? Will some of them be getting letters the following week or is the plan that there will be a big mail drop at the end of February?

Ms Dara Deering

The way our systems work, they will go towards the end of February, confirming their rate and repayment, as would be the normal case when we change accounts.

Will KBC put them all back on the rates in one go?

Ms Dara Deering

In and around a certain period as to how their mortgage is calculated. Without going into too much detail, towards the end of February, they will get a letter confirming they are on the correct rate.

They will get the letter at the end of February. Will anybody be put on the correct rate next week or the week after?

Ms Dara Deering

Our mortgages are calculated once a month. From a customer perspective, the most important thing is that they are on the correct rate before the end of February.

Mr. Barry D'Arcy

We have a window of time to actually put this in place between 1 February and 20 February. In that timeframe, we are trying to get the operational process in place so they can be put back on the right rate. As mentioned earlier, we are trying to identify what is the actual rate they should be moved to. We are in the process of finalising that, transferring it to our operations teams to ensure they can move into a space where they can make a change and the customer restored to the appropriate rate. That will happen in the month of February.

When the customer gets a letter saying they are back on the correct rate, will there be a redress and compensation element, as in the bank telling them how much it will be offering them in redress and compensation, or will it be in a subsequent letter? If it is a subsequent letter, will they go out in a batch in June? Can KBC give the committee any targets as to what it is planning to hit in March, April, May and June?

Mr. Wim Verbraeken

The redress and compensation component will be implemented in batches between February and ultimately June, if necessary. To give an example, we are planning to redress 350 customer accounts in the month of February. This number will increase in March and April. This is not a matter of postponing everything until June for the accounts which are still open. As we mentioned earlier about 600 are no longer open, meaning they would not be part of the rate rectification process but part of the redress and compensation scheme.

I thank the witnesses for attending.

The joint committee adjourned at 8.50 p.m. until 10 a.m. on Thursday, 8 February 2018.