BoI admits overcharging on thousands of tracker mortgages

Bank of Ireland has admitted overcharging thousands of tracker mortgage customers.

The bank said it had discovered 3,916 accounts that have been overcharged interest on their loans by an average of 0.15 per cent.

It had also identified 602 accounts where a right to, or the option of, a tracker rate of interest was not provided to the customer in accordance with their loan documentation.

The bank, which has apologised, has said it will start refunding affected customers in the first quarter of 2017. It is also setting up a redress and compensation scheme.

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“Bank of Ireland would like to sincerely apologise to each of these customers for these failures,” it said in a statement. “The correct rate should have been applied to these accounts and we sincerely apologise for not applying the correct rate in these cases.

“Bank of Ireland will now commence contact with these customers to return them to the correct tracker rate and inform them of their new payment amounts.”

Independent observer

Deloitte will act as an independent observer to review key aspects of the bank’s work.

The latest disclosure from Bank of Ireland comes after a previous review by the bank in 2010 led to the restoration of 2,100 customer accounts to tracker rates.

The overcharging was discovered as part of a review the bank is undertaking along with other financial institutions under the auspices of the Central Bank.

A number of other banks have previously admitted to applying incorrect mortgage interest rates. These include AIB, Ulster Bank and Permanent TSB.

Permanent TSB was left to pay a €4.5 million fine imposed by the Central Bank against the lender’s former subprime unit for overcharging tracker mortgage customers.

To date, the bank has also been forced by the regulator to pay €5.8 million in redress and compensation to 222 customers of its Springboard Mortgages unit.

The penalty is the highest to be paid by a company regulated by the Central Bank. It was the first enforcement action to conclude in the industry-wide probe of issues relating to the treatment of customers on tracker mortgages.

PTSB first revealed in July last year that some 220 Springboard mortgages counted among 1,372 tracker mortgage accounts which had been overcharged over several years.

Loss of homes

The bank had set aside as much as €145 million to cover redress and legal and compliance issues, which are understood to be largely related to the tracker mortgage breaches.

Ulster Bank’s chief executive Gerry Mallon told the Oireachtas finance committee that 14 or 15 account holders may have lost their homes as a result of its failure to meet their contractual obligation on tracker mortgages.

In total, 2,000 account holders have been identified by Ulster Bank as having been denied a tracker rate in the past.

AIB told the same committee that 14 account holders may have lost their home while 2,600 customers had been overcharged by being denied a tracker rate.