Ulster Bank fine brings total tracker penalties against lenders to €82m

The Central Bank's announcement on Thursday that it has fined Ulster Bank a record €37.8 million for its role in the tracker mortgage scandal brings total penalties levied against all lenders to date to €81.6 million.

However, Ulster Bank's record for the highest fine yet will likely prove short lived as the regulator continues investigations into the State's two biggest mortgage lenders. AIB has set aside €70 million so far for likely fines for the bank and its EBS unit, while Bank of Ireland has made an undisclosed provision.

Permanent TSB was fined €21 million, the previous record, in May 2019, while its former subprime unit Springboard Mortgages was ordered in 2016 to pay a €4.5 million penance. KBC Bank Ireland was fined €18.3 million last September.

Ulster Bank, which said last month that it is quitting the Irish market, was found by a five-year Central Bank investigation to have come up with "deliberate strategies" to shift borrowers off cheap mortgages linked to the European Central Bank's main rate during the financial crisis, and only put those who complained on the correct rate.

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Ulster Bank fined record €37.8m for ‘deliberate’ tracker overcharging

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Debacle

Ulster Bank admitted to 49 separate regulatory breaches in relation to the tracker debacle. The regulator determined that these warranted an almost €54 million fine, but a standard 30 per cent settlement discount brought it down to €37.8 million.

The bank “devised and sought to implement a customer campaign to encourage certain tracker customers to convert their tracker rates to fixed rates during 2008, without informing them that they would not be entitled to return to their original tracker rate if they moved to a fixed rate,” the Central Bank said.

While this particular campaign ultimately failed, thousands of customers opted for periods of fixed-rate loans in the normal course of managing their borrowings.

In 2011, Ulster Bank decided to only return customers who complained about being on the wrong rate to the correct tracker rate – after calculating what it would cost to do the right thing by all affected customers. The 352 borrowers that did complain were handled on a case-by-case basis and not all afforded the same redress, the Central Bank said.

“Having initially provided its customers with unclear information and having failed to warn them of the very real consequences of their mortgage-related decisions, UBID (Ulster Bank Ireland DAC) put further impediments in its customers’ way,” said Seána Cunningham, the Central Bank’s director of enforcement.

The regulator also found that Ulster Bank failed to properly implement “stop the harm” principles when the Central Bank started the tracker mortgage examination (TME) in 2015.

Compensation

“This resulted in UBID failing to identify and therefore inform some customers seeking to sell, or otherwise dispose of their properties, including by way of assisted voluntary sale or surrender, that they may be impacted under the TME and may be entitled to redress and compensation and to have their account balance adjusted,” the Central Bank said.

The regulator said that aggravating factors in the case include the fact that Ulster Bank was aware from 2009 onwards – as a result of customer complaints – that its mortgage documents were unclear. The Central Bank also had to go down the road of preparing to seek a High Court order to get hold of certain information from Ulster Bank, before the lender provided the material.

The bank would ultimately set aside about €300 million of provisions to cover costs relating to tracker fiasco.

This is the fourth time Ulster Bank has been fined by the Central Bank since the financial crisis, bringing the total charge to €49.2 million.

A spokeswoman for Ulster Bank declined to say whether any individuals faced sanctions or left the bank as a result of their role in the overcharging debacle.

The fine comes five weeks after the lender's UK parent, NatWest Group, confirmed that it was exiting the Republic in the coming years as it has struggled since the onset of the financial crisis to deliver acceptable profit returns. The spokeswoman said the decision was "in no way linked to the tracker mortgage investigation".