Oireachtas Joint and Select Committees
Tuesday, 21 February 2017
Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach
Banking Sector in Ireland: Discussion (Resumed)
4:00 pm
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The purpose of this meeting is to deal with matters relating to the banking sector. I welcome Mr. Larry Broderick, Ms Sharon McAuley and Ms Elaine Barker.
I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
I invite Mr. Broderick to begin his opening statement. There may be a division in the Seanad. If that is the case, the Senators will have to leave and we might suspend proceedings for the ten minutes.
Mr. Larry Broderick:
I thank the Chairman and the members of the committee for the opportunity to make this presentation. The Financial Services Union, FSU, was formerly the Irish Bank Officials Association and is a key stakeholder in the industry. To the delight of members, I am not going to read my submission into the record. I will instead focus on a couple of main headings in the context of the key issues we want to bring to the attention of the committee.
Our members have paid a significant price for the calamitous management of the banking sector. The latter had a huge impact on staffing, the future of the industry and customers. We believe that the industry is in the process of dynamic change. There are opportunities. It is improving, becoming more viable and profitable.
Based on the presentations the committee has heard to date, we want to identify the key issues of which we believe the Members of the Oireachtas should take hold. First is the need to establish a forum on the future of banking in Ireland. Banking is viable. There are State-owned banks, there foreign banks and there banking institutions that are merging towards profitability. There is a great deal of change in the industry. Our concern is that each institution is considering its own set of circumstances and not factoring in the role of banking in Irish society, the impact on rural Ireland and the impact on staff and customers to the extent that we believe it should. We believe a strategy for banking should be given guidelines through some type of forum to set out for all banking institutions what would be required of an ethical banking industry which must be viable and profitable and at the same time cognisant of its role in the economy. We have set out in our submission the kind of issues that forum should address: what kind of banking sector does the Irish economy need and want; how best to deal with State-owned banks; how to encourage a level playing field, particularly for those institutions that are part of banking now that are not regulated; how to address the best interests of customers, staff and communities in the context of the changing of banking; how to meet the challenge in the industry and how to create first-class employment for our employees. We have no particular view on how this should take place but it should involve stakeholders.
The second plank of our approach is sustaining branches in the community, which this committee is very focused on. There have been 160 branch closures since 2008. All banks have indicated that they are reviewing the essence of banking into the future. We argue very strongly that there is a need for banking institutions in communities. There also needs to be a strategy for banking as part of a rural Ireland strategy. Oireachtas Members have developed a rural Ireland strategy and financial institutions should be part of that.
We have set out an eight-point plan focusing on issues such as one financial institution being required to have a presence in every town. There should be a six-month moratorium before any branch is closed. That should be done by an independent expert or ombudsman who needs to challenge the bank on the rationale, engage with stakeholders to provide alternatives. We need to consider alternatives. Elsewhere in Europe and the rest of the world, there are alternative models - such as mobile units - where there are no branches. What tends to happen is that banks announce closures and only because of responses from us or customers are these issues addressed. The staff agenda should also be addressed. We have agreements with all institutions to the effect that there should be no compulsory redundancies but people will be transferred or relocated. That should be endorsed and be part of any strategy.
The third area we focus on is the culture in banking. In our submission to the banking inquiry we said this was one of the major factors in the malaise in banking in the past. We have identified the kind of changes needed to change the culture, starting with the composition of boards which do not have employee or customer representatives, the regulator is not a member of the boards. A more diverse board structure will help the governance of banks to achieve some of their objectives. The measurement of banks' success needs to focus not just on short-termism, maximising shareholder value or profitability but on long-term sustainability and customer service. We recognise that banks need to be viable and profitable but these are not incongruous ideas. Third, we need a pay strategy. We are not convinced that lifting caps on senior executives' pay or incentive schemes will do anything to improve the direction of the industry. Linking senior executives' pay to incentives caused the calamitous problems we experienced. Pay should be based on customer service, education and the performance of the organisation in terms of the service it provides to the community. We need to address the problems that front-line staff have because of inadequate staffing and stress in the industry.
Finally, there is a significant breakdown in trust in our industry between senior management and staff and in particular because of the fear permeating the industry which makes change very difficult. Staff are afraid to address and highlight difficulties. These are some of the areas we identified.
We have been involved in securing modest pay increases over the past few years but there is a huge gap between the pay levels at the top of the organisation and those at the bottom. A senior executive earns a minimum of 65 times more than a junior staff member who earns €23,000 a year. It is an enormous gap. There is still a focus on performance-related pay.
We believe that looking at staff performance based on sales targets is not conducive to a good environment to work in. If the industry is going to be successful, we need to invest in staff development and training and building on their skills and having them involved in local community bankers. Our members are prepared to participate in this but the focus in the industry is still on performance-related pay. We need to address, in a structured way, how somebody progresses from the bottom to the top of the scale. In some banks, if the bank gets its way, it takes 35 years for somebody to progress from a junior point of the scale to the top of the scale. It is ridiculous. Prior to the crisis, 12 or 14 years was a reasonable time for progression. These are things that need to be addressed.
We then focus on outsourcing. Our view in the past has been that outsourcing has been a recipe for disaster for the industry. There is evidence of that. I refer the committee to the RBS outsourcing of Ulster Bank's information technology function. Had there not been a branch network, the impact on the Irish economy for Ulster Bank customers would have been disastrous. AIB and some of the other banks have outsourced recently. While we are not convinced it is the route to go, as part of that outsourcing there was a commitment that this work would be retained in Ireland. We are genuinely concerned because there is a second phase going on now in which these new companies that are coming in with outsourced work are talking about offshoring that work outside of Ireland. That is not in the interest of our members, the community or the taxpayers and has implications for the economy as a whole. The Central Bank has a role in this but it has to be more vigorous in ensuring and looking at propositions. We are totally opposed to offshoring. We are particularly conscious of the implication for our members in terms of employment.
We are as alarmed as is everybody else about the development that has taken place in the tracker mortgage debacle. It is our view that the Central Bank investigation should have happened a lot earlier. No guidelines were set out for institutions when the challenge in respect of tracker mortgages was brought in. There must be a very clear guideline from the Central Bank on what should happen when people move within variable rates and fixed rates. In the absence of that, particular banks and institutions take particular decisions. It is complex because of legal contracts that emerge. We are certainly all for a system that talks about redress but we are not convinced that everybody has signed up to that redress. If they have, they should be communicated with and supported. The work the committee has done on this has been significant. We also believe there should be internal mechanisms of appeal because there is still a challenge going on there. Is what is being provided under the redress scheme fair and reasonable to the customer? What is the notion of a prevailing rate that will apply in the context of a solution to the problem? Nobody seems to be in a position to answer that.
We are concerned about the role of vulture funds in the industry. They have come in in number of areas in terms of lending and taking over non-performing loans, NPLs, which are difficult loans. Our concern is that much of the time they are not regulated. We have all seen the implications they have for the industry in terms of how they deal with customers. There are non-profit organisations that can manage non-performing loans for the banks in a cost-effective fashion. It may take a bit more time to address. The banks are dealing with pressure from Frankfurt to get such loans off their books in the interest of improving capital but there needs to be a balance here. The Oireachtas could play a role in challenging and looking at alternatives rather than the willy-nilly approach of each bank moving to a quick exodus in terms of the non-performing loans.
On the sale of AIB, as we stated previously, the Oireachtas and politicians need to question what will be done and what is the best value for the taxpayer of State-owned banks. If the decision is to sell, it should be transparent. From our perspective, if that is the decision, the terms and conditions of our members and pensioners should be protected, as well as their pensions and pension funds, as happened when that took place in Bank of Ireland. We are concerned in that context that these issues are not on the agenda and need to be addressed into the future.
Finally, the impact of Brexit will be the biggest challenge this country will face both in the Republic of Ireland and by our colleagues in Northern Ireland as well. We are unique as a union that has representation in Great Britain, Northern Ireland and the Republic of Ireland. We submitted a similar paper to our colleagues and all the politicians in Northern Ireland about the future of their industry. If there is going to be an opportunity to bring jobs here it should not be at the expense of jobs in London, Belfast or Northern Ireland. We need to be conscious of that. If jobs are to brought in, it should be done on the basis of value jobs and not on the basis of looking at cheap opportunities to maximise opportunities on a low-cost model. We are working with the banks and the committee to ensure that what emerges from that is very close.
The banks have appeared before the committee to talk about various strategies and we believe the committee has a unique opportunity as this industry is changing and the taxpayers helped out all of the banks. There is an opportunity with the announcement that KBC will remain in Ireland. The commitment of AIB to get back into profitability is very clear. Bank of Ireland will undoubtedly reach profit again and in the next number of days will announce a profit. Ulster Bank is back in profitability. There is a great opportunity to influence the banking institutions if members take it. They will listen to central direction. In the past, by being local and by focusing on local issues, we have all been bypassed. If some of these thoughts are taken on board and delivered, there will be opportunities to maximise influence in the industry into the future.
Rose Conway Walsh (Sinn Fein)
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I thank Mr. Broderick for his presentation. One of the major focuses of the Financial Services Union is on the culture of banking and how bad it was before the crash. Mr. Broderick had made seven very good suggestions in this regard. Does Mr. Broderick see evidence of any backsliding towards old habits returning? I have heard of one bank in particular making some very worrying moves such as halving the risk support manager role and getting rid of the team leader in each branch. The team leader was in charge of the control compliance and auditing, which is a role that was brought in as a response to the 2008 crash. The work of the team leader has been dumped, it would appear, onto the bank management, which is already overworked. The branch manager is judged by sales, which means there is a direct conflict of interest in his or her role in control compliance on the one hand and generating more and possibly riskier sales on the other hand. Does that sound familiar to Mr. Broderick? Would he consider such moves as a backward step?
Mr. Larry Broderick:
I am familiar with what the Senator is talking about. We have challenged that decision from a negotiating position in that bank as part of our process. Across the industry, we want to sit down to talk about what is the competency to do roles, what is in the best interest of the customer, as well as the institution going forward and what is the opportunity for there to be maximum staff in a location. In many cases there is not adequate staff in a changed environment. We share the Senator's concerns. The problem is these institutions see themselves as to some extent omnipotent and self-absorbed. Unless we go down the route of industrial action, they are concerning developments and it is difficult to mount industrial action against those kinds of issues. In fairness other institutions are a bit more sensitive to the role and are engaging with us. We want to try to develop a standard in the industry whereby those conversations can be had and that we go to the highest-level standard. My concern is that if those practices become embedded, every other institution will say that competitively they need to do similar things. We also believe the Central Bank has a role in this. Sometimes we are disappointed in that the Central Bank seems to take a view that developments like this are an operational issue. Particularly where risk is concerned, we think it is central to that. The Central Bank has made it clear to us that it does not intend to involve itself in industrial relations issues but these are broader than industrial relations issues. There needs to be an overseer, such as the committee, to talk about values or appropriate structures. They are things that can be looked at to build within the Central Bank. The Central Bank has a role to play in monitoring this, particularly if there are issues raised by us or the committee.
Rose Conway Walsh (Sinn Fein)
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The danger is that we backslide to exactly where we were before the crash. One issue Mr. Broderick does not really touch on is the regulation. What is the union's view on the role and fitness of the Central Bank as regulator in 2017? We have talked about that.
Mr. Larry Broderick:
There are a number of points there. There is a huge amount of regulation coming from Frankfurt, which is focusing on enhancing capital in the banks. The banks' strategy is very much geared towards addressing capital issues at the expense of everything else. Going back to our idea of the forum, we need to challenge Frankfurt. Do we have to capitalise ourself to the extent that short-term decisions are made to maximise capital which impacts on customer services and creates short-term changes in the industry?
That is the Frankfurt perspective.
With regard to probity and regulation generally, there is a considerable amount of regulation in the industry. It could be argued it is over-regulated. I do not believe one can ever over-regulate but there is a great deal of paper regulation. The core of the question concerns whether the regulation is fit for purpose. We believe there needs to be proper testing and evaluation in this regard. In the area of grandfathering, which involved an alleviation for senior staff in the industry in the past who were not involved in lending, the regulator is saying all such measures have to be regulated again. That is a conversation that needs to be had. The consequences, if the implementation were willy-nilly, would be that there would be no jobs for these people in the industry. Conversations on this are needed.
The Central Bank has a role in regard to regulation. It is stronger than it was before. To return to the earlier point on operational issues, the banks' use of cost-income ratio as a justification for action has to be balanced against regulation generally.
Rose Conway Walsh (Sinn Fein)
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With regard to some of the more recent scandals, such as those over tracker mortgages and higher interest rates and even some of the decisions taken on the arrears cases, we see a lot of consumer-led action and then political action. It is striking, however, how few whistleblowers have emerged from within the industry. Does Mr. Broderick believe a potential whistleblower within the bank has the legal protection necessary to speak out? There is a view that the Central Bank's investigative process is too secretive and internal to encourage whistleblowers to come forward. Does that concern Mr. Broderick?
Mr. Larry Broderick:
I will make three points to address that. I highlighted that fear is the main impediment to whistleblowing in our industry, irrespective of legal protection. It is absolutely constant. If a person is in a small branch - he or she does not know whether it will operate or function - having whistleblower protection will not help that person secure an alternative job or help him or her when that person is told he or she could be identified. The industry has experienced enormous change. While there is whistleblowing legislation in place which protects bank officials the same as everyone else, the fear is inordinate. That goes back to my point on culture and the need for external monitoring.
On the second point, on how we can regulate differently, we found over many years as a trade union that we expressed concern over certain things. This relates to the power of the institutions. Prior to the crisis, one bank said it was the best regulated and financed bank in the world. It ended up in a huge mess. Nobody challenged that. Therefore, a mechanism is required to challenge some of these statements. This is why we believe the forum could be of value.
