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

I commend Deputy Pearse Doherty and his colleagues in Sinn Féin for putting this issue forward and securing Dáil time to discuss what is a very important issue.

It must be borne in mind that of all the customers we know of who were wrongly denied tracker mortgage rates, the vast majority are still, in January 2017, not being charged the correct rate. The tracker rate to which they are contractually entitled has still not been reinstated by their banks under the supervision of the Central Bank, and that is a scandal and a disgrace. There seems to be no urgency whatsoever in the Central Bank's handling of this issue and this investigation. Let us put it in real terms. A family with a mortgage of €200,000 which is wrongly paying a variable rate of around 4% and should be paying a tracker rate of 1% is paying about €500 every single month in interest more than it should be paying. That is the reality of what we are talking about. Many of these customers have been paying this every single month, every year, for many years. This is an enormous issue in the household budgets of many thousands of houses across Ireland tonight.

I made the point about the lack of urgency. I will highlight one sentence for the Minister. The Central Bank stated in an update issued on 19 December, "[B]ased on current progress we expect that relevant lenders will have identified and commenced engagement with impacted customers by mid-2017 with payment of redress and compensation, processing and consideration of any appeals and the Central Bank's own assurance work continuing beyond this point for some lenders." Therefore, it could be many months yet before customers who we know are affected in this regard and have been wrongly denied tracker mortgage rates are actually given those rates for their own mortgages. That is the position as of tonight. Correspondence that Bank of Ireland brought before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach stated that the bank had completed the second phase of the four-phase Central Bank of Ireland tracker mortgage examination, that this phase was submitted on schedule at the end of September 2016 and that no timelines had been provided to complete the third and fourth phases. No timelines have been provided by the Central Bank to the banks in respect of the aspect of this investigation that really matters to people, namely, the reinstatement for them of the rates to which they are entitled. That is the nub of this issue.

There is a much deeper and wider issue regarding how this all happened, what exactly was known within the institutions and the nature of the redress that will be provided. However, the priority must be to ensure that those who are contractually entitled to a tracker mortgage rate are put on that rate without any further delay. If the Minister does anything, will he at least intervene and talk to the Central Bank about this issue and let it have direct contact with the individual lenders to ensure that this happens without any further delay?

The Minister spoke about the figures of 8,200 and 11,700. We were in a position to reconcile these figures over the course of the hearing we had with the Governor, Professor Lane, just before Christmas. The figure of 8,200 is the number of verified customers affected under the existing probe. However, we know there were almost 1,400 affected customers of Permanent TSB when it put up its hands and eventually, after many years of procrastination, dealt with this issue by way at least of acknowledgement in 2015, even though it has not been fully dealt with in the cases of individual mortgage holders. They are not included in the 8,200 but they are verified and confirmed. Equally, in 2010, Bank of Ireland, following a review, identified 2,100 customers who were wrongly denied tracker mortgage rates after having come off fixed rates. This is confirmed, verified and signed off on. While this is not part of the investigation, it is part of the issue at hand, namely, customers being wrongly denied tracker mortgage rates. One arrives at the figure of 11,700 by adding these up - the 8,200, the near 1,400 in respect of Permanent TSB and the 2,100 in respect of Bank of Ireland, a figure which dates back to 2010. When Deputy Pearse Doherty asked Professor Lane at the meeting on 20 December whether in the region of 15,000 customers could be affected, he did not dissent; in fact, he acknowledged this could be the case. However, the current figures are those we have outlined. We know there are 11,700. However, we do not have confirmation that many of the 15 lenders, to which the Central Bank wrote as part of the probe have completed the first and second phases, have done trawls of their mortgage accounts and have been in a position to confirm the number of affected customers. We do not know this as of now.

The Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach has done some very good work on this issue. In November and December, we brought in the main lenders - AIB, Bank of Ireland, Permanent TSB and Ulster Bank - and were in a position to go through this and other issues with them. We followed up on this with a meeting with the Governor before Christmas. We will continue in this regard. This body of work is far from complete. We have made the decision as a committee, under the chairmanship of Deputy John McGuinness, that the Central Bank should come before us on a quarterly basis until we are satisfied that this issue has been dealt with. I understand the next meeting with the Governor will happen in the very early days of April of this year, which I welcome because the engagement we had before Christmas was not satisfactory. To be fair, I think the Governor and his officials did not believe the tracker issue would dominate the meeting, but it did dominate the meeting because of the information we had gleaned from our engagement with the other banks. The Governor and his staff will be very clear before they come before the committee on the next occasion that the focus of our engagement will be on the tracker mortgage rate issue.

There is a wider issue about the statutory role of the Central Bank in consumer protection. I have made this point on many occasions. The Central Bank is not adequately fulfilling its consumer protection role. Perhaps the reason for this is that after the financial crash, the immediate focus in strengthening and reforming our regulatory system was to ensure prudential supervision was beefed up in terms of resources and, for example, a more intrusive style of supervision. I would like to think this is happening. However, my observation is that the Central Bank is not playing Champions League football when it comes to consumer protection and protecting the statutory rights of the consumers of financial services products in Ireland today. In many respects, the Central Bank is really in the spotlight on this issue.

I acknowledge that it levied a very significant fine on Springboard mortgages in respect of the 1,372 customers affected by the Permanent TSB - Springboard issue. It remains to be seen what it does about the possible enforcement proceedings that may follow this investigation. It has to have the space to do its work but we will put pressure on it to conclude that work at least from the consumer perspective as quickly as possible.

There are other issues that are relevant to this including the fact that many customers who should be on a tracker rate tonight are not. That has to be dealt with. There are other customers on the wrong rate. Bank of Ireland has acknowledged a significant number of its customers who are on the wrong rate and presumably it is taking steps to correct this. The customers AIB has identified as affected by this issue are being put on a tracker rate of 3.67%. That makes no sense because with others I have examined the contractual position in the mortgage contract it is very clear that at the end of the fixed rate period the customer may choose between a further fixed interest rate period, conversion to a variable interest rate or conversion to a tracker interest rate mortgage loan at the bank's then prevailing rates appropriate to the mortgage loan. In a further clause it clarifies the nature of a tracker rate saying it is made up of two parts: the European Central Bank, ECB's main refinancing operations minimum bid rate, the ECB rate, which is variable and the tracker margin as stated in part one of the particulars of mortgage loan "subject to paragraph 3.6.3 below". In other words, the only variable element of a tracker mortgage rate is the ECB based rate. It is ridiculous to suggest customers who the bank recognises should be on a tracker rate are going to be on the ECB rate, plus 3.67%. At no time when tracker mortgages were being sold from the late 1990s up to around 2008 were people put on an ECB base rate, plus 3.67%, yet when we put this to the Central Bank it seemed to be standing over that practice. I do not believe that is accurate. If that is how this issue is to be handled it might as well go to the courts where the interpretation of those contractual rights will ultimately be determined. That should not be the case. There are groups of mortgage holders who are being represented by solicitors and if they have to vindicate their rights through legal recourse that is exactly what they will do but they should not have to do that because it is clear what the mortgage contract, to which they and their financial institution is party, says. I gave the example of AIB. Deputy Pearse Doherty gave the example of Permanent TSB where I think the rate is 3.25%, at least in some cases.

Fundamentally, the probe here by the Central Bank has to get to the bottom of how this happened in the first place. In Priority Questions last week the Minister used the phrase that it stretched the boundary of coincidence that all the main lenders happened to make the same mistake and they made it in the manner that was adverse and not favourable to the customer. Perhaps that was a coincidence. Why was this practice widespread and systemic? The Sinn Féin motion uses the word "co-ordinated". I do not know if it was co-ordinated among the institutions. I do not have any evidence of that but they did all happen to make the same mistake. I want the Central Bank to go into each of those institutions to read the minutes of the executive management committee meetings and the board meetings, internal memoranda, the e-mails that went back and forth between the senior executives who were involved in this and see how they reacted when they became aware of it. They did not become aware of it today or yesterday. They became aware of it several years ago. We know in the case of Permanent TSB there was a concerted effort, through the work of the Financial Services Ombudsman and the court process to the very steps of the Supreme Court, to deny the blindingly obvious, that customers entitled to a tracker rate would not get that rate. The Central Bank probe has to be that forensic. It has to go in and find out exactly what happened. When the institutions first became aware of this how did they deal with it? Was a deliberate and conscious decision made to try to ride this out or was it a genuine mistake? Was it a systems error? I do not know but sometimes I despair. Having come through what we came through in the financial crisis of 2008 and having sat through the banking inquiry for almost two years, examining in detail the years leading up to the crisis, when the crisis originated, I wonder seeing this if the period overlaps. Have we learned anything? Have the regulatory authorities learned anything in respect of their approach?

