On 30 July last Permanent TSB wrote to about 1,400 customers to tell them they were due compensation. The compensation is owed it said because of “…a failure which it made in connection with the management of certain mortgage accounts…”. Essentially customers who should have been moved to a low interest tracker rate mortgage were not. They paid higher interest rates as a result. Ronan McGoldrick explains what borrowers need to know and what they need to do.
What happened?
Some customers were moved from a tracker rate to a fixed rate mortgage but were subsequently and incorrectly denied the right to switch back to the tracker. This left many customers facing much higher repayments. As has been widely reported, the higher repayments were identified as a key factor in borrowers losing their home in at least 22 cases.
The issue first came to light after a Central Bank investigation found more than 1,300 customers had been overcharged by Permanent TSB, referring in its final report to ‘significant failures’.
As has also been widely reported a County Dublin couple are to be repaid €61,000 overcharged by Permanent TSB, following a court action. Liam Fitzgerald and Angela Wallace were also wrongly taken off a tracker mortgage rate. They sued Permanent TSB after rejecting a €6,000 compensation sum offered by the bank.
What’s happening now?
There are two elements to the proposed compensation being offered. Firstly Permanent TSB is refunding any overpayment in interest made by borrowers. Secondly the bank is offering another sum, partly in compensation for its failure and partly to pay for independent legal advice.
If you’re not happy with the redress and compensation offered, Permanent TSB say you can still accept it but subsequently appeal it to an independent appeals panel. “We believe it [the Mortgage Redress Programme] will provide customers with an opportunity to appeal the redress and compensation proposals that have been made without the complexity and delays that might be involved for them in bringing the matter through the courts,” said Permanent TSB director of transactional banking, Niall O’Grady.
It seems that in this regard at least the bank may have had a change of heart. The bank initially appealed a ruling by the Financial Services Ombudsman in favour of borrowers to the High Court. It lost and appealed the decision to the Supreme Court. Doing that made the trauma suffered by the mortgage holders immeasurably worse by dragging them through the courts and delaying closure and fair compensation.
However, Liam Fitzgerald who took the action against Permanent TSB above has stated that “by accepting a return of the money that they are due and owed (borrowers) may be prejudicing themselves down the road for adequate compensation.”
Some issues that borrowers need to consider:
1. What’s the tracker rate offered?
Most of the affected customers are being restored to low rate tracker mortgages. Most are paying just 1.05% on their mortgages which is 1% above the ECB rate of 0.05%. But Permanent TSB has now admitted that almost 800 overcharged customers are being put on trackers that are on a margin of more than 1% above the ECB rate. Almost 500 of these are on a tracker margin of more than 2.3%. A number have been told their tracker rate will be set at 3.4% over the ECB rate. That for all intents and purposes is a standard variable rate mortgage.
A spokesman for Permanent TSB stated: “The tracker interest rate that is being offered to impacted customers is the rate that they had a contractual right to be offered at the maturity date of their fixed-rate period, had the failure not occurred.”
2. How do you know if the redress amount is accurate?
Permanent TSB or agents engaged by them likely calculated the overcharging. It is highly unlikely that if an error was made it was made in your favour. You need to ask Permanent TSB for details of their calculation. You then need to have that calculation independently verified.
3. Is the compensation being offered adequate?
Whether the compensation being offered is adequate is unclear. However, it does not seem that the cost to Permanent TSB of the redress scheme concerns it. In April this year Permanent TSB warned investors of a risk to a return to profits. But that warning was issued over concerns about a forced reduction in interest rates and a possible UK exit from the EU. The redress scheme didn’t register publicly at least.
We understand that Permanent TSB is offering most wronged borrowers a compensation amount of roughly 10% of the overcharged amount. Is that adequate for you? One simple way to answer that question is to ask yourself what could the value of the overcharged amount have been to you if you had it instead of Permanent TSB? Could you have invested it? Could you have paid medical or other bills that you otherwise couldn’t. Did the overcharged payments going out monthly put you under financial pressure causing anxiety or distress or physical or mental damage? Only you can answer that.
What do you need to do?
You or a competent lawyer acting for you should contact Permanent TSB to ask:
- How was the amount of redress calculated in your case?
- What tracker rate have you been put on and how was that rate determined?
- Are you entitled to a lower rate?
- On what basis was the level of your compensation calculated?
What we do:
We provide a boutique offering specialising in financial services law provided by litigation experts. Since 2007 we have project managed claims with a combined value in excess of €3.4 billion. We know how to effectively manage every stage of the litigation process and how to remove entire tranches of costs for you. We have acted successfully for and against financial institutions in Ireland and the UK. We are already advising Permanent TSB borrowers and we are happy to answer your queries.