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Tracker Mortgages

Dáil Éireann Debate, Tuesday - 7 March 2023

Tuesday, 7 March 2023

Ceisteanna (71)

Thomas Gould

Ceist:

71. Deputy Thomas Gould asked the Minister for Finance if he will engage with the Central Bank with respect to the sale of tracker mortgages to vulture funds where those mortgages were overcharged as a result of the tracker mortgage scandal; and if he will make a statement on the matter. [11337/23]

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Freagraí ó Béal (9 píosaí cainte)

It has become apparent that the retail banks sold to vulture funds thousands of mortgages that were overcharged through the tracker mortgage scandal. Hundreds of these tracker mortgage accounts were sold prior to them receiving remediation through the tracker mortgage examination. The principles of the tracker mortgage examination were very clear. These mortgage holders, having been overcharged by the banks, are now trapped with vulture funds with no option to fix interest rates and no ability to switch. They are in a worse position. Will the Minister outline his views on this revelation? Does he intend to engage with the Central Bank in respect of this?

I thank Deputy Doherty. The Department continues to work closely with the Central Bank on all mortgage related matters. Changes in the interest rate on a tracker mortgage are determined by any movement in the underlying rate being tracked and, in line with the terms and conditions of the mortgage contract, these changes are applied to tracker mortgages customers by their lenders.

This approach applies to all tracker mortgage customers, including those who have remained with the original lender, and to borrowers whose tracker mortgages were purchased by another entity.

Where a loan is sold or transferred to another regulated entity, the protections that were available to borrowers prior to the transaction continue to be in place with the new owner. Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018, if a loan is transferred or sold, the holder of the legal title to the credit must be authorised by the Central Bank and must comply with Irish financial services law that applies to “regulated financial service providers”. This ensures that consumers whose loans are sold or transferred maintain the same regulatory protections, including under the various Central Bank statutory codes of conduct, such as the Consumer Protection Code 2012 and the Code of Conduct on Mortgage Arrears 2013.

In relation to the tracker mortgage examination, the Central Bank's final report of the supervisory phase of the examination was published in July 2019. It outlined that over 40,000 customer accounts were impacted by lender failings and that almost €700 million of redress and compensation was paid to impacted borrowers, and borrowers were returned to the appropriate tracker rate as necessary. The Central Bank has also concluded enforcement actions and imposed fines on lenders for their tracker-related failures.

I have been informed by the Central Bank that it will now monitor developments in the Financial Services and Pensions Ombudsman, FSPO, and the courts in relation to the tracker issue to see if any further action is required by it arising from decisions which may be made in those forums. The FSPO has indicated that, as of 14 October 2022, it had identified 1,077 complaints on hand as being tracker mortgage interest rate-related complaints and, to that date in 2022, it had identified 113 new complaints as being tracker mortgage interest rate-related, closed 172 tracker mortgage interest rate-related complaints and reopened 11 such complaints.

Figures requested from the retail banks and sent to the Oireachtas finance committee showed that Bank of Ireland, AIB, KBC, Permanent TSB and Ulster Bank sold 2,315 tracker mortgage accounts which they had overcharged to vulture funds, and nearly 400 of these were sold before they were identified or remediated, either through the tracker mortgage examination or on foot of an FSPO decision. The Central Bank has subsequently informed me that 6,000 tracker mortgage accounts impacted by the tracker mortgage examination were sold on by retail banks. We know these mortgage holders were ripped off by the banks and then had their loans sold to vultures, and it was a real kick in the teeth for them. We all know today, given the interest rate environment, that if someone’s loan is with a vulture, because they cannot fix and cannot switch in many cases, they are at a disadvantage. However, the principle of the tracker mortgage examination was that there should be restoration and that there should be no further harm. At least 400 people who were still being overcharged had their loans sold to vultures. It should never have happened in the first place and now, because it has happened, they are in a worse position with fewer options. There needs to be a look-back on all of these cases and where they need to be restored, they should be restored to the original lender.

It should certainly not be the case that any individual borrower is disadvantaged because of where their tracker mortgage ended up, so the principle of remediation being applied across the board is one I absolutely subscribe to. I will examine the issue the Deputy has raised. The original lenders were in scope and they should have followed through with those customers. As the Deputy knows, even customers whose loans had been extinguished were also brought back into the scope of the examination, so the fact the loan was sold to another loan owner does not absolve the original lender of the responsibility to deal with that issue. I will take up the issue. If the Deputy has any information, he should please share it. I will ask my officials to engage with the Central Bank on that matter.

I welcome that. Let me be clear that I discussed this with the Central Bank in my recent meeting with it. These individuals, because they have now been identified as being in scope as part of the tracker mortgage examination, have eventually been remediated. However, the point is that, at a point in time, before they were identified and before they had the money restored to them following the overcharging that was taking place and the compensation, they were sold on to a vulture. At that time, some could have argued that there was no difference but there is clearly a difference today. They have been put at a disadvantage because they were overcharged by the same bank. If they were not, and if they were identified as in scope at the time, they would not have been sold on. The tracker mortgage examination is clear that lenders are not allowed to sell on a mortgage to a third party until they have dealt with the issues surrounding that. Some of these were in a better position and they would not be in arrears if they were not being overcharged in the first place. That is why it is important there is a proper look-back in this regard.

There is a principle here. These banks did wrong, and that is why they have been levied with the highest fines ever issued on financial institutions in the history of the State. They did doubly wrong in that while they were overcharging these customers, they sold the loans on to a vulture fund. They have to do the right thing now. They have to offer to take those loans back onto their books, deal with them appropriately and charge the necessary tracker interest rates.

As I say, it should not be the case that those borrowers would be disadvantaged in regard to the application of the tracker redress or remediation scheme because of where their loan ended up. I will examine that issue. Of course, it is also the case that their tracker mortgage contract has to be fully honoured by the new loan owner. The Deputy said they were compensated, they got redress and their loan is now with the new loan owner. That loan owner has to fully honour and abide by the tracker.

They cannot fix. That is the problem.

They do not have the option to fix, and I understand the point the Deputy is making. I will examine the issue offline.

I appreciate that.

Questions Nos. 72 and 73 taken with Written Answers.
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