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The reputation of the Irish banking sector has been in tatters since the financial collapse which led to the State bailout. So you would think that the financial institutions would be conscious of their wider responsibilities to customers and society. Most of then would, after all, have gone out of business if they hadn’t been rescued, at considerable cost to us all.
The tracker mortgage scandal – and scandal it is – is all the more amazing in this wider context. The banks have been dragged kicking and screaming to an acceptance that they overcharged many mortgage-holders.
They have had to be pushed by the Central Bank into acknowledging this and – remarkably – at least two institutions are still disputing the regulator's view.
The sector has been way too slow to restore customers to their proper interest rate and pay them what they are owed. Only one quarter of those affected have got a refund and compensation and many have still to even be restored to the correct interest rates. Had the shoe been on the other foot – and it was a customer that owed the bank – you can be sure that it wouldn’t take a couple of years for the bank to work out how much was due and demand it immediately.
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The evidence suggests that the bulk of this was due to calculated decisions high up in the banks that customers were not to be allowed benefit from the extraordinarily low interest rates resulting from ECB rate cuts. Through a process of guile, obfuscation and plain dishonesty, customers were bullied and hustled into new, more costly, mortgage arrangements.
We now know that at least 13,000 mortgage holders were affected and this number looks set to rise. We know that 29 mortgage holders lost their homes as a result as did 79 buy-to-let property owners. These numbers are set to increse too.
Financial regulation should not have allowed this to happen and the process of correction has taken too long.
The Central Bank points out that it has limited powers to act on things that happened before new legislation came in during 2013. This is true, but it seems to have still allowed the banks to drag out the process interminably.
Like so many recent episodes, there has been little accountability. The banks have apologised, but only with the regulatory gun to their head. The Central Bank has met with the Garda on the issue but it is unclear if anything will happen as a result.
Although there are questions about the regulatory response, the main questions here are for the banks themselves. It is a shameful episode. Despite their fine words of apology, it is clear that a number are still fighting to delay the process and minimise the financial cost, with no regard whatsoever for the customers affected.