A difficulty is that the members, no more than ourselves, are dealing with each institution in its own right. Bank of Ireland is independent and AIB is State owned. Permanent TSB is majority State owned and KBC is a foreign bank. Ulster Bank will refer to RBS on an ongoing basis. We need to have interaction not only with local management but with other managements across the board. We have this regularly.
The Senator is correct that there is legislation, but unless the issue of fear is addressed, bank officials will not speak out. There is this ongoing conflict and that is why we are very insistent that in all procedures in banks regarding discipline and grievance, there has to be external oversight. Our concern is that the banks and many employers will want an internal mechanism to deal with issues.
Rose Conway Walsh (Sinn Fein)
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Coming from a rural area, I share Mr. Broderick's concerns on rural banking, in particular, and the social and economic exclusion owing to the technology within the banks. Mobility and access arise in this regard. Has the union stopped any of the branches from being closed?
Mr. Larry Broderick:
We stopped a number of them. In fairness, the two major banks are talking to us about examining a different model. There is recognition that there needs to be a presence in localities. We have been involved in a lot of change. We know the branch model may well be different, with a different presence. It may be a different facility. There are some banks, however, that are very insistent that there is only one solution. Regrettably, on many of our campaigns we have not been successful. The banks just went ahead with what they had proposed, leaving us all to deal with the consequences. This is why, in our paper, we suggest a moratorium of perhaps six months and an independent overviewer. It would stop all of us having to chase our tails for three months.
In fairness, there could be valid reasons for proceeding in a certain way. If the industry could commit to making sure there is at least one financial institution - I do not mean a post office or credit union, although there is a role for these - it would be beneficial. I refer to an institution that could lend to local businesses and engage in the local community. These are challenges. They will not be solved through legislation but it would be useful if we could impress upon the institutions the need to meet customer need, commit to the economy and acknowledge corporate social responsibility. In the two bigger banks, I have noted a far greater understanding of the need to progress in this regard. That probably is based on the fact that there is State involvement. One or two other banks are not in that place so we need to bring to the highest level what we can do to address that.
Rose Conway Walsh (Sinn Fein)
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It is particularly the case since people cannot now get through to their local branch. That they cannot make a telephone call to speak to anybody within the branch is of concern, especially to people who are already marginalised and the elderly, but also people who just want to talk about their money. At the end of the day, it is their money and it does not belong to the bank. There is an unacceptable set of circumstances on which the Central Bank needs to act.
Mr. Larry Broderick:
Absolutely. Another issue is that there are customers who have to travel 35 or 40 miles up the road with cash to lodge. There are security risks. Some of these points are not taken on board. In the past, there might have been two branches in every location. I reckon most of the branches are still profitable and the reason they are being closed is that they are not returning enough in investment. We are in a different place now so they should be challenged. I share many of the views expressed. We have the same reservations. That is why a different formula, perhaps a voluntary code overseen by ourselves, might be useful in addressing some of these issues rather than dealing with them at the next announcement, as we will all do. We will all campaign and politicise the matter and we will have to deal with the outcome.
Rose Conway Walsh (Sinn Fein)
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I wish to ask about tracker mortgages, the redress scheme, and the issue of some banks not including their staff members. I understand one bank, in particular, is not including staff members in the redress arrangement for tracker mortgages.
Mr. Larry Broderick:
We have raised this with all banks. The have told us that, as and from now, all staff will be included in the redress programme. This is reassuring. Our concern, however, is that we need to be reassured this is the case because bank staff are no different from anybody else. They, too, are customers and have the same problems and issues as any other customer. There was some doubt, which we have raised. We are putting it on the record today just to make sure it will be the case that bank staff will not be treated any differently from other customers.
Rose Conway Walsh (Sinn Fein)
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Has the union got assurances on that right across the board?
Rose Conway Walsh (Sinn Fein)
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I am pleased to learn that because it was quite alarming to think staff would be excluded.
On Brexit and the North, there is much speculation about what Brexit might mean for the financial sector in Ireland. It is generally agreed that Brexit is bad news for the economy, but there is a chance that some banks and even the European Banking Agency might locate here. The union represents workers in the North also, as Mr. Broderick said. Does Brexit put at risk jobs in call centres or other back-office locations for British-based banks in the North? Does Mr. Broderick have any figures on how many jobs are in that category?
Mr. Larry Broderick:
The answer is that we do not know. We are making two points on this. There are many statements being made that there are opportunities for Ireland, including Dublin, in this regard. We are just very sensitive about London jobs being traded off, resulting in a move to Dublin, and do not want to be involved in one of these trade-off situations. We are working very closely with our colleagues in the trade union movement in the United Kingdom to ensure an institution will not just jump ship from over there, resulting in many job losses, and locate here.
On Northern Ireland, we are concerned. There are 44,000 jobs there in the financial services industry. We are not too sure what will occur and we are doing work on it. When we conclude it, we will share it with the Senator. We are ascertaining the extent to which the workers are vulnerable. Much will depend on when the UK Prime Minister announces the intention to move on the UK strategy on Brexit. At that point, we will probably have a better opportunity to understand the degree of vulnerability. There are concerns, which we share, and we are raising them in the North and Great Britain.
The reason we are concerned is that Northern Ireland is part of the UK so it could be viewed as an opportunity to move forward.
Rose Conway Walsh (Sinn Fein)
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I cannot agree with Mr. Broderick on that point.
Kieran O'Donnell (Fine Gael)
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Mr. Broderick talks about not displacing jobs in the UK but our responsibility is to Irish workers and Irish financial services so if circumstances arise with Brexit, should we not encourage financial services to locate in Ireland? If jobs could potentially come to Ireland they will by definition, leave the UK. Is it not better for us to bring them here rather than allow them to go to Frankfurt, New York or elsewhere? I appreciate the altruistic motives towards colleagues who are members of a union but I would hate to lose an opportunity and for these jobs to go elsewhere rather than here. The people working in these jobs in London would be very welcome to work in Dublin or Shannon or Limerick.
Mr. Larry Broderick:
We are not ruling it out but we are just being cautious. We would hate employment in London to become a battleground for various people. I agree that, where relocations are inevitable, we should ensure the right environment is here for the people involved. Our industry has donned the Irish jersey for some time and recognises the changes that need to take place.
Kieran O'Donnell (Fine Gael)
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Can Mr. Broderick explain the logic in his initial statement? I did not get it.
Mr. Larry Broderick:
The logic is that we do not believe short-termism on the part of big international banks in London, whereby they sack the staff and place them in Ireland, is the right place to go. They have to justify it to their own staff and unions in the UK and the individuals have to be treated with respect. Provided that is the case, we should be first to show we have a regulated proposition and a working environment that welcomes trade unions. There have been experiences of enticing people to move but without providing a structure. Banks should not relocate on the backs of staff.
Kieran O'Donnell (Fine Gael)
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What level of employees does Mr. Broderick represent?
Kieran O'Donnell (Fine Gael)
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Whom does the union not represent?
Kieran O'Donnell (Fine Gael)
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What percentage of bank staff does it represent?
Kieran O'Donnell (Fine Gael)
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Are the other staff members not in unions or are they in other unions?
Kieran O'Donnell (Fine Gael)
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We have grave difficulty in finding things out from banks. People talk of the pressure being put on them by the banks and they tell us there has been an increased impetus towards repossessions, towards going to court and putting pressure on SMEs. Mr. Broderick speaks of fair play but individuals in the SME sector tell us of settlements they have brought to vulture funds and to those banks who have still not sold their portfolios. Do any union members work for vulture funds?
Kieran O'Donnell (Fine Gael)
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Do the demands on members from top management put them under pressure in dealing with customers? Are the ways they do business unfair to customers? We have to find a balance between banks making a profit and a sense of fair play. People are providing sustainable, long-term solutions but the vulture funds have no interest in long-term solutions. This also seems to apply to some of the mainstream banks now that property prices are going up. How are union members dealing with what is happening to ordinary clients, many of whom they probably know as their neighbours?
Mr. Larry Broderick:
Our members are directed by senior management to get the best deal for the banks so their role is to discuss the issues with customers. A huge number of customers are not engaging with banks and this is another problem. It is a time bomb that has to be addressed and that is why there has been a move to transfer non-performing loans to vulture funds. The vast majority of our members would be sensitive to customers' needs and would factor them into any proposition. However, it will be the central credit committee that dictates the outcome.
Kieran O'Donnell (Fine Gael)
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Do any members, who are the interface with the public, come to the union as their representative body to say the way customers are being treated and what they are being asked to do are not fair to themselves or the customers?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Are union members, particularly those in call centres, able to express any form of compassion in dealing with customers or are they driven by a management decision to be aggressive to those who owe money? Is it their job to collect that money without showing compassion and to hound customers? Does this come from management as a strategy or is there flexibility for the person who makes the call?
Mr. Larry Broderick:
The direction given to the bank official comes from on high. The employee, as the interface between the customer and the management committee which deals with these issues, will identify what are the customer needs but at the end of the day, a decision will be taken in the best interests of the bank how to address it. Not all of this is done via call centres. Call centre staff also deal with incoming calls and it is not just about debt collection. The calls in question are scripted and there is no flexibility. They are directed by the best interests of the bank on how to deal with the small business customers who have the problem.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Are those whose job it is to contact customers in arrears encouraged to be aggressive towards those customers and to pursue them rigorously, as dictated to by the management of the bank?
Is that a problem for those employees?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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If it is a case of individuals making calls to try to collect money, why are the banks being aggressive? As a public representative, I have received numerous complaints about the efforts of banks to collect debts using junior staff. My point is that these staff must be dictated to, or the call must be scripted in some way.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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So we can take it that the script comes down from on high-----
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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-----and the staff have to pursue it in a very rigid fashion.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Many of them are being put in very awkward situations.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That is the point I am trying to make here. Has Mr. Broderick ever spoken to management about the feelings of staff who almost dislike going to work because they are being pushed in that direction?
Mr. Larry Broderick:
We have raised this problem across the industry. The people who work in that area are probably the most stressed staff in the industry. The nature of the work they do makes them very vulnerable. When we have suggested to the banks that these staff are under pressure, they have responded to us by saying they have to manage this issue in the best interests of the banks and their capital requirements. That is the kind of response we have got. We have asked members to raise particular issues with us on a confidential basis.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Bearing in mind the attitude of the management of banks in this country, how successful does Mr. Broderick think he and his colleagues will be in convincing the banks to establish a forum?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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No, we have to ask. I will put the question in a different way. How have these hard-nosed bankers reacted so far when it has been proposed to them that they should participate in this forum and when they have been asked to be more reasonable by having representatives of customers and employees on board? Have Mr. Broderick and his colleagues had a conversation with them about this?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is there a date for this marriage?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is that not the problem?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Mr. Broderick and his colleagues are at the altar on their own at the moment.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We will act as the best man.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What about the banks? How long will it take them to reach a position where they accept there is a need to transform the banking model we have?
Mr. Larry Broderick:
I believe some of the banks are beginning to realise that. I think the State-owned banks should be directed to do this and I suggest the banks that are not owned by the State, but have some State ownership, should be influenced greatly in this direction. I am suggesting that now that issues like profitability and sustainability have been moved on, there is an opportunity to be more focused in our efforts to get the banks into this space.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The idea that all of the players would be given a place within a forum is certainly a good one because it could shape the banking of the future. Will that not be challenged by the fact that many of these decisions are based on what the banks have described here previously as customer needs? The banks have told us that customers are voting with their feet by doing things on the Internet and other platforms and are not necessarily coming to bank branches. Does Mr. Broderick think that is the truth or does he believe we are being given information to mislead us?
Mr. Larry Broderick:
I will look at both questions. The Chairman said the forum is a good idea. If the industry is invited to attend, I would be amazed if it chose not to participate, particularly in light of the political circumstances we are faced with. The question of whether it would participate fully and seek to embrace what we all want to achieve is a separate one. I genuinely believe there is an opportunity for such a request to be made to the industry. I think it will participate. That is the first point.
The challenge for all of us is to get the banks, particularly the State-owned banks, to recognise that the taxpayer is in control and should have some influence. Nobody is saying the banks should not remain profitable and viable. We are proposing to change the model so it meets everybody's needs. If a branch with one teller and four machines on the side of the wall has a queue going out the door, what else will customers do other then migrate to one of the machines? Stressed and pressurised customers who are doing their best to make their lodgments will not choose to wait half an hour in the midst of this madness. The banks are probably correct when they say there has been a migration to digital banking. We have to recognise that banking is changing all around us. There are different models that can address customer needs. One of those models can involve banks being open in local communities and being available to senior citizens. Such a model that can involve elements of the digital approach. There can be a combination of both approaches. Our paper refers to examples across Europe that show how this can be done. Ireland is not that different. There is no doubt that there has been some migration. The banks use terms like "5% footprint" because they are driving the footprint away. That is not addressing the needs of customers. Our experience has been that if customers are asked what they want, they will say they want somebody to do business with. It is easier to do business with somebody locally than to go through options Nos. 1, 2, 3 and 4 on the telephone. This has to be taken to one side in all of these developments. That is why we are suggesting alternatives to branch closures, for example. How are those alternatives addressed? What is the best way to meet customer needs? We need to look at alternatives to politicians, trade union personnel and local activists going into banks in Dublin or Belfast and saying "please do not close this branch". As the committee will have heard in some of the representations that have been made to it, the strategic approach that is needed should involve looking at different models rather than necessarily going down the route of further closures. Such an approach will open a welcome debate.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I would like to ask Mr. Broderick about how the tracker mortgage issue emerged. Senator Rose Conway-Walsh touched on the behaviour of the banks in that context. If something odd is going on, how obvious is that to officials in the bank who are at a lower level than management?
