Dáil Éireann Debate, Tuesday - 4 April 2017
45. Deputy Joan Burton asked the Minister for Finance if he has satisfied himself that the Central Bank's order to lending banks to return affected customers to an appropriate tracker rate of interest is being addressed; if his attention has been drawn to the fact that banks are free to come up with their own offers of compensation and that many banks are not offering customers effective redress; and if he will make a statement on the matter. [16371/17]
View answerThis is a simple question on the tracker mortgage process and redress being effected to bank customers. The requirements provide that banks must place customers on an appropriate tracker rate of interest. However, the banks are free to come up with offers of compensation and are not required to ensure customers obtain redress. This is a serious wrong on an issue that has affected many thousands of families and resulted in some families losing their homes. Now that redress must be paid, there is no structure by which the banks must pay the appropriate rate.
The Central Bank (Supervision and Enforcement) Act 2013 has given powers to the Central Bank to direct the payment of redress to customers, where appropriate. However, this provision does not have a retrospective effect and the Central Bank does not have the statutory power to compel lenders to implement redress and compensation programmes in respect of failures that occurred prior to the introduction of the 2013 Act. However, where customer detriment is identified in the tracker examination, the Central Bank has clearly articulated its expectations of lenders to provide appropriate redress and compensation to impacted customers in line with its prescribed principles for redress, as set out in its report dated 23 March 2017.
The principles for redress are designed to ensure that harm is stopped as soon as possible and that impacted customers receive appropriate redress and compensation in a timely manner. In addition, they provide for an independent appeals process to ensure customers have an option to challenge any aspect of the redress and compensation package, including the tracker rate margin they receive from their lender. While the Central Bank expects lenders' reviews to deliver fair outcomes for customers, the bank believes the appeals process is a very important part of the overall framework to ensure there is an independent and transparent process in place for impacted customers. The appeals process, however, is additional and without prejudice to the options available to the borrower to bring a complaint to the Financial Services Ombudsman or initiate court proceedings.
In all, arising from the examination, approximately 9,900 impacted customer accounts have been identified as at the end of February 2017. Lenders have commenced contacting impacted customers and rectified the interest rates applied to such impacted customers' accounts, thus stopping further detriment. The Central Bank has also indicated that, as at the date of its most recent report, interest rates have been rectified on more than 90% of the accounts which require rectification.
I understand this issue was the subject of questions to the Governor of the Central Bank at a committee meeting this morning, at which he provided the most up-to-date information available to the bank.
As the time for questions has almost expired, Deputy Burton may make one supplementary contribution.
We have, on one side, a powerful institution, namely, a bank, and, on the other, an individual mortgage holder, usually a family. The Minister has confirmed that unless the mortgage holders are well advised and informed, the interest rate on their mortgages may not be returned to an appropriate rate which gives them the redress to which they are, as the Minister stated, legally entitled. The scheme established by the Central Bank and the Minister's comments leave a significant number of people on the hazard as to whether they receive fair redress from the banks in question. While practices differ from bank to bank, it is essentially up to the individual bank to decide what is fair compensation. Unless the affected customers have read up sufficiently or have expert advice available to them, they will be left in a position of having to take what the bank has to offer.
The Central Bank is insisting that redress is paid by the offending banks to persons affected by this issue, even if the redress obligation arises prior to the 2013 Act. In addition, affected customers do not have to accept the compensation offered and may go through an appeals process without prejudice to their other options of taking a second route of appeal, making a complaint to the Financial Services Ombudsman or taking their case to court. The Central Bank is conscious of this issue and is insisting that full and appropriate address is paid by the banks to all affected customers.
