Mr. Padraic Kissane:

I thank the Chairman and members for inviting me to appear before the joint committee. In my opening statement I wish to give it the up-to-date facts on the ongoing tracker mortgage investigation. As the investigation develops, it brings up more questions every day, some of which remain unanswered for affected customers. I will address some of the key issues that remain outstanding and update members on the key matters that remain unresolved by some of the lenders.

Of the lenders affected by the investigation, the following still have "cohorts" of customers whose accounts have not been corrected, as well as customers who have been deemed not to have been impacted on. I will deal with the banks in alphabetical order.

First, there is AIB and its subsidiary the EBS. The mortgage accounts that remain outstanding are those of homeowners who took out mortgages with the EBS and have not been returned to the tracker mortgage rate. The number affected could be up to 3,000. The key matter in the case of this cohort is that no customer was told that he or she was forgoing the variable rate basis of the loan in applying for a fixed rate for a period of the loan. The other issue is that the variable base rate tracked the ECB rate perfectly until 2008 and then magically transformed into a standard variable rate. There are outstanding issues that must also be dealt with by the EBS in a satisfactory manner. There are issues for the staff who took out mortgages with AIB. The question I pose is whether AIB or its subsidiary the EBS is sorry for the manner it is treating its customers?

Cases remain outstanding in Bank of Ireland, especially of the bank staff who availed of a fixed rate for two years on the understanding their loans would revert to the tracker mortgage rate of the ECB, plus a margin of 0.75%. Of the cases corrected, I have seen none that has been restored to the ECB rate, plus a margin of 0.75%, as was supposed to happen as per the infamous letter. There is a small cohort of customers who could have availed of the tracker mortgage rate but who instead chose a two year fixed rate as there was certainty, given that the roll-over position was the ECB rate, plus a margin of 0.75%. There remain outstanding cases that became tracker mortgage loans after the loan offers were issued and that have not, as yet, been restored to the tracker mortgage rate. In total, there could be approximately 800 cases.

Danske Bank also has outstanding cases that it has deemed were not impacted on. The stated position of the bank which it seems to have forgotten was that the customer on a tracker mortgage rate prior to moving to a fixed rate would at the end of the fixed rate period revert to the ECB rate, plus a margin. Danske Bank has many questions to answer about tracker mortgages, especially as it is the lender that began the race to the bottom in the margin being charged on tracker mortgages. In October 2006 it introduced a product called the LTV, loan to value, tracker product. It resulted in all other lenders immediately putting in place retention departments in their mortgage departments as it became clear to the other lenders that retaining their book of business was just as important as garnering new business. It was more important to some banks, especially the main lenders which wanted to protect their market share. This is a very important issue for all lenders, as well as in the investigation into the crisis. This key issue had a dramatic fall-out effect on other lenders, as has become clear in the investigation.

In summary, many customers of Danske Bank have not been restored to their tracker mortgage product, even though the bank stated in its communications that I have seen and hold in my office: “You have the option to choose between one of the following: To move to a Variable Rate; To Agree a new fixed rate period; To revert to an ECB Tracker rate (with the margin which had applied before your fixed rate period)”. This has not occurred and remains an ongoing issue. The statement is from the lender’s own communication, that it should be applied to the loans affected, but to date that has not been done in the accounts I have reviewed.

KBC Bank, formerly known as IIB Homeloans, resisted all matters related to tracker mortgages for many years. It consistently attempted to suggest it never had an issue in denying people their right to a tracker mortgage, even though it was clear to me from the outset that the opposite was the case. The bank's loan offers stated clearly: "The interest rate shall be no more than [a factor] above the European Central Bank Main Referencing Operations Bid Rate (“REFI” Rate) for the term of the loan". I have listened to statements made by KBC Bank representatives to the committee and want to pose the following question and thoughts to the committee: have they been given the communication to which they made reference in their most recent presentation which supposedly had been issued in February 2008? The communication sent to all brokers which is now being described as a "flyer" was never removed or discontinued in any subsequent communication that I know of and if it was, I should have been sent an email. The communication, now known as the "flyer", did not reference any preference that it only applied to homeowners. That is simply not true. It is clear that there seems to be an agreed or negotiated position adopted on the issue between the Central Bank and KBC Bank, but it is wrong to try to dismiss the other affected cohorts within KBC Bank.

