Oireachtas Joint and Select Committees

Thursday, 19 October 2017

Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach

Engagement with the Central Bank of Ireland

9:30 am

Photo of Michelle MulherinMichelle Mulherin (Fine Gael) | Oireachtas source

Ms Rowland stated that the Central Bank is in the process of crystallising the extent of the dispute in respect of tracker mortgages with lending institutions. I wish to address overcharging and sharp practices in respect of commercial loans to SMEs. Such a loan could be a tracker mortgage or a similar financial product such as a rate swap product involving a bank inducing a company that is trying to trade out of trouble onto another product which would cost it more money, or unilateral rate changes involving the cost of funds plus a margin. Banks have their own formula for calculating the cost of funds and that is a moveable feast. Banking sources have indicated that there are SMEs in similar situations to private citizens in that they have suffered enforcement actions by banks following non-performance of loans into which banks tricked their SME customers either by removing them from a tracker or putting them onto some similar financial product to their detriment. The particular cases of which I have heard suggest this does not solely concern enforcement action and overcharging but also extreme situations involving the closure of businesses, loss of jobs and personal fallout for those involved. I raise this issue in regard to SMEs and tracker mortgages in particular. Members know that SMEs do not have access to the financial ombudsman in the same manner as a private citizen. Their recourse for remedy is to the courts and they do not have the same avenues of recourse that Professor Lane said are available for private customers. In view of information I have been given and cases that have been brought to my attention I wish to know the extent to which the Central Bank has been investigating or assessing the impact on SMEs as part of its assessment and crystallisation of the dispute in respect of tracker mortgages and similar financial products. How many such cases has the Central Bank discovered within that assessment process? What provision are the banks making for compensation in such cases? To what extent are SMEs included in the tracker redress scheme? This is another cohort that is not being talked about. I have heard of cases, even from people within the banking community who have dared to come forward, which indicate there is an equal and perhaps even more devastating problem in this area because although the focus is on people and their homes, and there is a clear reason for that, some small businesses have been devastated by the overcharging, sharp practices and possibly illegal activities of banks, although the latter remains to be proven. I want to know about this particular area of lending.

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