Central Bank to investigate tracker mortgages

Move to ensure that all lenders have complied with regulations on disclosure and transparency

The Central Bank of Ireland has decided to investigate all lenders who have offered tracker mortgages in Ireland to determine if customers' rights have being fully honoured and ensure that the institutions have complied with regulatory requirements on disclosure and transparency.

This move follows the revelation in July by State-controlled Permanent TSB that there had been a "serious failure" in how it managed interest rates on 1,372 mortgage accounts.

The issues involved PTSB’s failure to inform certain customers of the consequences of breaking early from a fixed-rate or discounted tracker period. The consequences of breaking the contract early were that customers lost their right to be offered a tracker rate in the future.

The Central Bank found PTSB had failed to inform some other customers of their right to be offered a tracker at the end of their fixed-rate period and were put on standard variable rates that were more expensive.


The regulator’s investigation of PTSB is ongoing and the bank is expected to be hit with a fine for this failure.

Letters were sent on Tuesday to all lenders that offered trackers, both for family homes and investment properties, from whenever they started to offer these loans up to the end of 2015.

This includes AIB, Bank of Ireland, KBC Bank Ireland, Ulster Bank and ACC.

It will also cover banks that have quit the Irish market or gone out of business, including Danske, Bank of Scotland (Ireland), Start and Irish Nationwide and service companies who are managing these loans on behalf of private equity owners, such as Pepper Asset Servicing.

Lenders will be required to appoint independent third parties to provide assurance to the Central Bank on the “adequacy and appropriateness” of the reviews. “These plans and frameworks are to be in place by the end of March at the latest,” the Central Bank said in a statement.

The regulator expects “significant progress” to be made by all lenders before the end of 2016 and plans to provide a update on the matter in April.

The Central Bank flagged this investigation in October when it indicated that it would engage with consumer groups and the Financial Services Ombudsman in developing a methodology for its examination.

The review is designed to identify cases where customers’ contractual rights under the terms of their mortgage agreements were not fully honoured and/or lenders did not fully comply with the various requirements and standards regarding disclosure and transparency.

The investigation will require lenders to identify customers who have been negatively impacted and, where there has been any detriment, to provide “redress” in line with principles determined by the Central Bank.

“It is important that each lender carries out a comprehensive and robust review, which achieves a fair outcome for all customers,” the Central Bank said.

A spokesman for the Banking & Payments Federation Ireland said lenders would “be co-operating fully with the review and would seek to work to the timelines” set down by the Central Bank.

At the end of June 2015, some €57.6 billion or 51 per cent of Irish mortgages were on tracker rates.

Ciarán Hancock

Ciarán Hancock

Ciarán Hancock is Business Editor of The Irish Times