ACC sets aside €6.3m for tracker mortgage review costs

Central Bank estimates up to 15,000 mortgage holders wrongly denied tracker rate

A company set up to run down ACCBank’s loan book set aside almost €6.3 million last year to cover its expected costs relating to an industry-wide investigation into mortgage overcharging by Irish lenders.

The Central Bank ordered the State's mortgage lenders to carry out an examination in late 2015 of cases where customers had been wrongfully denied their contractual rights to a cheap loan rate linked to the European Central Bank's benchmark rate, or what is known as a "tracker rate".

The regulator estimates that up to 15,000 mortgage holders may have been affected across the industry.

Notes attached to recently-filed 2016 accounts for ACC Loan Management, as ACCBank was renamed in 2014 as it handed back its banking licence, show that a €6.27 million "conduct risk" provision booked by the company in its accounts for last year related to the tracker rate review.

Some €500,000 of the money that was set aside was actually utilised during the year.

“The best estimate of the potential liability in respect of project costs, customer redress and compensation is included in the conduct risk provision,” the notes said. “Only a small proportion of the provisions made relate to potential customer redress and compensation.”

ACC Loan Management had €783 million residential mortgages on its books at the end of last year, out of a total €3.2 billion loan portfolio.

The size of the provision is a fraction of the amount that larger lenders have had to set aside.

Redress scheme

Ulster Bank's chief executive Gerry Mallon told The Irish Times on Friday that a €211 million charge taken by the bank last year for its tracker rate redress scheme should be sufficient, even though the number of affected customers has risen to 3,500 from a figure of 2,000 outlined last December.

Elsewhere, AIB has taken a €190 million similar charge in its accounts for the matter, while it set aside as much as €145 million in recent years to cover redress, legal and compliance issues, largely related to mortgage contract breaches. Bank of Ireland said earlier this year it had put aside an initial €25 million for the issue.

The Central Bank’s industry-wide review came on the back of initial problems disclosed in PTSB. The regulator estimates that up to 15,000 mortgage holders may be affected across the industry.

Meanwhile, Ulster Bank disclosed on Friday that it had taken a further €39 million charge in relation to “errors” found in personal and commercial loan books as it carried out its tracker rate review.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times