Mr. Larry Broderick:
It does not become very obvious until a communication like a letter needs to be sent to the customer about what happens at the end of a particular lending product like a tracker mortgage. What tends to happen is that this is centrally referred to the legal department and then a letter is pre-printed or pre-sent out to the customer to address that. It is likely that a bank official would not be aware of something like this until a customer expresses dissatisfaction or raises an interest, or until it has an impact on the official himself or herself. That is how these things tend to operate. That brings me back to the question of whether the 2008 regulation described how a tracker or fixed-rate product should be phased out and the circumstances in which this should be done. We would have thought the Central Bank would have had rules in this regard, for example setting out whether a similar product should be made available if a certain product was not on offer. I do not think such a regime was in place at the time. This problem was compounded when everybody looked at their legal contracts. Some contracts gave banks the right to do what they wanted and other contracts were very much in favour of customers. We are still in the debate about what the prevailing rate actually was and what that meant. There is a misconception that every customer has gone back to the tracker he or she was on many years ago. As we know, that is not what is happening. As the terms of most of these products are pre-structured and based on legal contracts, and therefore dealt with in that way, officials are often unaware of them until complaints arise and have to be dealt with. Indeed, that was done. Members may recall what happened in one bank where there was a lot of noise in this regard. It travelled into other institutions as it emerged over time. Many of our members are customers of a certain bank and are therefore facing this exact issue.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The issue, as we discussed it with the bankers and as we are discussing it with today's witnesses, is that it looked like a cartel-type activity. It is strange that it happened in all the banks all at the one time. Does Mr. Broderick have a view on this?
Mr. Larry Broderick:
I must be honest with the Chairman that it is strange. We were not aware until some time recently that, as we understand it, 15 institutions are being accused of similar activity. We were probably not aware of this as a union, as members, because much of the activity was carried out through individual contact with individual customers. It is oriented around legal contracts and legal interpretation. In many cases, customers accepted the outputs at the time as being beyond challenge. I think this has only changed since the Central Bank has come in. This is why we have suggested that perhaps there needs to be an interim report from the Central Bank giving a heads-up. The report could ask what has been seen to date, the background to the trends that have emerged, whether there is a cartel involvement and whether it is widespread, whether there are justifications for that and where the matter is going.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We have asked for quarterly meetings with the Central Bank to do just that and flesh out the matter here publicly so that we all know what is happening. I have two final questions, one of which concerns tracker mortgages and complaints. If a customer makes a complaint to a bank at branch level, how is it passed on?
Mr. Larry Broderick:
Any complaint at local level is escalated to a central point in each institution. If one makes a complaint in a branch, there is an automatic mechanism whereby a compliance officer will make sure the complaint is tabulated, dealt with and referred up for somebody else to deal with.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It therefore goes up along the line-----
Declan Breathnach (Louth, Fianna Fail)
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Yes.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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-----but this depends on whoever deals with it at management level. That would determine the response or lack thereof.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The vulture funds concern all of us - at least, those of us in this committee. Regarding those who have their loans or debts transferred from a bank without notice to one of these vulture funds, is there room for a benevolent fund or friendly vulture fund that would begin to relieve the banks of their debts and give the opportunity to customers to work out their debts on the basis of this same discount as a vulture fund?
Mr. Larry Broderick:
As we understand it, there are groups working to try to put together alternatives in this regard. The extent to which they have finalised their thinking on it is another matter. However, we understand, from representations made to us, that there are such people out there. My view is that they need to crystallise their proposition sooner rather than later and they need to be supported. Going back to the Chairman's previous point, the value I see in this is that they will manage this differently in the sense that there will not be a haste to get rid of the debt within 12 months. There will be a better opportunity to reach out. We have a vested interest in this because it will involve our people dealing with this for longer and, I hope, with a different value proposition, if that is the direction in which we want to go. There is an opportunity in this regard. I call on those who say they have opportunities to come to assistance sooner rather than later. The banks will be under pressure on the capital side to release those non-performing loans as soon as possible. This goes back to all the contradictions with which we are dealing. If we are going to deal with silos of banking, we will have capital doing one thing and individual institutions doing their own thing. In the end, the economy, the taxpayer, the customers and the staff will be too late to address the issue. This is why we believe some of these ideas are very welcome.
Gerry Horkan (Fianna Fail)
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I thank Mr. Broderick for his opening statement. Regarding the banking form to which he referred, fortunately or unfortunately, corporate governance requires under law that the banks and the directors of the banks do the best for their shareholders. This does not mean they cannot or should not look after their customers or staff. One hopes that ideally they will look after all of them. How does Mr. Broderick think the idea of having worker directors and customer representatives on the board would fit in with corporate governance? The concept sounds plausible enough, but if one places all these people on a board, they must sign up to company law requirements that they do their best for their shareholders - full stop.
Mr. Larry Broderick:
These are two different matters. There are representatives of State-owned bodies on the boards of State-owned banks at the moment and they have not caused difficulties. We are saying that if one wants a better balance and the corporate responsibility of a broader, more diverse board, we must factor in how one maximises the opportunity for the employer or the shareholder. However, the board must also be sensitive to other groups as part of this process. An enlightened board with staff representatives, a regulator in attendance and a customer point of view will help inform banks to come to a decision. None of these people will say that the banks should be out of business or there should be a branch in every location in the country. These are not the kinds of people who will be on these boards. They will be responsible people seeking a balance. There is value in that. Equally, the forum creates guidelines. Every employer will do what it must based on its short-term needs or its shareholders' needs. However, it makes a difference if one starts identifying one's corporate social responsibility, how one can do things a little differently and how one can gauge a little more to achieve that change in a more engaging way with customers, employees and other such people. To be fair, I think some of the banks, in their strategies for the future, are beginning to recognise this. They are sitting down with us as a union and saying they will not close all branches and asking how they can do things a little differently. This is an opportune time. Very importantly, if we do not create some kind of forum, every bank will be very focused on its own little objective, and the Irish taxpayer and our local communities will be left out there. However, if a forum can be created whereby one can have conversations and reconcile the need for organisations to remain independent and have their own objectives - some of these banks are State-owned - one can at least create a value proposition that people might look up to. This is the challenge for banks at the moment: how does one make a difference in the marketplace?
Gerry Horkan (Fianna Fail)
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Regarding the impact of State ownership on the various institutions with which Mr. Broderick's members work, it appears the Government intends over time to unwind State ownership. What are his thoughts on the impact of State ownership on banks' day to day operations and how it has affected the banking industry, the Financial Services Union's members and the Irish economy? I do not think it is the Government's intention to hang onto its investment in all these banks forever. I think it will consider selling them at a time when it thinks it will get good value, presumably the best value return for the shareholder. I have not heard anything from the Minister for Finance or anyone else in the Government that would indicate that it is the objective of the Irish Government to maintain, control or run a commercial banking operation into the long term.
Mr. Larry Broderick:
Again, that is a Government decision. We are asking what the experience of State ownership has been in the banks for the past number of years. Without State ownership, under no circumstances would the banks have survived. The amount of money put into them was enormous. Has the culture in the banks changed? Not dramatically, I would suggest. Has there been a change in direction that has taken more on board the needs of the customers and the taxpayer? Probably not. The culture has been very focused on getting the banks back into profit and getting them out of State ownership. There is a balancing act in this regard. The challenge I am throwing out to the politicians is that they need to decide what they want out of their State involvement in the banking industry. If it is about maximising the return of capital for the State, the question is how one can influence, while the banks are in State ownership, a better banking environment, a better banking model and a better banking value that allows for profit, a changing model and digitalisation but also factors in politicians' needs and the economy's needs. This has been lacking and there has been a reluctance in this regard. I can understand it because the culture has been so focused on trying to put the capital in and save the banks. We do not need to go over the history of the industry and the huge amount of moneys involved. I put the question: what is the strategy? If it is to maximise capital, to what extent can the members use their bargaining position at this point in time to influence a more sensitive - as the Chairman said, perhaps a more compassionate - industry that can still be profitable and maximise profit, but not at the expense of everybody, and can do business more sensitively.
Gerry Horkan (Fianna Fail)
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Does Mr. Broderick believe that State ownership in the long term would be a good thing or that it should be in the fullness of time wound down? Does he think it is better that the Government has ownership or involvement with the banking sector or not?
I am only the general secretary of a union. I am not going to give a political speech about what is in their interests. The reality, however, is that by its very nature the Government will have more involvement in the banks in the short to medium term. That is the reality. Even in the Bank of Ireland there is still a 10% ownership. There is a value there and it will be there for the medium term. The Government should not lose the opportunity of using it to influence what it wants out of banking while it is still there.
Gerry Horkan (Fianna Fail)
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Mr. Broderick mentioned that there are about 15,000 members.
Gerry Horkan (Fianna Fail)
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They are split between the Republic of Ireland, the North of Ireland and Britain. What is the split there?
Mr. Larry Broderick:
We have about 10,000 in the Republic, about 4,000 in Northern Ireland and about 1,000 in Britain. In Great Britain, we would have had members in the Bank of Ireland and AIB. Bank of Ireland has moved out of branch banking in Great Britain, so predominantly we are in head office and branches in AIB.
Gerry Horkan (Fianna Fail)
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So it is mainly AIB and Bank of Ireland staff.
Gerry Horkan (Fianna Fail)
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Mr. Broderick referred to starting salaries of about €23,000.
Gerry Horkan (Fianna Fail)
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Presumably, Mr. Broderick's members are generally the day-to-day operations people in branches, but also in call centres, various technology sectors and so on.
Gerry Horkan (Fianna Fail)
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Does Mr. Broderick have any idea of the average salary of those workers, as opposed to the multiple of 65 times the base to get to the top? What does an average FSU member earn?
Gerry Horkan (Fianna Fail)
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No, it is just to get an idea of the members Mr. Broderick is representing. He is not representing these chief executives or the IFSC people on €200,000, €300,000 or more.
Gerry Horkan (Fianna Fail)
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I am sure that from 2008 to 2010, those individual staff members felt the brunt of public dissatisfaction with banks' decisions. In the same way, many back bench politicians and councillors would have felt the impact of what was being done from the top. In my own branch I heard of stories of people getting awful personal abuse about what the banks were doing.
Gerry Horkan (Fianna Fail)
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They were only the messengers. One can equally understand the frustration of people who were getting letters and facing this behaviour. I am trying to get an understanding of Mr. Broderick's membership, where they are coming from and the kind of work they do.
People can now do a degree of mobile banking that they could not do two, three or four years ago. Most of us now only go into a branch when we really have to in order to get a cheque or lodge foreign currency which happens a lot less now with the euro and credit cards. Some 160 branches have been closed. How many branches are there across the entire network of main banks now?
Gerry Horkan (Fianna Fail)
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There must be more than that.
Gerry Horkan (Fianna Fail)
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Mr. Broderick's members are working in all these branches. Does he see a lot more consolidation on the way? Does he see a lot of branches being closed?
Gerry Horkan (Fianna Fail)
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Technology has removed the need for some people but, equally, not everybody is technologically savvy and many parts of the country do not have particularly good broadband.
Gerry Horkan (Fianna Fail)
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Where does Mr. Broderick see the day-to-day future of banking in Ireland? He is at the coalface with 15,000 members. Is every bank fully unionised or would half the staff in a bank be non-union members?
Mr. Larry Broderick:
We would represent the majority of staff. To go back to the other question, I think the industry is going to change. There will not be the same branches we know in every location. The challenge is that there is a debate going on within the industry about what provision is wanted in future. As I said in the submission, cities will have full branches doing the whole lot. Smaller locations will involve some advisory and technology work. There will be other areas where there may not be a presence, so there will have to be a community or mobile bank. It is changing and we are embracing that change. We will have to recognise that. This is not a bleat about things not changing. We absolutely understand that is the nature of the work. Our people are educating and developing themselves to create higher value. International organisations like Accenture and others have said that bricks and mortar will have a role, but more of an advisory role on pensions, investments and development. It is about balance.
At the moment our members are caught not knowing what the future will be. They are trying to deal with change and pressure, but there is no support in place. Going back to the forum and how one deals with this as a community and a country, we must recognise that there will be change. We are ahead of it because we are having those conversations. Two of the main banks are saying they will sit down with us and talk about what the proposition will be in future. It will be different. We are prepared to engage in that provided our members are not facing compulsory redundancy and there are opportunities.
Even in the head office areas there are things called robotics which are changing the nature of support. In the past, staff would do a lot of the centralisation work, but now it is being done by robots or computers. There are challenges on all fronts but there will still be a lot of staff in banking which will still be a key to the economy. While we are in that dynamic stage, we want to see how can we balance that. That is what we want to achieve.
Gerry Horkan (Fianna Fail)
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In terms of the behaviour of the banks and the way they are putting pressure on customers by ringing them, some of those may be scripted conversations, but they are Mr. Broderick's members. Does Mr. Broderick have any kind of whistle-blowing charter or mechanism to allow his members to express concern about some of the tasks they are being asked to do? As the Chairman said, we have been made aware of customers who are getting phone calls three, four, five or six times a day. They are effectively being hounded. Presumably, some of those people are probably Mr. Broderick's members doing what they are hired to do and what their superiors ask them to do. They are possibly quite young people, maybe in their first job. Is there any way that Mr. Broderick's members can articulate concerns to him in an environment where he can raise them and say that they do not think this behaviour is appropriate or suitable in terms of dealing with people who are in distress. Mr. Broderick said some people are refusing to engage at all and obviously there has to be some method of contacting them. However, are there any procedures like that?
Gerry Horkan (Fianna Fail)
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Do they do that?
Mr. Larry Broderick:
No. The majority do not and I will say why. We have tried to tease it out but there is a fear factor here. Even by going to the union they feel to some extent that they will be singled out and dressed down. We must use other surveillance on the ground to engage more and see how we can address these issues. We do not need whistleblowers to tell us that this is going on. We have raised the issues with the banks anyway in terms of their behaviour. There is this fear factor, however, that is germane to people who have contacted us.
Gerry Horkan (Fianna Fail)
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I have a number of other points but I am conscious that we are finishing at 5.30 p.m.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yes, at half past five.
