Ulster Bank fined record €37.8m for ‘deliberate’ tracker overcharging

Borrowers lost 43 properties as result of bank’s strategies

Ulster Bank has been fined a record €37.8 million by the Central Bank for its role in the State's tracker mortgage scandal, which saw the lender devise "deliberate" strategies to shift borrowers off cheap mortgages during the financial crisis and only rectify matters for those that complained.

Borrowers lost 43 properties as a result of overcharging as they were denied their entitlement to a low-cost mortgage linked to the European Central Bank’s main rate, the Central Bank said in a statement on Thursday. Family homes accounted for 29 of these cases.

Ulster Bank, which confirmed last month that it is exiting the Irish market after more than 160 years, has paid €128 million in refunds and compensation to 5,940 overcharged mortgage customers.

“Our investigation identified the numerous opportunities that UBID (Ulster Bank Ireland DAC) had to do right by its customers and the efforts that UBID went to in order to evade its obligations to these customers,” said Seána Cunningham, the Central Bank’s director of enforcement. “Despite it being clear to UBID from customer complaints that certain customers were paying more for their mortgage than they should be, UBID continued to deny customers the lower tracker rates that they were entitled to.”


Ulster Bank chief executive Jane Howard said the bank had learned “serious” lessons from the debacle.

“On behalf of Ulster Bank, I am deeply sorry for the impact that our handling of the tracker mortgage issue has had on our customers and their families,” she said. “We have learned serious lessons and made fundamental changes to the way we work.”

Ms Howard said that the announcement “does not draw all tracker issues to a close and we will continue to work on those cases which are under appeal or are with the Financial Services and Pensions Ombudsman to bring them to a conclusion”.

Largest ever fine

The Ulster Bank penalty is by far the largest ever levied by the Central Bank and brings the total level of tracker-related fines to date to €81.6 million. Permanent TSB was fined €21 million, the previous record, two years ago, while its former subprime unit Springboard Mortgages was ordered in 2016 to pay a €4.5 million penalty. KBC Bank Ireland was fined €18.3 million last September.

AIB, which has set aside €70 million to date for likely fines for the bank and its EBS unit, and Bank of Ireland, which has made an undisclosed provision, remain under enforcement investigation. The wider debacle has cost the industry over €1.5 billion, half of which has been absorbed by redress and compensation in more than 41,000 cases.

The Ulster Bank sanction comes five weeks after the lender’s UK parent, NatWest Group, confirmed that it was withdrawing from the Republic in the coming years as it has struggled since the onset of the financial crisis to deliver acceptable profit returns. AIB and Permanent TSB are in talks to buy much of Ulster Bank’s €20 billion loan book.

Ulster Bank admitted to 49 separate regulatory breaches in relation to the tracker debacle. The regulator determined that these warranted an almost €54 million fine, but a standard 30 per cent settlement discount brought it down to €37.8 million.

The bank “devised and sought to implement a customer campaign to encourage certain tracker customers to convert their tracker rates to fixed rates during 2008, without informing them that they would not be entitled to return to their original tracker rate if they moved to a fixed rate,” the Central Bank said. However, this particular campaign ultimately failed.

In 2011, it decided to only return customers who complained about being on the wrong rate to the correct tracker rate – after calculating what it would cost to do the right thing by all affected customers. The 352 borrowers that did complain were handled on a case-by-case basis and not all afforded the same redress, the Central Bank said.

“Having initially provided its customers with unclear information and having failed to warn them of the very real consequences of their mortgage-related decisions, UBID put further impediments in its customers’ way,” Ms Cunningham said.

‘Stop the harm’

The regulator also found that Ulster Bank failed to properly implement “stop the harm” principles when the Central Bank started the tracker mortgage examination (TME) in 2015.

“This resulted in UBID failing to identify and therefore inform some customers seeking to sell, or otherwise dispose of their properties, including by way of assisted voluntary sale or surrender, that they may be impacted under the TME and may be entitled to redress and compensation and to have their account balance adjusted,” the Central Bank said.

The regulator said aggravating factors in the case include the fact that Ulster Bank was aware from 2009 onwards, as a result of customer complaints, that its mortgage documents were unclear. The Central Bank also had to go down the road of preparing to seek a High Court order to get access to certain information from Ulster Bank, before the lender provided the material.

The bank would ultimately set aside about €300 million of provisions to cover costs relating to tracker fiasco. This is the fourth time Ulster Bank has been fined by the Central Bank since the financial crisis, bringing the total charge to €49.2 million.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times