Bank of Ireland trebles upper payment for advice for tracker victims

Bank of Ireland has moved to increase payments to customers denied a right to tracker mortgages to cover independent legal and financial advice by 200 per cent, as its new chief executive seeks to resolve the matter.

The bank has raised the minimum threshold for independent advice payments from €250 to €750, although the sum can be as high as €1,000, depending on the type of error made by the bank and circumstances of the customer.

“We have reviewed and changed the independent legal/financial advice fee payments for all right-to-tracker cases in recognition that some customers have had more complex requirements,” the bank said. “Customers who have already received their initial redress and compensation letter detailing a lower payment of €250 will receive an additional communication in January from the bank advising of this increased payment.”

Two years after the Central Bank ordered banks to find borrowers who were either wrongly denied low-cost mortgages linked to European Central Bank rates or put on the wrong rate, the regulator revealed on Wednesday that since September the number of customers hit by the scandal had surged by 13,600, or two-thirds, to 33,700. Bank of Ireland accounts for 14,500 of the total, including 5,100 cases that were resolved in 2010.

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The decision by Bank of Ireland to increase advice payments to victims of the tracker controversy sees it move from offering the lowest rate among banks bailed out by taxpayers during the financial crisis to the highest.

Permanent TSB, the first bank to unveil a refunds and compensation plan, in July 2015, has offered to pay €400 to affected customers to cover independent advice. AIB's rate for the majority of its cases is €615. However, it will pay up to €3,690 to customers who were significantly affected by overcharging.

Change of approach

Bank of Ireland’s chief executive of less than 12 weeks, Francesca McDonagh, has taken personal ownership of the lender’s approach to the tracker crisis, as public and political uproar over the scandal intensified in recent months. The bank acknowledged an additional 6,000 impacted customers in November that it had previously denied redress to under a more legalistic approach.

The bank said on Wednesday it had returned all identified affected customers who still have a mortgage with the bank to the correct rate, while more than 80 per cent under the scope of the current examination have been offered compensation.

Bank of Ireland has signalled it will take up to €200 million of provisions to cover refunds and compensation of up to 15 per cent of the amount overcharged, as well as other costs associated with the controversy. That equates to almost a quarter of the €860 million set aside by the country’s five main mortgage lenders to date.

Analysts estimate that the final figure will end up topping €1 billion, with AIB and Ulster Bank expected to add to their respective provisions of €190 million and €211 million.