Gerry Horkan (Fianna Fail)
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Mr. Broderick said that the culture has not changed that much. He also referred to performance measurement and performance-related pay. We all know about bankers getting rewards for lending money that never came back. That kind of behaviour, to which Mr. Broderick alluded, was part of the crisis and the crash. Does he see that coming back and happening again?
Gerry Horkan (Fianna Fail)
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Is it happening?
Gerry Horkan (Fianna Fail)
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How modest is modest?
Terry Leyden (Fianna Fail)
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I just have a brief question. I welcome Mr. Broderick and his colleagues Ms Elaine Barker and Ms Sharon McAuley. I know of the FSU's work since the late Brian Lenihan was Minister for Finance during the crisis. The union played an important role on behalf of its members. The union leaders went through a difficult time but kept cool heads when others were losing theirs. Well done on that.
I also wish to congratulate the union on being rebranded as the Financial Services Union which represents workers throughout the country. I have noted the union's comprehensive document. I want to declare an interest as I am a customer of Allied Irish Banks in Roscommon where the staff are working very well.
I share Mr. Broderick's concerns that there should not be a rushed sale. They should be very careful before a sale. In addition, Mr. Broderick's union should be consulted in detail regarding pay and conditions. If some vulture fund takes over AIB more jobs will unfortunately be lost. I do not see why the Government cannot consider continuing its role for as long as possible because there will be a return from AIB. It is a very good bank now which is doing a good service.
I also note Mr. Broderick's comments on Brexit, which is very important to the Government's role in attracting banking jobs from the city of London or elsewhere. It is vital that the Financial Services Union is involved in all these negotiations. I thank the witnesses for coming in today.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank the Senator. We will conclude this part of the meeting because we have another session.
I thank Mr. Broderick and his two colleagues for coming before us today. I found the presentation and the replies to the questions very constructive and helpful. I encourage Mr. Broderick to proceed with his suggestion on the forum. I believe banking is changing considerably and all the stakeholders he mentioned should be part of a forum. We certainly can raise it with the Taoiseach and the Minister for Finance when they come before us.
I encourage Mr. Broderick to take a stand on behalf of his members against the scripts. I find them offensive, difficult in terms of how people with the demands that are being made and I think somebody has to stand up against the attempts by the banks to chase customers and harass them to the extent that they fall into poor health and other consequences. I think there is an onus on the Financial Services Union to do that while there is an onus on this committee to do likewise.
On the question of fear and the whistleblowers, what Mr. Broderick described as the fear factor in the bank is very real. I know there are many bank employees who would like to highlight issues and bring to the attention of the industry certain practices but they are afraid to come forward. One must ask why? The legislation is in place, unfortunately, in my opinion the legislation is not worth the paper it is written on because it does not offer the protection that is necessary and therefore there is an onus on the unions. The unions have a major challenge in taking on board the issues raised by employees in banks who become whistleblowers. I know there are issues that need to be brought to the fore to have the individual who raised the matter protected. It is hard to achieve that balance. I would like Mr. Broderick to know he has my support, as well as that of others on the committee. Mr. Broderick has an extremely important role and shaping the future is all about respect for the people who work in the bank and for the bank customers.
Mr. Broderick commented on the bailout but I think it is time to bail out the people who have been so severely affected by the workings of the banks.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We will suspend for five minutes while we wait for the witnesses to come forward.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We are now in public session. I welcome Mr. Padraic Kissane to the meeting. I ask members and all those present in the Gallery to please turn off their mobile phones as they interfere with the sound quality and transmission of the meeting. I draw the attention of the witness to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if he is directed by the committee to cease giving evidence on a particular matter and he continues to so do, he is entitled thereafter only to a qualified privilege in respect of his evidence. He is directed that only evidence connected with the subject matter of these proceedings is to be given and he is asked to respect the parliamentary practice to the effect that, where possible, he should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
I invite Mr. Kissane to make his opening statement.
Mr. Padraic Kissane:
I thank the Chairman and members for inviting me to appear before the joint committee. That thanks is on behalf of the thousands of people across Ireland who have been affected by what in my world has been called the tracker debacle. It has affected customers across all lenders. Within that confirmed fact lies a clear indication that this matter and how it came about was based on deliberate actions between each of the lenders. I will tell the committee how this occurred and why and to put across the customer's viewpoint.
I believe before we go forward we must look back. An infamous advertisement ran in 2006.
It showed a guy on a bus saying that he did not know what a tracker mortgage was. A product originally introduced by Bank of Scotland, it tracked the ECB base rate at a certain margin above. Within that lie the causes and results of what happened. It tracked the ECB rate, but the banks borrowed on the interbank money market of Euribor. They were aligned at the outset, but the issues started and banks panicked when they became unaligned.
I know what a tracker mortgage is. This issue first rose in 2009. To understand what a tracker mortgage is, my submission includes definitions and understandings from every bank. A common theme runs through each. For AIB, it is for the life of the loan. For Bank of Ireland, it is for the term of the loan. For PTSB, it is during the term of the loan. For EBS, it is for the term of the loan. For Ulster Bank, it is guaranteed for the life of the loan. KBC guarantees to track to ECB reference rate. For First Active, the interest rate will never be higher than a certain margin.
From these definitions, what the product was - what people signed up to - was clear. For a long time, I have argued that the variable bases of those loans were established when the people commenced them.
Regarding what went wrong with the product, the alignment of Euribor and the ECB changed dramatically in mid-2008. The ECB reached a peak of 4.25%, the banking collapse that became known as the financial crisis occurred and banks suddenly panicked. I am certain that high-level meetings were held in each bank to address the issue. I know of no lender that has admitted to this or made available the minutes to any such meeting, but it is clear that meetings would have had to have occurred. Then the messing with customers' accounts began. For example, PTSB came up with the idea of getting customers to break from their fixed rates and subsequently denying them a return to trackers because they broke from those fixed rates. In some cases, EBS decided not to offer the rate at all and see what happened. Bank of Ireland tried the same line, namely, that it did not do tracker mortgages anymore, so tough luck. KBC tried to claim that, since one of the forms that customers signed included the phrase "thereafter reverting to a standard variable rate", it would discount any customers returning to their trackers. KBC did not even have a standard variable rate mortgage when people were fixing loan rates. All home loans reverted to trackers, as the infamous e-mail claimed. AIB has tried every excuse to get out of trackers.
In one of the decisions in which I was involved, however, the Financial Services Ombudsman decided that the underlying contractual position of the variable basis of the loan was clearly set out at the commencement of the loan and was not altered in the customer selecting a fixed period. Astonishingly, this was not challenged in any court. Of the cases that I have won through the Ombudsman's office, not one has been challenged to the High Court. Every one of them was accepted.
The answer to the question of what would have happened had no banking issues arisen in 2008 is clear. The conditions that everyone signed up to did what they said on the tin, as the saying goes. The margin was for the life of the loan. According to the banks in their various replies that I have received over the years, the customers were meant to be the legal, financial and banking experts in understanding their documentation. However, the contracts were clear. All that differed in each was the margin above the ECB rate that was allocated to loans based on various reasons, for example, loan-to-value ratios and the percentages that would have been borrowed against those ratios. The only reason any of this changed was because of the banking difficulties that arose from mid-2008 onwards.
I am at this meeting to discuss the customers of all banks whom I have met since 2009. The purpose is to tell the committee the effect on those people and, more importantly, their families. I have met hundreds of these customers across all lenders. The impact of the banks' actions have been catastrophic, especially on families and children.
Members are aware from some of the lenders that the banks' actions have resulted in the loss of homes. However, what needs to be examined in this context is the number of customers who have had any type of loss of ownership. The only numbers put forward by the banks to date are those that can be classified as homes lost, which suits the banks perfectly because it keeps the number small, but there is no difference if a home is sold to trade down to meet the overcharging or to emigrate, if a property abroad is sold to help meet the payments or if a property is voluntarily sold to avoid the inevitable happening, that being, emptying all of a customer's savings first, then asking friends and parents for help, approaching the credit union for a short-term loan, running up debts on cards and current accounts to their max to meet the payments and, if all of that was not enough, going into arrears.
Homes are not all that have been lost in this debacle. Lives have been lost, and most people affected have had their lives and outlooks changed. These lenders have used our "Irishness" against us. By that, I mean that the desire of Irish people to own a home and put down roots is fundamental to our make-up. To attack that section of their customer base is appalling behaviour. In the majority of cases, customers have done everything possible to avoid going into arrears on their homes. Add in the unique economic circumstances that prevailed at the time and what was created by the banks' actions was the perfect storm.
That the lenders set about deliberately attacking and robbing home owners - essentially amateur investors - is truly appalling. There are unwritten rules in place that are not covered by any consumer protection code, law or directive but are sacrosanct when it comes to being a home owner. Banks should be able to be trusted in how they deal with home owners especially.
In 2014, I wrote a piece at 6.30 a.m. one morning when I got up, entitled "Why is the customer always wrong?" I will read it into the record:
I cannot understand the continual erosion of a time sound basis of business namely the customer is always right to one now where the customer is always wrong.
The acceptance as a requirement by these lenders of time as the important ingredient as well as cheap capital in order to restore their basis of becoming pillar banks but to then use the very opposite weapons namely no time or cheap rate to help their customers recover is wholly unfair that it has been allowed to happen.
But the cunningness of how it has been done to include our Government and the Central Bank as co-perpetrators of these actions is unacceptable.
It is clearly obvious to me that far from becoming pillar banks that will support our economy there is only one requirement for the heads of all lenders and this is to squeeze the customers to the very limit of what they can get away with because in the new financial world within Ireland the customer is always wrong.
I am here today to say that the customers are not wrong and were never wrong.
I commend the customers who challenged these lenders. It was no easy journey for anyone. I know first hand what it takes to take on these lenders with their power, might and financial strength. I stated this in 2009, but no one listened. It is now 2017 and we still have the same problems. I challenged my first tracker case in 2009. Since then, I have been challenging lenders, initially through the processes of the Financial Services Ombudsman, culminating in getting the matter to the Central Bank industry-wide investigation. One would think that, at this stage, the banks would accept that their game and trickery are up and that each has been caught, but not a bit of it. I want to state on the record that there is not one morsel of regret within any bank that I have encountered for what they have done. Their only regret is that they have been caught.
One must remember that, until August 2015 for PTSB and August 2016 onwards for the other lenders, each customer affected by this tracker issue believed it was his or her own fault. Customers blamed themselves for buying that nicer home, for trading up and keeping the existing home as an investment or for having to borrow so much money to even get on the ladder. It was all their own fault. These became known as the Celtic tiger fools. It seems conveniently forgotten that the levels of stamp duty, VAT and fees that contributed to the finances of the State were enormous.
I wish to address some words towards the Central Bank. I want it noted on record that I support and acknowledge the efforts that the Central Bank is making in this investigation. While accepting that the Central Bank might have arrived to the matter somewhat later than was ideal, it must nonetheless be acknowledged that it has arrived with its investigation. Currently, there is an enforcement investigation into PTSB and Ulster Bank and an industry-wide tracker investigation across all lenders. The difficulty for the Central Bank is that it cannot make any statement of note other than updates until the investigation is complete.
I disagreed with the treatment that the Governor, Professor Philip Lane, received at his most recent appearance before this committee. The Governor and the Central Bank have not taken one cent from any customer. The banks did. I would ask this committee and indeed all who are affected to place a degree of trust in our Central Bank to do its job as I do, but it must be allowed the time to complete its work. I accept the difficulties that the waiting is causing to the families and individuals affected. For that, the lenders should be ashamed.
The lenders' current CEOs are holding the reins of responsibility for how their banks are behaving. I cannot and will not accept the reply of "I was not there when this occurred." The legacy of this issue is being written as each day passes, but the word "apology" is being used without the support of any degree of true remorse. There is still a level of resistance within each lender to correct the matter fully.
I am still being told on a daily basis that I am wrong. Each lender is attempting to tell me I am wrong about a matter that is within the banks' own documentation. I challenge the CEO of each bank to take full control of and responsibility for the investigation and to put the customer first and the bank second.
I have been in financial services for over 33 years and I am appalled at the level of wrong done to customers by the banks. I have heard the heads of some of the banks come into this room and give this committee details of the number of accounts affected. Everything is scripted to perfection to ensure that nothing wrong is said. That caution and care reflects the fact that the banks are concerned to ensure that they do not cause further damage to themselves. Each of these banks has made provisions without any degree of knowledge of the harm their actions have caused. I have spoken to thousands of customers and the level of hurt the banks have caused is truly appalling and I am certain that each lender has no real sense or understanding of this.
I am mindful today of the people who have met me to tell me their story. I mention in particular the brave couple who took the matter to the High Court at enormous cost to themselves and their family, both health wise and financially. They won their case in court only to be redressed by PTSB with a margin of 3.25%, which was never allowed for and their fight continues today. I think also of the lady who felt humiliated when she had to leave her Christmas shopping trolley behind, four days before Christmas, who was being overcharged by €1,000 per month at the time. I think of the man who was only able to meet with me because the rope snapped when he attempted to take his own life, the man who had to take a back office position in a bank for fitness and probity reasons and the man who could not accept his redress cheque as he had no bank account after losing his home. I am mindful also of the many couples who have split up and the effects of that on their children, the many families who have had to emigrate and the people who had their homes and properties taken from them illegally. The list goes on and on - 15,000 times or more. I cannot forget and I must applaud the sacrifices made by the parents of many affected customers who, while their children were being deliberately overcharged by banks, assisted them with payments to meet their loans. Ironically, some of these parents had lost their entire life savings because of the fall in share value in these banks.
