Wednesday, 16 May 2018

Ceisteanna (11)

Pearse Doherty


11. Deputy Pearse Doherty asked the Minister for Finance the latest engagement he had with the Central Bank on tracker mortgage issues; if he raised the issues of prevailing rate customers, customers of a building society who have not returned to a tracker mortgage, staff tracker mortgages in a bank (details supplied) and other groups still not deemed to be impacted on by the matter; and if he will make a statement on the matter. [21433/18]

Amharc ar fhreagra

Oral answers (7 contributions) (Ceist ar Finance)

Last week the Central Bank told us that it was still in discussions with some financial institutions on some categories or groups of victims in the tracker mortgage scandal. We know how pressure has been brought to bear on the financial institutions, at a political level from the Minister's Department or by the stories of the victims. However, I am concerned that we are not yet done in dealing with the issue. We are so far into it, yet I am concerned that time is slipping and that there are still queries or disputes between the Central Bank and the financial institutions. We have received many emails from individuals who are disgruntled at decisions that they are not within the scope of the inquiry.

In April the Central Bank provided me with a comprehensive update on the tracker mortgage examination. It subsequently published the update on its website. The report indicated that an additional 3,400 impacted on accounts had been identified since the previous December progress report, bringing the total number of impacted on accounts to 37,100. Progress has been made in the payment of redress and compensation. A total of €412 million has now been paid in respect of 88% of accounts so far identified as impacted on and verified pursuant to the examination. This is additional to the €47 million paid in redress and compensation to impacted on customers identified outside the scope of the industry-wide examination.  

In line with its engagement with lenders via the examination the Central Bank, as independent regulator, has intervened on prevailing rate issues. This intervention is aligned with the Central Bank’s functions as part of the examination to rigorously test and challenge, from a systemic perspective at the macro level, the position adopted by lenders in order to try to achieve the best result for all customers within a group.  

One of the lenders which indicated that there was an issue with the prevailing rate was AIB.  The matter was pursued by the Central Bank and directly as a result of its intervention, AIB prevailing rate customers were admitted to the examination and will receive a compensation payment, as well as an offer of the current prevailing rate, as opposed to the prevailing rate at the time their fixed rate expired.  By securing their admission to the examination, the Central Bank has also ensured those customers will have the opportunity to utilise the examination’s appeals processes should they be dissatisfied with any aspect of their redress and compensation offer and can pursue their case, based on their own unique circumstances, with the Financial Services and Pensions Ombudsman. In the particular case the Central Bank examined AIB’s model to determine the then prevailing rate and concluded that it was reasonable in relation to the contractual interpretation of the term "prevailing rate”. The bank also advised me that it had formed the view that, at a macro level, it could not mount a legal challenge on behalf of all customers in the relevant group on this issue.  Nevertheless, more generally it advises that it continues to engage with and challenge lenders on a number of tracker mortgage issues which include the prevailing rate.

The prevailing rate has been a serious bone of contention for many individuals. My colleagues on the finance committee and I have quizzed all of the financial institutions about the prevailing rate, where they accepted that a customer should be on that rate, but it was 3.5%. What they came up with was ridiculous and we queried it with the Central Bank. When officials of the Central Bank appeared before the committee in recent weeks, I put the issue to them. They told us "it is clear that the prevailing rate issue has been dealt with in some of the entities." That was the first time we had received information that that was the case in AIB. I welcome being able to give that information. We will tease out the matter with AIB when its representatives come before the committee soon. However, the Central Bank has stated it is still in discussions with others. There are people who do not know if their issue with the prevailing rate with Permanent TSB, Bank of Ireland or any other bank has been closed, whether they should go to the Financial Services Ombudsman or if the Central Bank is still arguing on their behalf. Will greater transparency be brought to this issue in order that customers will know where they stand?

I will answer the Deputy's question, but I wish to return to two other matters related to staff loans included in the Deputy's original question. The Central Bank has made it clear to lenders that their staff, who have impacted mortgage accounts, are to be included in the examination in the same way as all other impacted customers.

The Central Bank has now indicated that it is satisfied that all impacted customers have been identified at this point. In overall terms, however, while the bank is currently of the view that the majority of affected customers have now been identified, it nevertheless expects that there will be some further increase in the number of impacted accounts before the conclusion of the examination. This is an ongoing matter. I do not expect the number of accounts to move up in the way it has in the past where it moved up by such a quantum, but it is entirely possible it could move up again.

On transparency, I have also had a lot of contact on the matter from constituents and citizens and the general view I have received is individuals have understood where they stand on the process. If the Deputy has specific examples of where he believes that is not the case, he might share those with me and with the bank director.

On the issue of staff loans, I received an email this morning from an employee in Bank of Ireland and it is quite interesting given the revelations in the national media this morning that Bank of Ireland's chief who has a mortgage of €2.8 million is servicing that mortgage with a payment of €1,400 per month. That is less than the current average rent in Dublin and it shows how these banks can fleece their customers with the highest interest rates in Europe, as we have seen from the Central Bank's report last week, but how they also treat their customers. This employee in Bank of Ireland was just informed that they are not impacted, despite the fact that the staff were told at the time that they would roll onto a tracker and that they did not have to do anything but then the carpet was pulled from under them. I make the point that there are still unresolved issues on some of this and we need to continue to encourage, support and challenge the Central Bank in dealing with these outstanding issues.

To add to what Deputy Pearse Doherty said, it is really important that at this late stage people are told where they stand because there are various strands of outstanding issues here and the Central Bank is clearly moving towards a conclusion on all these issues. There will be legal challenges on certain issues. That is absolutely certain at this stage.

The other key point I want to make is that while I welcome the fact that there are six enforcement investigations under way, the elephant in the room is the following question. Why did this happen and how could this happen across all the main lenders in the same way in a manner that was disadvantageous to the consumers and advantageous to the bank? That is the question that has to be answered and at the end of the day, if we are to have any accountability for what has happened, that question must be answered.

Deputy Pearse Doherty said that this matter is still unresolved and not concluded. I agree with him, it is. Deputies have raised a number of issues with me, as I have dealt with this matter, on where we were with staff loans, where the Central Bank was with staff loans and where we were with the issue on the prevailing rate of interest. I have now updated the House on where that stands. On the information the Central Bank has shared with me on where individuals stand, I would expect that as the investigation moves into the final stage of its work, that all individuals will know where they stand at the end of it. That is not to say every individual will be satisfied. People may take further action and I acknowledge that could happen, but I believe the appeals process that has been put in place is comprehensive. I restate that if an individual has received payment, that payment is then his or her and it will not be affected by any future participation he or she has in the appeals process.

On the question about why this happened, that is a question that I expect the Central Bank will be able to answer in the inquiry report that will be at the end of this process. As I have said on a number of occasions, this should not have happened and it should not have taken this long to resolve. The Central Bank, despite views that have been articulated to it, has risen to the challenge in dealing with what was a very complex issue which has inflicted much loss on many of our citizens.