We have not named the Director of Corporate Enforcement and An Garda Síochána directly in our amendment to the motion because the Central Bank has to do its work and that has to be led by the evidence. If the evidence points to criminal wrongdoing the Central Bank has no option but to refer it to the Garda. If there is any evidence whatsoever of a contravention of the Companies Acts it has to refer it to the Director of Corporate Enforcement. I do not need to spell that out in our amendment, but it is relevant. A review of our legislation on white collar crime and deterrents is well overdue. It does not have to be directly connected to the Central Bank investigation but it is warranted. When one considers the proceedings taken against individuals concerned, the length of time it has taken for cases to come to the courts one has to question its efficiency and effectiveness. The Government should institute an independent review of our law in that area as quickly as possible.

The priority is to ensure those affected will receive restitution as quickly as possible and that the Central Bank moves through the various stages of its process to ensure customers will be treated fairly. We will do our job as elected representatives through the work of the Oireachtas Joint Committee on Finance to maintain the public and Oireachtas spotlight on this issue.

I do not know how the voting on the Sinn Féin motion, our amendment and the Government's amendment will work out but it would be good if the Oireachtas could speak in some degree of unison on this issue and some agreement could be reached so that a motion does pass in respect of it because there are strengths and weaknesses in the motion and amendments.

What happened is a disgrace. With each passing day we hear individual stories of how it has affected people. Even the Central Bank acknowledges that perhaps up to 100 families have lost their homes directly as a result of this. Can the Minister, any Deputy who has not gone through that trauma or I really understand its nature, what it does to a family, the devastation involved? We cannot and how can people who have lost their homes be compensated, apart from providing them with another home that meets their needs? For people who lost their homes that is exactly what needs to be done. The banks have a duty to ensure they have a home and that it is one they can afford because there will be some job of work to be done here to go back over each of these mortgage accounts to see exactly the level of compensation, the reimbursement of money taken from people, compensation for that loss and added compensation if they lost their homes.

I advise people to trawl through their houses, find their mortgage contracts and have a good look at the documents. I refer, in particular, to people who started off on a tracker rate and were placed on a fixed rate in 2006, 2007 or 2008 when the ECB base rate was climbing. Many fixed at that stage, for fear that their tracker rate would get out of control, only to be put straight back onto a variable rate at the end of the fixed rate period. They might not be aware that they were entitled to a tracker rate. People who think they might be affected by these issues should find their mortgage contracts, read and check them again and obtain independent financial advice.

Can we have any confidence in the trawl being done by the individual institutions? Can we be confident that the supervision of the Central Bank will unearth all of the individual cases that have been affected? The answer is no, we cannot. We thought, for example, that Bank of Ireland had disposed of this issue in 2010 when it found that tracker rates had been wrongly denied to 2,100 customers. We found out in the course of the investigation that Bank of Ireland had not got to the bottom of the matter, as 602 other customers had been denied tracker rates and an even larger number of customers - 3,916 - had been put on the wrong rate. These cases were not picked up in the original probe. If the Central Bank had not undertaken its subsequent probe, would these customers ever have been identified? My advice to customers is to take nothing at face value. They cannot trust that the investigations the banks are undertaking will identify their cases. They cannot trust that the supervision of the Central Bank will deliver justice for them. They will have to fight for justice themselves. That is exactly what customers will do. From our perspective in Fianna Fáil, we will work collaboratively with others in this House and at the Oireachtas committee to ensure those affected will get the justice they deserve.

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