The economic circumstances at the time represented a perfect storm for the affected customers and their families. It is a truly appalling and horrific what these lenders have done to customers. The customers and their families did nothing wrong. I get angry when I hear the replies from these lenders who appear to have not one morsel of regret. I made a commitment to all of the customers that engaged with me that I would go shoulder to shoulder with them, wherever that journey takes us. I will continue to do so until I am proved right, whether through this investigation, the redress process, the ombudsman, the Irish courts or the European courts. Giving each customer the opportunity to draw a line under this sorry matter should have been the desired outcome from the very outset. Issues within families, relationships and careers, ill-health, shame, isolation and social exclusion are but a few of the effects I have encountered in my dealings with customers. No bank has escaped in this debacle. When one realises that it should never have occurred, one begins to realise the tragedy of the whole matter. Life will go on for sure but the scars will remain with people for ever. To delay that healing process will be a continuation of the wrong doing.
The banks should refer to the numbers of people affected. If they do not do so, this committee must find out why. This is not just about the accounts that are affected. It is about the sanctity of the family home which has been attacked by our banks, in direct contravention of Article 40 of our Constitution. It is also about the malignant effect the banks' behaviour has had on the social fabric. It has resulted in death, separation, divorce, family breakdown and ill health. The family is also protected in our Constitution under Article 41. The banks have attacked customers, their families and their homes. It is claimed that 15,000 accounts are affected but up to 500,000 people could be affected by this debacle, directly or indirectly. A willingness to borrow and an eagerness to lend was always a recipe for disaster. This disaster occurred because our banks made credit too easily available and tried to get their customers and the State to pay for their mistakes.
I thank members for their attention. I will now take questions on each bank.
Pearse Doherty (Donegal, Sinn Fein)
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I welcome Mr. Kissane to this meeting and thank him for his efforts, over many years, to shine a light on what he sees as the deliberate action of banks to move customers off tracker mortgages. He has been a beacon of hope for many individuals who sought his professional help. I also thank the other organisations who are representing individuals. Credit is also due to the individuals themselves who had the courage to speak up and who alerted the public to what has been going on within the banks. Mr. Kissane made it very clear that he believes the actions of the banks were deliberate. He suggested that there would have been high-level meetings within each bank about carrying out these actions. He also spoke about lenders stealing from their customers. I ask Mr. Kissane to explain how he arrived at the view that this was deliberate and that meetings would have taken place at a senior level in regard to this activity.
Mr. Padraic Kissane:
First of all, the elephant in the room at the beginning of the crash was the tracker mortgage, which was costing the banks quite a lot of money. It was a temporary issue but the banks panicked. As I said in a presentation to the Central Bank, the elephant in the room was the tracker mortgage and, at the time, it would have been remiss of the directors of banks not to address the issue. Tracker mortgages were going to result in the banks haemorrhaging money but what they did was not legal. The banks tried to determine if there was anything they could do to take customers off tracker mortgages without consulting them. The elephant in the room had to be addressed and I know that meetings took place in that regard.
Pearse Doherty (Donegal, Sinn Fein)
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Have any of Mr. Kissane's customers reported to him that they have reported the actions of individual lenders to An Garda Síochána or any of the other authorities in terms of further investigations into whether what took place was illegal?
Mr. Padraic Kissane:
That is a subject for somebody else to address. My only desire from the outset was to get my customers back onto tracker mortgages. The broader issues, while I am aware of them, are not for me to address. It would not have served my purpose to use terms like fraud or illegality about what occurred. In 2009, when I started, my only intention was to get everyone that to which they were legally entitled. The matters that the Deputy raises are relevant, of course, but they are relevant to a separate body. My focus was on the customers, which is why I am here today. Certainly, it has been mentioned to me but it would take some time to bring these matters to court which would only delay things for customers, most of whom cannot afford to wait any longer.
Pearse Doherty (Donegal, Sinn Fein)
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Mr. Kissane makes a very valid point with regard to the number of homes that have been lost. This committee was informed, through various presentations from the lenders, that approximately 100 homes were lost that should not have been lost as a result of the tracker mortgage scandal. Mr. Kissane makes the point that we are looking at the wrong information and that we should also be looking at voluntary surrender figures, trading down figures and so forth. If we were to take all of those into account, does Mr. Kissane have any idea of the numbers who had to hand over the keys of their house as a result of this scandal?
Mr. Padraic Kissane:
I would say that it would be between 5% and 10% because the natural economics of the statistics suggest that is the case. There is an issue here that has been forgotten. When people set out to purchase a home they know that they have to pay their debts. That is the tragedy here because people would have done everything they could to prioritise the retention of their homes. That point is missed in this whole debacle. People sold their cars, they got loans from credit unions and did everything they could to pay their mortgages. In terms of the appeals that I am currently bringing to PTSB, for example, I have referred to the isolation and social exclusion that occurred.
It is an aspect of the results of the banks' actions that is not appreciated. I had an example of a case of a religious family, not a Catholic family. It is enshrined in their ethos that they have to pay back money borrowed. In their case, the interest rate was increased wrongly and, because they missed their payments, they were ostracised within their religious community. Recently, I got a man to send me photographs of his unfinished home to highlight the cause and effects of his bank's actions. He did not want to send them to me initially. The reason I needed them was to show the lack of any work done on the house for nine years. The point I was making was the impression this community had of that family and the children in it. It was still a builder's finish nine years later because the family did not have a penny to wallpaper or put curtains up, paint the house or put down a driveway. The community's impression of that family, which does not realise the bank is overcharging them over €1,000 a month, is there forevermore. That is the point I was making, again, which was dismissed by the customer appeals panel. It was not even regarded as important.
Pearse Doherty (Donegal, Sinn Fein)
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When Mr. Padraic Kissane mentioned letters are coming back that it is a non-financial loss, are these the type of examples one hears back from the central appeals panel?
Mr. Padraic Kissane:
There is lack of empathy in the central appeals panel. There are two panels involved in appeals, namely the independent review process and the central appeals panel. I have 100% faith in and satisfaction with one; the entire opposite with the other. The decisions coming back to me are flabbergasting. It tells me I am wrong and how could I be right. Take the last example I presented. His case is still not resolved. With most cases I have got back, I now have to go forward to the ombudsman's process or to the courts. Some of the issues I raised were not addressed or even investigated. This will slowly change because I am now putting it on record in the highest authority possible that I have no faith in the customer appeals panel within the redress process. However, the independent review panel is a fair process. It is not that I get an easy ride in any of the appeals, but it is a fair appeal, which is what it should be.
Pearse Doherty (Donegal, Sinn Fein)
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In December, Mr. Gerry Mallon of Ulster Bank was before the committee. I asked him some straightforward questions on behalf of the 2,000 affected customers who were waiting for letters in the post to be restored to their original tracker rates. He said the bank would be writing to them that month. I then asked would all customers receive a letter to be put back on their tracker mortgages before Christmas. He replied:
Yes. That is certainly the intention. We will certainly be writing to them. I do not know the day the rate change is due to apply but-----.
His colleague, Mr. Paul Stanley, interjected and said:
We will be looking to have as many as we can back on it before Christmas. Some of them may drift into the very early part of the new year due to process.
We are well into the new year now. From Mr. Kissane's understanding, has Ulster Bank done what it committed to doing to this committee?
Mr. Padraic Kissane:
No. The length of time it is taking creates questions for me. It is an easy argument. One is either entitled or not entitled to a tracker mortgage and one's margin is defined. The investigation in a collective is an easy argument. However, I am concerned the reason it has taken so much time is because the banks are creating lines of defence rather than resolutions. I have seen it in some of the resistance I am meeting with cases which have come back. Some of them are incorrect. I do not know why it is taking the time it is.
The Central Bank told each bank that as soon as it identified a customer affected, it was to put the customer back on the correct rate. I said a long time ago all affected customers should all be put back on the correct rates and we can sort all the other stuff out afterwards. The banks must stop the overcharging. I put it to the Central Bank that it had to stop the offender offending. That is the critical aspect. The minute that would be done, at least the overcharging would stop.
When people get the cheques, three emotions arise. The first is delight because some of these people did not know it was happening. The second emotion happens within the minute, namely, anger. The third emotion is the what if. As I have said on a broader scale, the opportunity to deleverage this economy has passed us by with a low interest rate environment by the banks overcharging. It has to spread across the standard variable rate issue.
By the way, I do not buy the lack of being able to repossess houses. Every one of the banks has boasted about their profit levels, to a degree, to this committee. Lazarus could not have recovered as quick. There is only one person creating profits, the customer. One factors in the perfect storm. How many rejected direct debits happened in this country? That is €10 a go. There might have been €300 in the account but the €10 was charged when the direct debit was bounced. The retrieval of current accounts by banks is presented to committees like this as new lending. When a bank takes away a current account from somebody, it takes away not just the current account but the confidence to transact business. The banks have done this across the board and I am now moving to broader banking issues.
The elephant in the room is commercial mortgages. If the banks attack the most vulnerable of families, I dread to think what went on on the commercial side. I already have had a contact from London about an Irish international bank. It told a commercial customer to give up its tracker mortgage or it would lose its credit facilities. There are 15 cases of this with the lowest loan size at €8 million. Where does it end? I do not know. We could go back to the sanctity of what is the family and get it right. What the banks are doing is an utter disgrace.
Pearse Doherty (Donegal, Sinn Fein)
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Mr. Kissane said he did not believe the treatment of the Governor of the Central Bank, Philip Lane, by this committee was appropriate. However, he asked the committee to have trust in the Central Bank. Why should the public have trust in the Central Bank, given that Mr. Kissane has been raising this since 2009 and nobody listened? The Central Bank is the agency of the State that the Houses of the Oireachtas charges to protect the consumer. It is not Mr. Padraic Kissane or the Irish Mortgage Holders Organisation. When it was flagged by people like Mr. Padraic Kissane, the Central Bank did not listen until 2015. Up to 15,000 customers have been robbed by the banks. Two years ago, 80,000 customers had to have nearly €70 million restored to them through the scandal of payment protection insurance. Given its track record and the fact the Central Bank has not set down a deadline for the banks to restore affected customers to tracker mortgages, why should we pledge blind faith in the Central Bank?
Mr. Padraic Kissane:
The Central Bank did write to every bank in 2010 telling them to carry out an investigation. Bank of Ireland had 296 customers restored. Conveniently, it looked at the fixed-rate issue and never looked at the variable side, which affected its own staff on these mortgages. Astonishingly, the staff are afraid of their lives of losing their jobs if they raise this issue. Every one of these cases is still not resolved. This bank did not just do this to families because it did it to its own staff. I have told all of the staff who contacted me about this not to engage me because I am fearful it could result in the loss of their jobs. I know the responsibility that is on my shoulders. I have received a reply for a staff case as well as a family one. In one, the loan offer is superseded and with the other it is not. When it suits them, it is one way. When it does not, it is the other way.
One of the biggest issues the Central Bank had up to 2013 was the lack of power. It was a mistake in my view. The powers were granted in 2013, but they could not be applied retrospectively. The issue that this caused was the Central Bank did not have the clout it needed.
I am not certain the previous incumbent was as reactionary as the current one. On the matter of the wrongness of not doing it up to now, I come back to my issue of the criminality of it. Admittedly, they arrived late for sure, but I have to work with them now. I have trust in them and I have met the heads of this and they are absolutely serious about this. The resources that are being put into this investigation are extensive but they are in a catch-22 because if they say anything, the banks will react accordingly. A perfect example of that is Permanent TSB, PTSB, with the margin issue. It has to go to court because it was not addressed. AIB stepped straight into the space and its rate is 3.67%, but it commenced at 4.97%.
Pearse Doherty (Donegal, Sinn Fein)
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I thank Mr. Kissane.
Michael McGrath (Cork South Central, Fianna Fail)
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I thank Mr. Kissane for his attendance and opening presentation. Like Deputy Doherty, I thank him for all the work he continues to do for affected customers. I will start by addressing the overall numbers that are involved. Is Mr. Kissane satisfied that the numbers being quoted by the Central Bank and the banks are broadly accurate? The Central Bank's statement indicates a figure of 8,200 accounts or customers, and there is a big difference between the two. On top of that, there are the 1,400 from PTSB and the 2,100 from Bank of Ireland from 2010. That is where we are getting the figure of 11,700. The Governor of the Central Bank, Philip Lane, accepted that the figure could be as high as 15,000. What is Mr. Kissane's sense about this? Are the numbers broadly accurate?
Mr. Padraic Kissane:
No. Yesterday, the figure increased to 20,000, according to an article in the Irish Independent. The figures are unknown because while the argument is clear, the lines of discussion are very varied, and it is now a case of who will and who will not get their trackers back. To take the example of AIB, no customers prior to March 2006 are currently getting their tracker mortgages back with that bank because it did not update their terms and conditions until March or April 2006. What I find astonishing about that, and we are getting into the meat of a particular case, is that the bank did not decide on 1 March to change its view of a tracker mortgage and to reprint every relevant piece of documentation. It just decided to update the documentation. The definition of AIB's understanding of a tracker mortgage is set out in the new conditions, and in respect of those cases, they are all going back to tracker mortgages, but the bank claims that the cases that were written prior to the documentation being updated are not entitled to do that. I thought it was the easier argument originally because there are two methods of interest in that documentation, which is variable and fixed, the variable being a tracker. However, that option appeared to have disappeared if a customer decided to fix their mortgage for a period, but where did that option disappear to? The more important question is why the bank did not tell any of its customers that this option was going to disappear, because I have not met one who was told about that, and I have spoken to more than 1,000 people at this stage. I begin to think at what point the banks' stance on this appears foolish.
However, in terms of the numbers, I do not know how many are affected. It is approaching levels now where it is such a serious number and we need to take account of any customers who fixed their mortgage rates during the period. We must remember why they decided to fix their mortgage. Between 2006 and 2007, there were six consecutive increases by the European Central Bank, ECB. Therefore, people were panicking because there were rumours that the ECB rate could go to 6% or 7% and the banks' margins had to be added to that. The opposite is now happening. The ECB rate is now at 0%, so the banks are stepping into the space of trying to make attempts to increase their margins, so there is same argument again. First, it was people panicking to get fixed mortgage rates. Now because the ECB rate is low, the banks are saying a 3.25% rate is acceptable. What is astonishing about that is that each bank, when underwriting these tracker mortgages, stressed the loan, an element which makes sure that the customers can afford the loan, and the margins used in the stressing element are 2.75%. The banks have used their own rules and put on a margin above what they felt the stressing element was.
