Seán Kyne (Galway West, Fine Gael) | Oireachtas source

The tracker mortgage examination is a matter of great interest to the public and one the Government considers to be of the utmost seriousness. This debate has raised a number of important points and I thank all the Deputies involved for their contributions.

As has already been referenced by the Minister, Deputy Noonan, the Central Bank, as the independent regulator of financial services in Ireland, is currently undertaking an investigation into tracker mortgages. This industry-wide examination, which began in 2015, is ongoing and while all lenders are currently in the process of carrying out their internal reviews, it is important to note that some lenders may have their internal reviews completed sooner than others, depending on the size of their mortgage books and the complexities associated with them completing the examination. The purpose of the investigation is to identify cases where the contractual rights of borrowers under the terms of their mortgage contract were not honoured or where lenders did not fully comply with various consumer protection requirements and standards regarding disclosure and transparency of information for the customer.

In its most recent update on the matter, the Central Bank announced that it expects that all relevant lenders will have identified and engaged with all affected 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. This is certainly a matter of great significance to the Oireachtas and the wider public. The work of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform and the Taoiseach, in particular, should be acknowledged in giving the issue the attention it deserves. The focus now should be on completing the Central Bank examination as quickly as possible.

There has been some progress on this issue. In his earlier statement, the Minister referred to a €4.5 million fine imposed by the Central Bank on Springboard Mortgages Limited. Deputies may be interested to hear further details on this matter. The fine and reprimand issued by the Central Bank on Springboard Mortgages Limited was the culmination of the Central Bank enforcement investigation into that firm which found it had breached key requirements of the consumer protection codes 2006 and 2012. In addition, the Central Bank required Springboard to implement a major redress and compensation programme to customers impacted by the breaches in the amount of approximately €5.8 million to date.

The Central Bank’s investigation found that the company failed to apply the correct interest rates to 222 customer mortgage accounts over a seven-year period between August 2008 and July 2015. The length of time customers were required to make higher mortgage repayments than required ranged between 12 months and six years and 11 months. The average amount overcharged to a customer’s account was €19,351. Overcharged amounts ranged from approximately €100 to approximately €68,000. Having to make higher that required mortgage repayments, due to the failure of the company to apply the correct mortgage interest rate, caused serious difficulties for customers with some customers going into mortgage arrears and some being subjected to legal proceedings.

The key elements of the redress and compensation programme required by the Central Bank from Springboard included the restoration of impacted customer accounts to the correct tracker interest rate; the adjustment of the balance of impacted customer accounts to the position the accounts would have been in if the correct interest rates had always been applied; the refund of any overpayments to customers after their account balances have been adjusted; the provision of compensation payments to impacted customers to reflect the detriment suffered by them as a result of the breaches; the provision of additional payments to impacted customers to enable them to take professional advice in respect of the redress and compensation offered to them by the company; the establishment of an independent appeals process to ensure that impacted customers can challenge the redress and compensation offered to them in an expeditious and customer-friendly manner; and the provision of redress and compensation to impacted customers upfront, regardless of whether they appeal. Also, the company agreed not to invoke any statutory limitation period in respect of any complaint that impacted customers may choose to make to the financial services ombudsman and the courts for a certain amount of time.

Charging an incorrect higher interest rate was clearly a very detrimental activity on the part of Springboard and was totally unacceptable. The strong sanctions applied by the Central Bank, however, demonstrated that it has considerable powers to punish regulated firms for detriment they cause to their customers. The focus now should be, as previously indicated, on bringing the full Central Bank examination to a conclusion as quickly as possible.

In conclusion, it is important that we remember that both the cause of this problem and the primary responsibility for repairing the damage caused to consumers rests with the relevant lenders, which did not act in the best interests of their customers or which did not properly honour the mortgage contracts they entered into, and it is essential that these affected customers now receive acknowledgement for the harm they have suffered, with appropriate redress and compensation packages. This Government is committed to ensuring and assisting the Central Bank complete its independent examination as quickly as possible, to bringing this damaging episode for the financial services industry to a conclusion and, most importantly, to ensuring that impacted home owners and consumer borrowers are properly compensated and dealt with by their lenders.

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