€4.5m penalty against Springboard Mortgages likely just the start

The €4.5 million penalty imposed by the Central Bank on Springboard Mortgages, a former subsidiary of Permanent TSB, and its redress of €5.8 million paid to customers with tracker mortgages, is likely to be just the start. After all, the Central Bank initiated an examination of all tracker lenders at the end of 2015. Its move was sparked by revelations of overcharging and poor customer communication at Permanent TSB itself where, for example, many borrowers were not properly informed of the implications of breaking fixed-rate mortgage contracts early.

At Springboard, a subprime lender, 222 borrowers were charged interest rates that were too high. The amount involved was not trivial, with the average amount overcharged per customer coming in at more than €19,300. These 222 customers were among the 1,372 which Permanent TSB said it overcharged. We await to see what the penalty and redress fee will be for the others.

Given evidence of overcharging which have emerged from other institutions – and the advanced engagement of some with the Central Bank – this will not be the end of it, either. We can expect 2017 to see a string of further fines and confirmation of redress schemes.

These may not be financially significant to the institutions concerned, but they are deeply embarrassing. We are not talking about isolated cases here, we are talking about systemic problems to charge customers more than they should have been charged and to avoid spelling out correctly their options. After all, if you can’t rely on your bank to charge the correct interest rate on your loan, what can you trust it to do?

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As the fallout from the crisis years continues, it is becoming clear that not only were the banks incompetent in the management of their overall loan books, but in some cases at least they were gouging customers by charging them too much. There are real questions still not answered about why this happened – and about who knew what. It also raises a new set of questions about the efficacy of financial regulation at the time. We knew the regulator at the time missed the bigger picture. It also now appears there were gaps in terms of protecting consumers, too. We can only hope that the system now in place is considerably more robust.