Michael McGrath (Cork South Central, Fianna Fail)
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I will come back to the rates issue, but is it Mr. Kissane's view that the official figures put out by the Central Bank and the banks are still understating the problem?
Mr. Padraic Kissane:
Yes. They have to be because those 2006 customers, of whom there is a large cohort, are not captured. I do not believe the 1,800 staff in the banks are captured. While they are captured in the investigation, the problem is where that result will come through in the investigation. I am not certain that if there are 15,000 people affected, or if there are 15,000 accounts or 20,000 accounts, they will all get their tracker rates back. It is easy to say there are 1,400 people in PTSB but 450 of those have been put on margins that were incorrect, in my view.
Michael McGrath (Cork South Central, Fianna Fail)
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As of today, how many customers been put back on the correct tracker rate? That is the key issue. As Mr. Kissane said, we have to stop the offender offending. It seems from talking to customers and listening to the Central Bank and the banks that in the vast majority of cases people are still being overcharged. What is the true picture of the number of customers who are affected by this, whether it be 15,000 or 20,000, who are today paying the correct rate?
Mr. Padraic Kissane:
The definition I would put on that is that the cases that cannot be argued by the banks are back on the correct margins. The cases that can be argued by them are not. That is probably a very facile reply to a very serious question but it comes back to what I am saying. One of the reasons this has taken such a length of time is that I am certain the paperwork associated with the level of loans that was done was all over the place. One client I had engaged with from 2010 or 2011 got a letter in 2013 to state her deeds were registered. She asked me if this was good news, and I told her that it certainly meant that she was included in the process and at that time it was an Ombudsman case. The reason I said that was that the bank had only registered the deeds eight years after the loan was done, so there was a catch-up happening. A bank manager, whom I will not name, nor the bank, told me that he had to get €7 million out the door every week and that they did not care how he did it.
Michael McGrath (Cork South Central, Fianna Fail)
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Our frustration is that we cannot even get answers to simple questions, including the question of how many customers in each bank, which customers those banks acknowledge are affected, are now paying the correct rate. That is very frustrating. No timeline has been given by the Central Bank for reinstatement of the correct rate for individual customers. Therefore, we do not know how long this will drag on.
Mr. Padraic Kissane:
That is the tragedy. When somebody asks how long will this take, the Central Bank says it is waiting on audited reports to come in, which should capture everybody. It should not be taking the bank this length of time to do this. This is a very straightforward argument. If this runs towards the later part of 2017, while I do not know enough about banking results, we can be certain that if the profit figures are looking good, it will move into 2018 because it will suit the banks to bring it into a good year because they are back in profit now. The banks are telling customers they are sorry for the error and mistake but that they are now able to afford to repay them is not acceptable.
Michael McGrath (Cork South Central, Fianna Fail)
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On the key issue of the rate that customers are put back on, the nature of a tracker mortgage rate is that the only variable element is the ECB rate, and yet AIB is reinstating customers at 3.67% and Permanent TSB at 3.25%, to which Mr. Kissane alluded. What could be the possible basis for them doing that? What could be the legal justification? If they are going to inevitably lose this battle, why would they decide to put customers back on rates that bear no resemblance to tracker mortgage rates?
Mr. Padraic Kissane:
To get out of it as cheaply as possible and to put back customers back on a tracker rate because they are caught. It is essentially a second leg to the wrongdoing. Nobody is accepting a rate of 3.67% or 3.25% as a margin because what if the ECB rate turns and it returns to 4%. Are the banks going to tell those customers they should be paying a rate 7.25% because it is contractually written?
Michael McGrath (Cork South Central, Fianna Fail)
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That is what they are trying to do.
Mr. Padraic Kissane:
The PTSB's definition of a tracker mortgage was set out on the back of every single page of its loan offers. It stated that margin will not be exceeded during the term of the loan. It might seem astonishing news but the term of the loan began when it was drawn down, not at the expiry of the fixed rate. Therefore, what was the tracker rate? What is astonishing is that, if we take the example of the one that is the furthest along the lines of the challenge on the margin issue, I have cases in my office with no margin. What the banks representatives claimed here in this committee room was they had two tracker products, they had the stated margin product and the non-stated margin product in 2016. In 2006, 2007 and 2008 when they were doing this, the reason margins were withdrawn was related to the retention of business. The margin could be improved but it could not be increased.
If one had a loan-to-value ratio of 90% at the outset and at the end one's three years one's loan-to-value ratio might have improved to 60% at the rate valuations were going, it allowed the bank improve the margin so that it did not lose the customer to another lender. I have in my possession documentation I have called, "The PTSB puzzle". It is four loan offers, all with similar loans. No margin is stated in any of loan offers. I have four margins: 0.8, 1.1, 3.25 and 3.25. The game, I challenge anybody to, is to assign the margins to the correct loan offers. These are four cases in redress. They are telling me I am wrong on the 3.25 one and it is identical in one case to the 0.8 margin. Before I brought it up, I telephoned the Central Bank and stated I needed to be certain that the customer with 0.8 will not be caught with another systems error.
Michael McGrath (Cork South Central, Fianna Fail)
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Who will be the ultimate arbitrator on these issues if the Central Bank investigation merely roles on and on? Where will a customer ultimately get justice? Is it before the courts, is it with the Financial Services Ombudsman, is it with the Central Bank or will the Oireachtas have to bring in legislation to give a definitive interpretation of these issues?
Mr. Padraic Kissane:
At present, with the one furthest down the line, it is the courts that will have to do it. There lies the problem. One of the issues - my next challenge - is to try and unify all of the affected customers within each lender because what the banks do not want is an informed opinion grouping the entire levels of affected customers into one group because then that group will have clout. It would have the financial might, the legal expertise and the finances to take it wherever it goes and defend it to the hilt. If we group together - that is what I am telling people they should do - as one unit, let us send in one case and, by crowd-funding it, we will finance it to the same degree. I have a legal team ready to go. I have a senior counsel engaged. None of it is paid for because we have no money, but we will have to challenge them.
One question will arise. There is a question at the start of a witness statement, "Do you swear to tell the truth, the whole truth and nothing but the truth", and I will have no problem going on the stand and taking it. However, we will have a list of witnesses, both past and present, from each bank and they will be asked those tough questions. That will be an uncomfortable day. If I have to go to court, I will bring the staff back who took those margins out, explain how one case got it back and the other one did not, and get to the bottom of it. Unfortunately, for those affected who are listening in their thousands, we do not have any choice at present. If the Oireachtas was to do anything, I would suggest that the possibility of class actions should be looked at because that would take away the need for individual cases. The banks have all the aces when it is an individual issue but when one groups those cases together, that changes the animal.
Michael McGrath (Cork South Central, Fianna Fail)
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Is Mr. Kissane convinced that the banks deliberately, knowingly and willfully denied mortgage customers their contractual right to be on a tracker interest rate?
Mr. Padraic Kissane:
In 33 years, I have been no more certain of anything else. I am absolutely positive they did it. The reasons they did it were essentially for themselves. I saw one of the CEOs asked the question about the appeal to the Supreme Court and I timed it at approximately seven seconds. The answer to the question was always, "Yes".
Michael McGrath (Cork South Central, Fianna Fail)
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There is no question that they would have a motivation to do so. They would have a direct economic interest in doing so. However, it is another step to say that is was definitely deliberate and it is a very serious allegation to make.
Michael McGrath (Cork South Central, Fianna Fail)
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Finally, Mr. Kissane stated that he believed between 5% and 10% of the cases involved here would have involved the loss of the home through one means or another. If, potentially, we are talking about 20,000 cases here, is Mr. Kissane saying that between 1,000 and 2,000 customers or families lost their home unnecessarily because they were overcharged on this tracker issue?
Mr. Padraic Kissane:
On the loss of home, I have people who moved 30 miles to try and make ends meet. They sold the home that they had to move to a cheaper home and brought the negative equity with them. I refer to the number of people who traded negative equity homes at the time in order to try and make ends meet. The tragedy of all this is that all of these customers, up to the investigation beginning, have believed this is their own fault and of their own making, that they were the fools who went and bought the nicer home or retained a first home to have it as a pension supplement later on in life. Up to the point where they find out that there was a tracker issue in the first place, they were to blame for everything. One can imagine, if one introduces financial stress into a family home, it brings with it a myriad of related issues - the blame game, the effects on relationships, the effects on children. A 12 year old wrote a letter to me on behalf of his mother and father. It is an astonishing letter. A 12 year old got the whole issue of the appalling behaviour of what has gone on.
If I am wrong, then fine. I know I am not wrong. I have checked it. I have read it. I have spent 12 to 16 hours a day, six days a week running it, looking at it and assessing it. I covered my floor in the office one day with all of the AIB conditions and promotional material. There is one piece that they wrote, in 2015, that many more customers are choosing tracker given the certainty if offers them with the margin above the ECB rate along with the flexibility to switch to fixed at any point, and then they changed it.
This is the issue I raise. The consumer protection codes are there. If there are 20,000 people who fixed, lost or whatever without being told by the bank the consequences of their actions, the 2006 consumer protection code states that one cannot diminish, disguise or obscure important information. There is only one piece of information that is important with a tracker mortgage, that is, the margin above the ECB rate. Everything else is variable vis-à-visthe ECB.
It brings me to the issue of the prevailing rate. It is a disgrace for a bank to attempt to take one word from 14 pages of documentation and that is the reason the customers are not entitled to revert to tracker. Now the onus of responsibility lies on the customers. They will be blame the customers, stating that the customers did not read their documentation and that it says, on page 4, "the prevailing". The only reason there is a prevailing element to a tracker mortgage - I will challenge them all the way on this - is for the variable element of ECB. The margin is set.
Rose Conway Walsh (Sinn Fein)
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I thank Mr. Kissane for all the excellent work that he has been doing. Without Mr. Kissane, the issue would not be where it is. He has certainly done the State some service. The situations he describe where people have been robbed of their money, and robbed of their lives in some cases, is a stark picture but it is the reality we, as public representatives, come across every day.
I agree with Mr. Kissane, in terms of the banks. Mr. Kissane will have seen the banks here before us and he will have met them. While the banks would say that they are sorry and they regret that this has happened, that is not reflected in their actions.
I have a couple of questions, leading on from Deputy Pearse Doherty's questioning. Is it likely to end up in a criminal court?
Mr. Padraic Kissane:
It is like any quirk. Something I say to all of the customers is that the court is public as well and one is bringing one's inner-most issues with regard to a family home to it. I do not believe it is for me to state whether it should or should not. I remain foremost in my purpose from the outset which was the customers and their cry for help, and can we get assistance to get this back.
On the issue of the broader aspects of it, the report of the investigation from the Central Bank will probably dictate whether that should or should not happen. People may well try to escalate it. I believe it would slow the matter at present. It has to be acknowledged that progress is being made, but at such a slow pace. If one is overcharged by €500 or €600 a month - it is going on now six years - to pay €600 of an overpayment one has to earn €1,200. This sector of society is the sector that pays the taxes, meets the payments and paid the stamp duty. They contribute a huge amount to society.
It is one of the concerns the Oireachtas has had in bringing in taxation or other means of creating income for the State. In the meantime, our banking sector, which we have supported, has been doing this. It is a perfect storm for the economy in terms of the businesses that are failing because of overcharging, the lack of availability of credit and the people who are going into arrears. It goes back to Deputy Michael McGrath's issue, which is that they are now essentially bank locked. That is the difficulty. There is a 3.25% and 3.67% margin issue. All these customers are bank-locked because they cannot move anywhere. It would be very easy to resolve. I made myself available to each of the banks. KBC is the only one that has not met me. It told me if it needed to meet me after the investigation it would. All of the other banks have met me. In November 2015, one of the main banks denied that anybody was going back to tracker mortgages but four months later, it made a provision of over €140 million. Why did it change in three months? The bank knew exactly where it was going because there had been 400 or 500 people working on the project for two years at that point. I have concerns. I understand the question but it is not my game. It is not my fight. I have taken on the issue on behalf of the customers. I want to unite the customers into one informed voice and challenge the remaining issues through the courts and see what happens.
Rose Conway Walsh (Sinn Fein)
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Mr. Kissane's absolute confidence in the Central Bank in terms of sorting this out is difficult to understand. We had representatives of Ulster Bank before us and they committed to having most of it sorted out by Christmas and anything else early in the new year. All the Ulster Bank customers I know are still waiting. They are still getting the letters they have been receiving for the past number of years saying that it is being dealt with but they do not see any action on whether they are inside or outside the redress scheme. It really concerns me that Mr. Kissane thinks lines of defence rather than resolution are being sought out and that is what is causing the delay. The consumer protections role of the Central Bank for those people is not obvious to me.
Mr. Padraic Kissane:
The Central Bank can only deal in the facts of the case and that is probably what is causing the major issue. It is trying to establish the facts. At the moment, there are data requests and access requests for each account. We have a number of cases where some of the documentation that makes reference to tracker issues has now been withdrawn which is an astonishing development. We have seen it in a number of cases in the past couple of days. The replies are telling me where they are positioning themselves. Some are caught in some areas but know they have wiggle room in other areas. They have one purpose, which is to get out of this as cheaply as possible. If they can save some of the amount they are provisioning it goes straight back into their profit figures. I do not know how any bank could have provisioned any number when they do not know the cause and effect of what has happened. One cannot multiply certain figures across every family, individual or young person. I have referred to some of the more traumatic things as examples. I challenge any of the banks to question anything I am saying. I say bring it on. They should show me where I am wrong and then I will stop saying it. If a bank thinks that two plus two will become five or three, they are wrong. The one word that describes the whole tracker debacle and which captures it all is "control". I have said this for quite a long time. The customers had control of the costs of their loans when the margin applied above ECB and the banks did everything in their power to get that control back. That is what it is about. They had lost the control by creating the product. Astonishingly, Irish Nationwide Building Society is the one bank about which I have had no complaints about the product. It is no longer a bank but it used to be in operation. That astonishes a lot of people but the reason is it never offered the product. It knew exactly the consequences of taking up the product and chose not to do it.
