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Tracker Mortgages Examination

Dáil Éireann Debate, Thursday - 18 May 2017

Thursday, 18 May 2017

Questions (64)

Joan Burton


64. Deputy Joan Burton asked the Minister for Finance if the Central Bank's order to lending banks to return affected customers to an appropriate tracker rate of interest has been undertaken; 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. [23596/17]

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Written answers (Question to Finance)

As the Deputy will be aware, the Central Bank of Ireland published a report providing an update on the Tracker Examination on 23 March.

As the Central Bank has set out in the report:

- approximately 9,900 customer accounts had been identified as impacted by lenders, as part of the Examination, as at end February 2017;

- lenders had commenced contacting impacted customers identified as at end February 2017 and had rectified the interest rates applied to such impacted customers’ accounts, thus stopping further detriment; as at the date of the Report, interest rates had been rectified on more than 90% of the accounts that require such rectification;

- to end February 2017, approximately €78m had been paid in redress and compensation to approximately 2,600 impacted customers identified as part of the Examination.

The Central Bank invoked its powers under Section 22 of the Central Bank (Supervision and Enforcement) Act 2013 to set specific timelines for lenders to complete Phase 2 of the Examination, the last of which will be completed no later than end September 2017.

Regarding compensation, the Central Bank does not have the statutory power to set compensation levels or to compel lenders to implement redress and compensation programmes in respect of failures that occurred prior to the introduction of the Central Bank (Supervision and Enforcement) Act 2013 (the “2013 Act”).  However, as part of the Examination framework, where customer detriment is identified, the Central Bank has clearly articulated its expectations of lenders to provide appropriate redress and compensation to impacted customers in line with prescribed Principles for Redress. The Principles for Redress are designed to ensure that impacted customers receive appropriate redress and compensation in a timely manner.

Key elements of the Central Bank’s expectations in respect of redress and compensation for impacted customers include:

- any harm is stopped at the earliest possible time after each group of impacted customers is identified;

- the interest rates applied to impacted customers’ accounts revert to the appropriate tracker interest rate or impacted customers are given the opportunity to revert to such a rate where relevant;

- redress will be provided to impacted customers to return them to the position they would have been in had lenders’ failures not occurred;

- reasonable compensation, that reflects the detriment suffered by individual customers, is provided;

- redress and compensation is to be paid to impacted customers up front at the point of offer and compensation cannot be reduced by virtue of a customer lodging an appeal; and

- an additional payment is to be provided to impacted customers at the point of offer to enable them to take independent professional advice regarding the redress and compensation offers made to them;

As the Examination continues to progress, the Central Bank will continue to challenge the position a lender has taken in relation to particular groups of customers to ensure the fair treatment of tracker mortgage customers.

The framework of the Examination also provides that lenders should establish an independent appeals process to deal with customers who are dissatisfied with any aspect of the redress and compensation offers that they receive from lenders in respect of these matters. As the Central Bank Principles for Redress provide that all redress and compensation payments are made to customers on an upfront basis, customers can accept the redress and compensation offered and still make an appeal. In addition, the impacted customer has the option of bringing a complaint to the Financial Services Ombudsman or initiating court proceedings.