Government talks tough on trackers

You would have thought banks had got the message the dispensation had changed by now. Obviously not, as an extraordinary Monday testified.

Minister for Finance Paschal Donohoe called in the heads of all the banks to dress them down on the tracker mortgage scandal.

In all, 20,000 cases have already been identified of customers being overcharged despite having a rate tracking the interest rate set by the European Central Bank. A little over 7,000 have been compensated with 13,000 cases outstanding.

And, as became clear yesterday, a further 7,000 customers may have been overcharged.

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Donohoe is now hanging tough on the issue. Among the procession of people who passed through Merrion Street yesterday were Central Bank Governor Philip Lane, as well as senior management of all the major banks, who were told in no uncertain terms that the Government’s patience on this issue had come to an end.

It is the lead story today.

Fiona Reddan also has a good background piece on how many customers have been potentially affected.

The tracker rate was a super-low rate offered in good times by the banks, vying ferociously with each other for custom.

But when rates fell dramatically as Europe recovered following the global crash, such rates became uneconomic for banks. That did not justify the banks’ actions over rates for customers, a portion of whom got into such difficulties with repayments that they faced repossession.

The Cabinet was meeting last night (Taoiseach Leo Varadkar is travelling to France today), and this issue dominated. Donohoe said it was “very disappointing” that some banks were digging in their heels.

The two banks that have been tardiest at dealing with the issue are said to be KBC and Bank of Ireland.

It is clear that the issue will cost banks hundreds of millions of euro in compensation. Lane, in a brief exchange with reporters, said there was no upper limit on the figure.

Tomorrow, a Fianna Fáil motion on tracker mortgages will be debated. Among its more far-reaching sanctions is a law that would make “senior decision makers and directors (in banks) personally liable for decisions made under their remit that have directly led to wrongdoings and to increase the penalties for such offences”.

That’s a very tough measure. The Government is likely to accept the motion.