Give me a Crash Course In . . . Permanent TSB mortgages

What on earth is going on with Permanent TSB mortgages? The bank was back in the High Court this week after a couple brought proceedings against Permanent TSB (PTSB) seeking to be immediately repaid €61,000 they were overcharged by the mortgage provider. The couple were among more than 1,300 customers of Permanent TSB and a subsidiary who had their mortgage accounts disastrously mismanaged by the bank. As a result of the bank's repeated errors some people lost their homes.

But did the Central Bank not already find the bank in breach and order it to sort things out? Why did the couple have to go to court? Because the bank has fought legal actions on multiple fronts for years in connection with this issue. It took its legal case against the Financial Services Ombudsman over the mismanagement of customer accounts right to the steps of the Supreme Court, before eventually conceding it had got things wrong.

What are the details of this case? In this instance the bank overcharged a couple by more than €60,000 over a period of more than six years. Having to pay more than €1,000 a month than was necessary into their mortgage put great stress on the couple. The bank admitted the overcharging but the couple claimed in court that PTSB had demanded they accept just over €6,000 in compensation, before it would repay the €61,000 it had overcharged them.

That seems unfair, right? It certainly does. The couple, who always fully complied with their mortgage, claimed it was "utterly improper and unlawful" for the bank to place such a condition on the repayment of the monies which the bank admitted it owed them. Eventually the bank caved in and on Thursday on the steps of the court agreed to give the couple their money back free from any pre-conditions.

So, that’s that then? Hardly. All told all 1,372 customers of the bank and its subsidiary Springboard Mortgages are now in line for substantial refunds following the conclusion of a Central Bank investigation into the bank’s mismanagement of accounts.

What kind of mismanagement? Among the issues identified by the investigation was PTSB's failure to inform certain customers of the consequences of their decisions to break early from a fixed rate or discounted tracker period. The consequences of breaking early were that they lost their contractual right to be offered a tracker rate when their fixed rate or discounted tracker period would have ended. The bank also failed to inform other customers of their right to be offered a tracker rate at the end of any fixed rate period.

What was the consequence of the mismanagement? It led to financial hardship for many people. In all 61 accounts affected by the multiple failures at the bank have seen a subsequent loss of ownership of the property, the Central Bank said. The failures were also a "key factor" in the loss of ownership of at least 22 properties.

And how is PTSB proposing to make it right? It has said it will pay €50,000 to owner-occupier accounts and €25,000 to buy-to-let customers.

And is that enough? It is hard to see what level of compensation would be enough given the level of stress many people have been put under. The lesson of this week’s court action should, however, be not to be pushed into a deal with any financial institution.

Clarification: An article in Saturday's Weekend Supplement by Conor Pope ("Give me a crash course ... in Permanent TSB mortgages") quoted a claim by a customer in the High Court that suggested Permanent TSB (PTSB) was making redress offers to customers overcharged on their mortgages on condition they also accepted limited compensation.

PTSB says this claim is unfounded – “the bank had never imposed any pre-conditions on the compensation and redress offered ...The bank’s position has always been that customers can accept the compensation and redress offered to them and still appeal for more compensation” through other mechanisms.

“It was ... untrue to state that the bank had ‘caved in’ on the steps of the court,” a PTSB statement says, “as the position claimed by the author was never the position of the bank.”

The bank also feels the article incorrectly asserted that it had set a ceiling of €50,000 on compensation to impacted customers who lost ownership of their properties. “Additional compensation may be available through the appeals panels or, if customers wish, the Financial Services Ombudsman or the courts,” the PTSB statement insists.