Rose Conway Walsh (Sinn Fein)
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Mr. Kissane will be familiar with the figures for provisioning. The figure for Ulster Bank is €118 million. Does Mr. Kissane think that provision is in any way sufficient to meet what will be needed?
Mr. Padraic Kissane:
I have a wry smile on my face. One of the reasons I smile is that the bank is able to tell us it has provisioned €118 million but cannot tell us how many customers it affected. That does not add up. Which one is the guess? Is the guess the provisioning figure or the numbers of people that will come and tell us? Will they ask me to challenge the other 500 that might or might not be? The figures of provisioning came out. That is for accounting reasons and other broader aspects such as whether they are sold across the Irish banks and so forth. How can a bank provision a figure but not come into this room and tell us accurately how many it affected? The provisioning figure is the accurate one. They do not know how many children are in each of those family homes or how many properties are affected. It just goes on and on.
I will address one of the difficulties I had envisaged coming in today. I am talking about all of the banks and I have files here which are just reflective points across all of the banks. They arrive with their experts and they have been scripted. I have seen some of the letters written to the affected customers when the redress letters eventually started to arrive. When one reads them, one would start to think the problem was of the customers own making. They say they are very sorry for not having informed the customer correctly. There is a tone being used and it is all perfectly scripted. We know they are caught so they should just get on with it. They should man up. They have done the crime and should face up to it.
Rose Conway Walsh (Sinn Fein)
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Does that tone, namely, that we all partied, not come from the highest level? Mr. Kissane has talked about people's shame and feeding and exploiting that has been done in a ruthless way. Has the tracker mortgage debacle happened in any other country?
Mr. Padraic Kissane:
In the UK, a group I would describe as amateur investors, for want of a collective way of describing them, challenged West Bromwich Building Society. There is also a Bank of Ireland issue pending because of the tracker product. There is something astonishing about tracker mortgages. Would they prefer that the headline that appears in the Irish Independentis "Padraic Kissane introduces tracker mortgages to the marketplace"? If they keep challenging me, I will do it. Tracker mortgages are freely available in the UK currently at 1.78% above UK base rates - 20 year fixed at 2.1% in Crédit Agricole in France and 2.05% fully fixed for the 15 years. How quickly would they bring a tracker product back then? They will not do one mortgage. I have called it a cartel before. It suits the banks perfectly that other entrants are not coming into the market. I hear the resistance to being able to repossess homes. I am not for one minute stating there are not people who have deliberately used the situation to stop paying their loans. I can tell the committee for certain today that I do not have one because I can see through them. I only engage people where I know there is a case. I had a win percentage level in the ombudsman's office of 76% when the average upholds were between 10% and 12%. It is not because Padraic Kissane is a walking genius but because I knew how to present a case. The question I had was how did I lose 24% because I did not bring a case unless I had one? It is not the 76% that I was highlighting but the 24% that was lost. With the present incumbent, Ger Deering, there is a complete change in how the ombudsman investigates and checks cases. That should help in bringing the cases to it if customers are not redressed correctly. To set a 10% of overcharged interest as a base level of compensation and then design it as a ceiling of compensation is also wrong.
Rose Conway Walsh (Sinn Fein)
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What timeline does Mr. Kissane envisage for having all of this sorted?
Mr. Padraic Kissane:
It needs to happen in 2017. People cannot hang on any longer. It has been eight years. A ten year old is now 18 and an eight year old is now 16. There are years passing by. A 40 year old is now 48. I have been told by 30 year olds that 30 has just passed. The scars that will remain with people need to be understood. The reason I am saying it here today is because the banks do not get this. They know it because they are not fools. They know it has gone on and they know what the effects of it are but are not prepared to properly address it. Perhaps the Irish banks did not ask for enough money when they asked for a bailout.
However, they should not go blaming the customers for that. If they needed to get €28 billion instead of €26 billion, that is fine, but they should have asked for it. Either way, they should not be trying the other tricks and try to go at rights that I had thought were protected. There is a reference to an old film called "It's a Wonderful Life" in several reports. It is time for the Mr. Potter types to cop on, get in and do it right or else get out.
Rose Conway Walsh (Sinn Fein)
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Surely the Central Bank is the institution responsible for ensuring that none is outstanding at the end of 2017. Is that not correct?
Mr. Padraic Kissane:
It is, absolutely. More care is being given at the moment to getting it right rather than getting it done fast. Would it not be great for me to come back before the committee and tell Deputy McGrath that 1,000 customers who had been treated incorrectly were restored? That is not likely to happen because of the rush to get it done. Would it not be shocking to have to say that? The customers know they are right.
I will try to put it across in another way. To even think about doing it is wrong, then to do it is wrong. Moreover, to attempt to stand by and let it continue is morally deplorable. I am challenging them all the time. There are units in which only a certain number of people are allowed to talk to me. However, I am going to keep talking. If I unify the customer base, then the banks are going to have a concern. This is because when a number of customers are unified, everything that has happened to each of the customers can be corralled into the same reply. Then, suddenly no customer gets anything that another customer did not get and there is collective treatment on account of being the same. That is one of the difficulties they have had. I know the mortgage that has no margins stated in the arrangements is replaced at 0.8%. I know that other mortgages that have no margin stated are at 3.25%. However, if I did not try to join these together collectively, they would probably have had far more success.
Rose Conway Walsh (Sinn Fein)
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Surely the Central Bank needs to be doing that job.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Thank you, Senator. I wish to take up the point that Senator Conway-Walsh has been making. Let us suppose a customer of a bank fights this issue on his own and is not satisfied with the outcome. Is his only recourse to the Central Bank? Is that where he would go to make a complaint?
Mr. Padraic Kissane:
No, the Central Bank does not deal with individual complaints. If a person is in redress and is not satisfied with the result of the appeal, he has two routes. He can go to the Financial Services Ombudsman - the established body for hearing complaints - or the courts. However, the court element involves the High Court. A person could lose there.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We will take it on the broader line. The Central Bank is fully aware that an issue exists. What do you make of the response of the Central Bank to date?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Why?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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No, I am talking about before we get into the investigation. Were those in the Central Bank aware that this issue was emerging?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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What would you have expected the Central Bank to do at that stage?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That is not what I meant. What should the Central Bank have done at that time?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Why has it come about this way, bearing in mind all the human elements of this story? Mr. Kissane outlined the case of the man who is alive today because the rope broke. He has talked about the families and the distress that has been caused and so on. Surely, when the Central Bank received a complaint first - bearing all of the foregoing in mind - it should have been more proactive about its engagement with the banks. Is that fair to say?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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If that is the case, what part of the engagement with the Central Bank does Mr. Kissane have a complaint about in respect of the appearance of the Governor before the committee recently?
Mr. Padraic Kissane:
First of all, he is new in the post. The powers granted in 2013 allowed the Central Bank the opportunity to carry out an investigation in this regard. Before that, the difficulty I would have had in the broader banking aspect was an acceptance that the lenders, the banks, were doing matters right. We saw where that led. Let us go back to the situation of the lack of governance. Governance is in place but it can only be properly applied if it is accepted by the banks. The drive for profit is what caused all of this. Now, the Central Bank realises that it got caught. I believe it was beholden on the banks to be fair in their replies to the Central Bank as well. The letters were written. The 2010 letter is a perfect example. They were told to investigate.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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To be fair to who?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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No, you were saying that the letters to the bank-----
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yes.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Now what we have is a Central Bank that did not do what it should have done when it first heard this complaint. We had a Central Bank – by way of reference to what Mr. Kissane just said – that expected the banks to do the right thing. These are the same banks that caused this problem in the first place. Are we to expect that they have gone from sinners to sainthood and they are going to be helpful? My issue with the position on the Central Bank is that it stood by when all of this was going on. I do not accept that a new Governor or new person in a job cannot be blamed chastised or interrogated on the basis of what is happening in the Central Bank. It is not about the person; it is about the Governor of the bank. It is about what the Governor is doing and what he is empowered to do. In my estimation it is no defence of the Central Bank to say someone new is in place. In my estimation, as I said the last day, the Central Bank is afraid of the banks.
The unions were before the committee earlier. Their representatives were telling us that their employees are afraid to deal with some of the issues in the bank. I realise that is not why you are here today, Mr. Kissane. However, I simply want to clarify this. My position on the Central Bank is that I was struck by the fact that on the day the Governor came before the committee, he gave us the wrong figures. We could not add up the figures that were being presented to us. That is the kernel of the issue. I admire the work Mr. Kissane does and his presentation today has been significant. Bearing in mind what he said about the Central Bank, he has said that if there was an inquiry, he would stand up and say that he was prepared to tell the whole truth. However, he could not rely on the same thing happening from the banks. That is what he said earlier.
Mr. Padraic Kissane:
I wish to clarify that. That is a difficult statement to make. A person may be in a court and about to give evidence. Will it ever get to that point? The person on the stand is going to have a difficulty because the questions are going to be put. The person would be under oath in a court and is going to be asked difficult questions.
Let us go back to the Central Bank. I am not saying that all is perfect in the Central Bank. However, two enforcement investigations are currently under way. It is now industry-wide. I absolutely concede that it is late – that is for sure.
One of the reasons the Central Bank is inaccurate on the numbers is because it does not know the numbers. The banks themselves are telling us they do not know the numbers. The definitive numbers are still evolving.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Yet it is also the case that Mr. Kissane said they are now more interested in reinforcing their line of defence-----
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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-----than in addressing the issues. Who set down the guidelines for the tracker mortgage investigation?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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That is the Central Bank. The scope of those guidelines is only known to the banks and the Central Bank.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Does Mr. Kissane know why?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Okay. Let us start with that point, to try to tie in with Mr. Kissane's presentation. Surely the reason behind this is to protect the consumer and to give redress to those who have been very badly affected. The effects were outlined in Mr. Kissane's presentation, on which I cannot agree with him more. I have met these people in my clinics and many Members of the House have seen the same thing. Should we not first call for the scope of the guidelines to be published in full and to include the various aspects of the cases we are talking about? When a person had lost their home through the loss of their tracker mortgage - I am amused by the term "voluntary surrender" - the banks took it back and the person lost it. People went abroad and ran away from the situations because they were forced to run. Should all of that, first and foremost, be part of the guidelines so we can get a really true picture of what went on here?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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They are being paid for by the banks? He who pays the piper etc.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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The next step, within those tracker mortgages that have been identified, concerns those families who are still paying the higher rate. Nobody has come back to deal with them on a one-to-one basis. Each bank is dealing with the overall view on this. The result will come at the end.
Mr. Padraic Kissane:
The people that are identified as being on the wrong margins can go to the redress process. Permanent TSB is the furthest down that road at the moment. On the margin issue I have 44 summonses registered to the High Court to challenges the issues. One difficulty, however, in challenging the issue is the financial consequences.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Have each of the banks not been instructed to prioritise the cases where it is clear?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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They have?
Mr. Padraic Kissane:
Yes. The brief the banks have been given is that once a bank has identified an affected account holder, it is supposed to restore that account to a tracker rate immediately. I presume the banks' reply will be that the system makes it difficult to put it in place collectively. I do not know if they can be done in batches or individually. The committee needs to understand that I was from the outside coming in. I have not been given any of this information. It was what I could glean from the documentation of the people coming in and putting it together. I attempted to engage one bank and I said that if it wanted to sort the matter out correctly then it should bring me in. It should put three people one side of a desk and we could sort it out in six months. I could tell the bank what mortgage accounts should go back onto tracker rates. Without a shadow of a doubt, however, there is still a level of resistance to that position. I am still getting letters. I have a letter from today, and I am still wrong.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Therefore, what we are looking at here is the banks maintaining the line of kind of addressing this and not wishing it to go anywhere beyond a narrow focus with regard to the guidelines, which would attempt, as Mr. Kissane has said, to strengthen and reinforce the banks' lines of defence rather than anything else.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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When we started looking into this first, I believe there were 8,700 cases, then 15,000, now it is 20,000 cases. If we take Mr. Kissane's comments and translate them into a set of guidelines, it will go way beyond 20,000 cases. I agree fully with the case being made by Mr. Kissane. What would he suggest the committee should do to try to highlight the cases, to get to the numbers we need to understand the extent of the problem and then to get the banks to deal with each individual customer?
Mr. Padraic Kissane:
The first thing I would probably ask is whether the committee can get the banks to produce any of the minutes of the meetings that occurred in the middle of 2008. Out of those minutes one would immediately identify which customers they targeted. It would be self-explanatory. I am certain that none of that information will be made available. I have said it to the Central Bank that this information should be requested. I do not know whether or not it will come with the investigation. If the meetings did occur, it could paint a terrible picture and an indictment of the treatment by each of the banks and the real story could then begin to unravel. I applaud the level of questioning of the banks and as far as I can see the only uncomfortable time they have is when they come to this committee. I am not certain they have an uncomfortable time in putting it together; they might have to put in something that identifies the deliberate nature of their wrongdoing.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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If the committee is to play a central role in getting a resolution for all the customers who have been badly affected it should, on a quarterly basis, invite each of the banks to report on the progress they have made, rather than just inviting the Central Bank.
Mr. Padraic Kissane:
Or put a timeframe on it and force them to get it done quickly. As I said earlier, so what if they get 2,000 people back onto tracker rates who maybe should not be on the rate? Why is it the other way around? It would be a crime, but what would happen if these 20,000 people decided to pay what they thought was the correct rate? The banks would then have to send out the letters and bring the customers to court. That would be a universal solution to the problem because it would be sorted out pretty quickly then. If the customer pay what they believe they are entitled to pay, and they can check independently if they set about it, that would be dramatic. If the customers did that tomorrow morning, however, it would be illegal.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It is illegal?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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They would be reneging on their commitment to pay back a loan that has been calculated incorrectly?
