AIB says 3,000 tracker mortgage customers overcharged

AIB will begin writing to a large number of its tracker mortgage customers this week to inform them that they have been overcharged on their loans and that they will be placed on the correct rate going forward and offered financial compensation.

The announcement will be made as part of the bank’s interim results today and follows a review of its books as part of an industry-wide trawl of tracker mortgage accounts ordered last December by the Central Bank of Ireland.

Some 3,000 tracker mortgage accounts are thought to be affected at AIB, which has set aside €190 million to cover the various costs associated with this issue.

As a first step, AIB will place the affected customers on the correct tracker rate. The bank will also be required to offer a refund of their overpayment of interest, and financial compensation to customers, including discharging any tax liability that might occur for the borrower.

Customer redress

AIB made a provision of €105 million in its 2015 accounts for customer redress, and €85 million for related issues, such as the costs of the examination and any tax liabilities that might arise for customers.

The internal review covered the period from when AIB, including EBS, began offering tracker interest rates until December 31st, 2015. It comprised both owner-occupier home loans and buy-to-let mortgages.

At the end of 2015, some 37 per cent of AIB’s €34.5 billion in residential loans were tracker mortgages.

Trackers were variable rates pegged to the main rate offered by the European Central Bank, with an agreed margin. With the ECB's rate currently standing at almost zero, these loans have turned out to be a millstone around the necks of Irish banks.

‘Public announcement’

No comment was available from AIB last night. In an update on its tracker review issued yesterday, the Central Bank said one lender would make a “public announcement in relation to the progress it has made on its internal review”, but declined to identify the party.

Permanent TSB, which published its own half-year results yesterday, has so far paid out €60 million from the €140 million it has set aside to cover its mortgage redress issues. It announced last year that some 1,372 customers were adversely affected by the bank's "failure" to apply the correct tracker rates to their accounts.