The communication was crystal clear. It stated: "Fantastic News From IIB Homeloans ... All IIB Homeloan fixed rates will now roll onto tracker rate upon expiring. Offering your clients even better value". It did not apply to new business only because all lenders at the time were reacting to the launch by Danske Bank of the loan-to-value tracker product. KBC Bank did so with this announcement in late 2006. It applied to existing business, as well as new business, but it was primarily directed towards existing business. The new business aspect of the communication was covered in bold print, with a further offering which was available to "ALL NEW CUSTOMERS* who want to take out a mortgage with IIB Homeloans". I reference this to highlight the differentiation in the communication between existing and new business . I will be asked what is the current position on these matters and, unfortunately, I do not know the answer, as I do not know what was agreed to by KBC Bank in its discussions with the Central Bank. The numbers the bank has issued are on record. However, I know for certain that the communication of November 2006 was not withdrawn in February 2008 as claimed.

Another matter that has not yet been addressed by KBC Bank in the investigation concerns the loan applicants who began on a fixed rate for three years or more. The only reason KBC Bank did this was, astonishingly, fixed rates for three and five years were not stress-tested by the bank which allowed it to lend more money than any other lender could have. Other lenders would have had to stress-test the rate, which was generally done at a rate of 2% above the rates on offer. To now suggest the reason customers cannot go to a tracker mortgage rate is the bank lent more money as a result of the non-stress-testing of the loan cost is wrong and utterly unfair. The "flyer" issued in late 2006 addressed this issue of concern at the time among customers and brokers alike. There are still many of these cases with KBC Bank. However, I am pleased to report that I met KBC Bank management recently and hope to expand on these issues in future meetings, but, for now, large cohorts of customers are still in the waiting room of not knowing what is going to happen.

The level of ongoing issues with PTSB is staggering. What is more remarkable is that this lender will inform the committee that it believes it has addressed the issues surrounding tracker mortgages. It has not and many issues remain. However, I am pleased to report that I have reopened lines of communication with this lender and its senior management and hope some of the key matters that remain will at least be discussed at the coming meetings. I believe there is a growing acceptance within PTSB that if it is serious about putting its customers first, it needs to revisit some matters that remain unresolved. I have begun recently, including yesterday, with broad-based matters such as the treatment of appeals and the restoration of accounts that were moved to another bank.

The margin issue has not gone away. I am certain that I am 100% right on the issue which is central to the big remaining issue within PTSB. I am 100% certain that the position I hold on what the correct margins should be for each individual loan account is the right one. The loan offer and the ESIS sheets applicable to each loan inform, with 100% accuracy, what the correct rate should be. I want to give an example of what is occurring on this matter. Many of the loans that remain unresolved were commenced on what was called a "discounted tracker rate". I have only one question: what was the rate from which it was discounted? A parent rate applies to enable the discount to apply from it and that is the rate to which the loans should be returned. PTSB never had what is now calls "The non-price promise tracker". It simply did not exist in 2006, 2007 or 2008. The Danske Bank matter is the reason the margins were not included in the loan offers. The margin could be improved but not increased. I will report later on the progress I make on this matter and continue to challenge the Central Bank to deal with the margin matter properly.

The key ongoing issue with Ulster Bank relates to First Active account holders, few of whom have been reimbursed and restored to their tracker mortgage rates. There is also the ongoing delay in the issuing of redress letters and statements. Ulster Bank, in its replies to me during the years in respect of First Active, seems to be satisfied that the documents customers signed to apply a fixed rate for a short period were clear and that the forms also included what Ulster Bank now titles "A Tracker Removal letter". Of course, it was not titled or stated or even indicated when customers went to fix their interest rates, but nobody was told directly that he or she was forgoing the tracker mortgage rate. Not one person was told by a member of staff of First Active that fixing his or her interest rate also had the effect of removing and altering the variable interest rate basis of his or her loan. If it was the case, this is what should have been printed and stated in all communications between the customer and the bank: "If you fix the interest rate on this loan, you will lose the right to go back to the tracker rate". If it had been stated and printed in this clear fashion, I would have no argument and that applies to all lenders. Ironically, the terms and conditions of a First Active Tracker loan include the following clear and unequivocal condition: "In order to transfer from the Tracker Mortgage product to another mortgage product the Borrower must [among other things] first redeem the tracker mortgage loan". No loans were, or have ever been, redeemed by First Active when a customer chose to fix the rate and the reference number never changed for the accounts I have reviewed. On the first page of the same book of conditions the following is stated: "(m) "fixed rate period" means the period during which First Active has agreed to fix the interest on the loan". That is the key. First Active agreed to fix the interest rate for a period without first redeeming the loan; therefore the underlying variable rate basis of the loan continues to remain in force.

