Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

This issue relates to mortgage holders who have been wrongly denied the right to return to their tracker interest rate at the end of a period on a fixed rate. I will set out the background to this issue. In 2008 there was widespread expectation among mortgage customers that interest rates were going to rise further. The European Central Bank had increased its base rate in July 2008 to 4.25%, a different world from the current rate of 0.05%. At the time it represented the eighth rate hike in three years and many people, justifiably, took the decision to fix their rate rather than having to endure even higher rates.

It has emerged that in the case of Permanent TSB for sure, and possibly AIB, customers were incorrectly denied the right to return to their tracker rate at the end of the fixed rate arrangement. This occurred despite the right to return to a tracker rate being enshrined in mortgage contracts.

We know that in the case of Permanent TSB almost 1,400 mortgage customers were scandalously treated by that bank and its subsidiary company, Springboard Mortgages, when the bank failed to inform them of the consequences of their decisions to break early from a fixed rate or discounted tracker period as well as the failure to inform other customers of their right to be offered a tracker rate at the end of any fixed rate period. Some customers lost their homes as a result of this cock-up. A compensation process is under way now but many people lost their homes.

In the case of AIB it has emerged that the Irish Mortgage Holders Organisation has been in communication with 4,200 customers of AIB to encourage them to come forward if they believe they were denied the contractual right to a tracker mortgage rate after the fixed-interest period had expired.

It has yet to be established if this was an industry-wide practice but, to be frank, it is unlikely to have been an isolated practice. In 2011 Bank of Ireland was forced to put more than 2,000 of its residential borrowers back on tracker mortgages and compensate them after the Central Bank intervened in the matter. The Sunday Independenthas reported that an AIB mortgage holder has been put back on a tracker rate after a write-down of in excess of €25,000 on the mortgage. The person was wrongly denied the right to return to a tracker interest rate following the expiry of the period on the fixed rate.

This is a key issue for consumers. I raised the matter directly with the Central Bank but, to be frank, the reply was not satisfactory. The Central Bank noted my view that there should be a system-wide review. The reply stated that the Central Bank was currently examining a number of lender-specific practices, particularly in respect of the transparency of disclosure for borrowers. However, that does not give me confidence that there will be a proper system-wide review of whether bank mortgage customers were wrongly denied the right to return to a tracker rate.

Given the record low ECB interest rate, we all know how valuable a tracker mortgage is. People should really guard it with their lives. To think that banks have, for certain, in some cases, wrongly denied people the right to return to a tracker rate is appalling. In other cases the banks have used dubious tactics to get people off a tracker rate. That is something the Central Bank should deal with strongly and decisively and this is the purpose of my putting down this Topical Issue. It is about protecting consumers and vindicating the rights of consumers who were wrongly denied a tracker rate. I hope these views will be conveyed to the Minister for Finance by the Minister of State present and that the Minister will take up these matters with the Central Bank and ensure a comprehensive industry-wide review of how mortgage customers have been dealt with in respect of tracker rates. Frankly, what we have learned so far is an utter disgrace.

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