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Do not be afraid to profess it because that might be the answer. The fact of the matter is we have the banks on one side and we either wait for them to sort out the situation or the tracker mortgage campaign takes the class action as a group and encourages people to come forward or the people do not repay the miscalculated mortgage loan and they pay the correctly - in their eyes - calculated mortgage and one takes it from there. They are the three options.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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It would seem to me that the banks will not come to any conclusion on this unless they are strong-armed into it.
Mr. Padraic Kissane:
Without a doubt, I would agree. The difficulty is that 1 March arrives and people must pay their mortgage again. We must be careful with it because we are then going at the fabric of the concept that a person borrows money and must pay it back. There are deeper elements to the issue but for the majority of these people, paying a home loan was of fundamental importance because of the shame, embarrassment or isolation caused by losing their home. By putting out that broad expansive issue of the correct rate, one is then also altering what people understand going forward. The difficulty I have with that attitude is there are other people who could take advantage of that situation too.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is it the case that the basic understanding people in Ireland have around repaying their debt is what has them caught in the first place, as Mr. Kissane said in his opening statement?
Mr. Padraic Kissane:
As I said in the report, the banks have absolutely used our Irishness against us.
It would probably be wrong to leave it at that. I would rather that we challenge the banks in the correct manner. Why get as dirty as they did? It would be to ask people to change their fabric. It should be within our collective powers and authority to bring the banks to task. The consumer protection code does not include the phrase "consumer protection" for any other reason but to protect consumers.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Are we not then back to the Central Bank ensuring compliance in order that the full extent of the compensation is paid to each family and the banks correct each tracker mortgage as quickly as they can? I have a letter from a lady on the same issue.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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No. We timeframe it. I do not accept-----
Mr. Padraic Kissane:
If the committee decided that by 1 June everyone who was entitled to a tracker should be back on one, there is no reason that could not be achieved, given that the banks have been working on this for three years now. Were it the other way around, the customers would be written to within a day.
Peter Burke (Longford-Westmeath, Fine Gael)
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I commend Mr. Kissane on his detailed presentation and on answering the detailed questions that have been put to him. This long saga has been ongoing for more than eight years and has caused people great hardship. Mr. Kissane's work is important and I hope it will bear fruit. We should hold the banks to account for the issues he has raised. As he rightly stated, no one else is doing that.
I wish to address the unwillingness of the banks' current CEOs. Mr. Kissane is being told daily that he is still wrong. Why is that?
Mr. Padraic Kissane:
They probably believe that, if a case goes to court, they will win it. They probably have an air of confidence about us not going to court. Until they are challenged to that degree and a judge says it, the banks will not give two hoots about what Padraic Kissane says.
Some aspects of the investigation into the tracker issue are vague, but there is an old Latin phrase in law, contra proferentem, concerning the lesser party. If members were to hear some of the replies from the banks, they would believe that the lesser party was the bank. It is the rule of law against the draftsman. I read a case, Bogdan Matei and Ioana Ofelia Matei v. SC Volksbank Romania SA, that was heard by the European Court of Justice a number of years ago. The court found that, if the increasing nature of a variable rate mortgage was not clearly identified, the contract was voided. It was an astonishing decision that we would use in court. The banks probably never believed that, from 2009, I would get the matter to this point. Now that I am starting to unify more customers, the banks are growing more nervous. Unity is the next stage, as that will give us the clout and financial muscle to challenge the issue in court and take on the level of senior counsel and legal support that we will require to challenge the large entities that the banks will have at their disposal.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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Is it not shocking?
Mr. Padraic Kissane:
It is truly shocking. I have with me a folder of amazing facts from my investigation. Some are astonishing. No bank in Ireland has ever advised any customer in respect of his or her mortgage. Every day banks tell me that they did not advise a single customer and that the customers made their own decisions. A reason for this is that, if they did advise, they would then have a fiduciary duty of care. By Irish law, banks have no fiduciary duty of care to their customers. It is astonishing. However, I was in a queue in a bank a number of months ago and I saw an advert: "Looking for some financial advice? Book an appointment with us." The same bank is writing to me saying that it gives no advice on mortgages.
Some of the documentation involved in a fixed rate mortgage was described in a Financial Services Ombudsman's decision as misleading, vague, imprecise and confusing. The bank never challenged that in court. I referred to KBC's fixed rate applications. Similar to AIB, KBC'S application may have been out of date and was not updated to account for the tracker aspect of the loan. It was KBC's get-out-of-jail-free card per se. Tricks are being played with loans that should have been clear.
Requests for interest-only extensions are a regular occurrence. Given the economic environment, people lost their jobs and overtime and bonuses and many issues arose. They approached their banks for interest-only extensions. This was another opportunity that the banks used to remove people's tracker rates. PTSB offered a 10% bonus if people paid off their trackers early. Bank of Ireland conducted market research into people’s worries about increasing rates and presented it as an opportunity to fix their mortgages at the low rates of the time.
There was an issue with the Central Bank, which brings me back to certain concerns. Investors with 20-year loans had those loans underwritten and granted on the basis of there being interest-only periods of ten years. When their interest-only terms expired, it was used as a reason to lose a tracker because the investors had changed the conditions of the loan even though the loans had been underwritten as interest only at the time. The banks assumed that the values of the properties would increase. Mr. Justice Hogan stated in one of his decisions that how the banks had played tricks with the documentation would have been a unique argument from his lecture students.
I witnessed a lady crying in the Court of Appeal one day. My heart went out to her. She had won her case in the High Court but the bank challenged it to the Court of Appeal. The decision was set aside. When I saw her leaving the court, I wondered what would happen to her now. I do not know what happened with the costs. I did not even ask.
I referred to the stress testing effects. A 12 year old wrote to me on behalf of his mom and dad. It was astonishing, but his letter should be read. It is not that any of this is untrue. He is an astonishing young man who gave a statement. His name is Kyle, and he wrote at the bottom of his two-page note how he could not understand why, because the bank made a big mistake, his parents should have anything to do with it, that the bank had ruined his and his sister’s childhoods and that it was not fair. This is truly appalling.
Banks can line up their legal experts, but they have no moral defence. I will challenge any of them. There are good people in these banks, but many are being told to shut up and not to reply in a certain way. In one reply that I received from a bank, I saw documentation where I know that information was withdrawn. Whatever people do, they are not to respond to my commentary on anything relating to tracker mortgages. They must respond to what the customer said and should not include me. The issue goes to the appeals panel, which is then meant to try to assess the matter. This is astonishing. Were the committee to ask me to guess as to whether any of this would come out in the investigation, I would say that I am pretty certain that it will not, but it could come out in a court case because that is-----
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We have to find some means within the House and this committee to bring the truth to the fore and the examination into the public domain and to ensure it is done efficiently.
One of the points raised by a lady who corresponded with the committee was that, as she started to deal with the matter and was pushed into a process, her case formed part of a bulk number of cases that were being handled. The bank assessed what she should have been paying as opposed to what she had been paying, but she could not get the result of that until the bank was ready to give it to her.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We discussed people fixing their own repayments, but an issue with what is happening is people’s credit ratings. As Mr. Kissane stated, people become bank locked.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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We must find some method of dealing with this matter that gives voice to those who are without a voice or restricted in what they can do.
Mr. Padraic Kissane:
The banks probably also feared fictitious claims and people looking for something they were not entitled to. However, I have not seen such claims. Even if it were tried, I would not let it through because one would know it was made up. I asked a lady a question one night in my office. I asked her if I had a magic pen which could do anything, what would she want from this process? Her answer astonished me. She wanted to humiliate the banks the way they had humiliated her. It had nothing to do with money. Her life was close to being destroyed. I have sat through hours upon hours of tears and reflections. People are being asked to come in to me about their innermost feelings. People are being asked to crash their car again, but this time they know they are going to hit the wall. It has been an open wound for six years. I am not certain the banks have any interest in hiring the correct surgeon to resolve it.
Peter Burke (Longford-Westmeath, Fine Gael)
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It is incredible stuff. This is against the backdrop of the State bailing out the banks. There was mention of the provision in the banks' accounts for dealing with the fallout from tracker mortgage examinations. However, the banks cannot come up with definitive numbers. Mr. Kissane mentioned a very important point on all the direct debit fees taken out of what would be thousands of accounts. He noted that the PTSB central appeals panel was a disgrace.
Peter Burke (Longford-Westmeath, Fine Gael)
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Could Mr. Kissane give a brief outline of that panel and its mechanics?
Mr. Padraic Kissane:
I send in the appeals. We sit down and assess them beforehand. People open their hearts to me and tell me their stories. I write them down, submit them and then get a reply from the panel. I call it the copy and paste reply. It says that it has not been proven that the economic issues outlined or the non-financial losses claimed were caused by a failure by the bank. As a financial adviser, I find it truly astonishing that it can be claimed that overcharging of €500 to €1,000 for six years would not result in any non-financial consequences or financial losses. The other panel gets it. I am making the same appeals to two panels. I find it rather astonishing that I make no progress with the panel on that includes a bank representative.
Peter Burke (Longford-Westmeath, Fine Gael)
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Does the Central Bank have to approve that panel?
Mr. Padraic Kissane:
I do not know the process for selection. I am almost back to my ombudsman days again of 100% no satisfaction or 100% satisfaction. Rest assured, the independent review panel does not give us an easy appeal. It questions everything, as it should. There is a proper and fair examination of the issue. However, the other panel has truly failed. With the exception of one applicant, who told me that she was tired of the process, accepted it and closed it, every other case is going forward either to the courts or to the ombudsman. I find it truly astonishing that I am being told I am wrong again and again.
Peter Burke (Longford-Westmeath, Fine Gael)
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I thank Mr. Kissane for his time and his presentation.
Rose Conway Walsh (Sinn Fein)
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It appears to me that the control is still firmly with the banks, and it has not been taken by the Central Bank. The Central Bank expects that banks will have commenced engagement with impacted customers by mid-2017. What does it mean by engagement? Is it another letter that says something slightly different? That is a problem. It goes back to the Cathaoirleach's observations that the process is not transparent.
Mr. Padraic Kissane:
The bus in the infamous ad where a person does not know what a tracker mortgage is should have been full of bank executives and board of directors. They were the real people who did not know what a tracker mortgage was, or the consequences of one. The next definition that will be up for debate is, what is a pillar bank? I do not think the current design matches what the Minister for Finance believes a pillar bank should be. I think there needs to be some empathy shown for what people went through, and an understanding of the causes and effects. Some of the top bank officials have not had to make choices for their children in the way that visitors to my office have. It is truly appalling that, having engaged in a voluntary scheme intended to resolve these issues in a speedy manner, people are now receiving the types of replies they are. It is a continuation of the wrong. These people have gone to the trouble of opening their hearts and their souls to me, and are then simply told, "no".
Michael McGrath (Cork South Central, Fianna Fail)
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Are buy-to-let loans included in the examination?
Michael McGrath (Cork South Central, Fianna Fail)
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They are included in the figures.
Mr. Padraic Kissane:
They are. The banks have used the interest-only aspect as an opportunity to take people off tracker mortgages. I challenged it at the time with the Central Bank. I wrote in the report that any replies from the banks have one intention, namely, to get everybody off tracker mortgages. They were allowed do it.
Michael McGrath (Cork South Central, Fianna Fail)
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Is Mr. Kissane satisfied that the digging into the system that the banks are doing will capture accounts that have been closed for a number of years? People may have sold their home, and the tracker account could be closed since 2010. Is Mr. Kissane satisfied they are being examined and captured?
Mr. Padraic Kissane:
I am not sure. I do not have the resources to get that level of insight, although I probably will eventually. One issue of concern is the restoration of accounts that moved banks, and should be put back to the tracker rate. That is posing an enormous difficulty. There is the absolutely ludicrous situation that if one wants an account to be restored to the bank as a result of an appeal, it can be restored it to the bank. The bank will have calculated a rough estimate of what the overpaid interest is. However, to get that loan restored, the appeal must be accepted. That disallows any further appeal from being brought, even to the courts. It is astonishing.
I can certainly make the members aware of some of the harder questions that should be asked. It is not easy to come in here and raise these the issues. I would rather it never happened. However, if the banks think I am going away, I can tell them I am not. I am absolutely committed to my clients. I said I would go shoulder to shoulder with them all the way. Some have been my clients since 2012. I have not enriched myself from this. People may wonder how much I am making from this. Many of my clients do not have any money, so I do not take any payment from them. The banks should pay me for everything that I have done. The clients should not pay me one cent. It was agreed that my conditions to do with engagement would be honoured by AIB but it has rowed back on that as well. I sent in a bill for one of the successful appeals, and was then challenged on my hourly rate. It said it was too high. It never ends.
I do not really care what it does to me, but I get really upset and angered when I see the children who are affected. For example, Kyle's sister, who had to go straight into fifth year and leave all her pals in fourth year, because the parents knew that they were not going to be able to afford the trips, and it would be more embarrassing for the girl. That is one example but there are thousands of these. At some stage, the CEOs, who are mostly family men themselves, are going to have to step back, put their hands up and perform an about turn. Hopefully, today's meeting will go towards it.
I want to thank the committee on behalf of the thousands of customers that are affected. Everything that can be done needs to be done for the customers. Thankfully, today we did not talk about accounts. That is all the banks talk about. There are people behind every one of those accounts. What has been done to them is truly appalling, especially with the most sacrosanct aspect of borrowing, family home ownership.
John McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank Mr. Kissane for coming in and members for their engagement. If Mr. Kissane wishes to suggest a line of questioning or a direction, he should feel free to give us whatever information he has. We will meet to decide how best we can progress this and what role we can play in the process. As Mr. Kissane will see, members are keenly interested in doing much more than what is being done.