Overall, there are outliers which are outstanding across all lenders, but they are more individual and singular arguments by nature. The issues I have covered comprise large cohorts in each bank that have not as yet been addressed. It raises the question as to whether the relevant lenders are sorry for these customers or apologetic for their actions, or whether they are glad that, to date, each has not been forced to fully correct the position on the accounts. It is important to acknowledge that the investigation is ongoing.

Another matter that still comes up on a regular basis is the churning of loans. This has occurred in different volumes across all lenders. I mention as an example, with permission, Ms Marian Kenny who took out an interest only loan with PTSB for €550,000 for the full term through a broker. She then applied for a top-up loan of €80,000 but went directly to a branch of PTSB and ended up with a new interest only loan for the entire amount of €630,000 but only for three years. She lost not only her competitive tracker mortgage rate but also, crucially, the basis of the agreement for the main loan. The branch gained a "new" lending figure of €630,000 when all that needed to change was the top-up facility of €80,000. That is just one example of how churning affected customers when the drive for new lending was at its highest and it occurred across all lenders. I was told by a bank branch manager in 2007: "I have to get €7 million out that door each week and they don’t care how I do it."

I had established a triage process to deal with appeals directly with AIB, but that has now been set aside, wrongly. I must submit all aspects of an appeal through the relevant appeals process. I have spent the past few weeks putting in place a process that will assist customers who have grounds for appeal to submit same in a detailed and formatted way. I have a sample of an appeal. They do not come easy to customers. I hold grave concerns, however, about the issuing of data access requests, as some pertinent documents seem to be withdrawn by banks. It is utterly unfair and wrong that a process that requires a high level of proof to substantiate an appeal is restricted because banks are not making paperwork or evidence such as telephone calls available to support a position. This is relevant to appeals and in proving if a case should be deemed to have been impacted on.

Importantly, not all customers submit appeals but for some the impact of this issue on their lives has left scars that will not heal if an appeal is not brought.

In summary, I have not heard from the Competition and Consumer Protection Commission. I am meeting the Financial Ombudsman in the coming weeks. I have held meetings in the recent past with senior management of Ulster Bank, Bank of Ireland, KBC, AIB and Permanent TSB in the hope of resolving outstanding matters for their customers. I am also in ongoing communication with the Central Bank.

The appeals process is difficult for people to complete simply because the customers who most need to bring appeals are the ones most affected by what has occurred. Travelling back over that period of time is not easy. I began working on this issue in 2009 and it is not acceptable that some matters remain unresolved nine years later. I am aware of the customers watching who know that I may not have covered all the relevant accounts affected. However, they can be certain that I am aware of them. There could be another 5,000 cases outstanding and while tracker fatigue could become a factor, it is vitally important that we continue to work for all those families who have been deemed by the banks not to have been impacted. In that context, the following considerations must be borne mind by those lenders that still have issues with tracker mortgages. First, where there is doubt about the meaning of a term, the interpretation most favourable to the consumer should prevail. This is not just a desire but is the law. Second, if there is any doubt about what was to occur following a fixed rate period, lenders should disregard the fixed rate period and behave as if it never occurred. That will address the lack of clear information. Third, if a tracker mortgage was one of the options then the lender should offer the customer the tracker rate even if tracker mortgages are no longer available. That comes from the CCMA. Fourth, if the lenders' apologies are sincere and if their desire to put customers first is real they should resolve these outstanding matters immediately. This will send the clearest signal yet that attitudes and the culture within banks has changed for the better.

I was asked by a reporter recently if I would do it all again, given the tough journey involved for me and my staff. I said that I would do it all again but that the question should be whether the banks would do it all again. I fear the answer to that question might be "Yes" but I hope I am wrong, for once. Finally, I want to thank this committee for all of its work on behalf of the people affected. I believe that saying sorry is just not good enough for what has happened. I am happy to take questions from members now.