AIB AIB at the Oireachtas Finance Committee this morning

October2019

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this is what I got from RTE, Michael McGrath finally says the fact the AIB customers were not on a tracker is irrelevant and goes onto say there was a prevailing rate!!! Good man Michael

The AIB representatives were asked by Fianna Fáil's Michael McGrath about a group of 5,195 mortgage account holders who he said were denied their contractual entitlement to a tracker rate by the bank when they came off a fixed rate.

Tom Kinsella, Managing Director of Homes at AIB, said in all cases the customers concerned did not have a tracker mortgage and when they rolled off their fixed rate there was no prevailing tracker rate available.

Mr Kinsella said it was the bank's contention that had there been a prevailing tracker rate available it would have been priced at an unattractive rate and therefore the customers suffered no detriment.

He said the bank had taken a long time to reach that view and took on board both the Central Bank's view and those of the independent overseers.

He said there had been a service breach in that there was no tracker rate available at that stage but a remedy of €1,000 and €600 for independent advice had been offered to those customers concerned.

However, Mr McGrath said it was irrelevant that the customers concerned did not have trackers as they had a contractual right to one.

He said there had been a breach of contract, and even though there was no prevailing tracker rate for new customers at the time, other customers were still on trackers and that was the prevailing rate.
 

tnegun

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I don't think we could of hoped for better from both Michael McGrath and Pearse Doherty. Will have to watch it again to take it all in but AIB are certainly aware that the prevailing rate group are not going away now.
 

Brendan Burgess

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Three of us attended the hearing today. We introduced ourselves to the Chief Executive Colin Hunt, and his colleagues before the meeting.

We want AIB to understand fully that we are determined to stick this with this all the way.

[These are from my notes at the time. The full transcript is worth reading]

Michael McGrath played a blinder. I have not seen as good a performance from a politician before. He set out the case in a calm, systematic and logical manner. He quoted from the contract. He really left them with nowhere to go.

They were very uncomfortable as anyone trying to defend an indefensible position is.

They came up with the usual arguments: "This cohort never had a tracker" But Michael pointed out that this was irrelevant and their contract entitled them to a tracker.

He asked them where was their definition of prevailing rate. And of course it did not exist.

Michael pointed out that a prevailing rate did exist. It was either the rate prevailing when they took out the mortgage or else the rate on offer before they withdrew them for new business.

Michael pushed them on the difference between "a service failure" and a "breach of contract". I am ashamed to say that I felt sorry for the AIB executives trying to explain that.

AIB said that they should have had a prevailing rate available.

AIB said that this was a stain on the reputation of AIB and whether due to lack of foresight or poor controls they wanted to put it right. They have looked at thousands of cases and wherever there was ambiguity, they came down on the side of the borrower. It took them a long time to reach the decision on the prevailing rate issue and their decision had been backed up by the Central Bank and the Independent overseer.

Explain how you manufactured a prevailing rate years later
They denied that they had manufactured the rate
she asked what the rates on trackers had been and they replied "between 0.75% and 2.5%" [Unfortunately the public is not allowed to interject to correct such nonsense]

He again said it was a great shame for this to take away from the good work they had done in other areas. If they allow themselves to be forced into High Court it would damage them financially and reputationally. Only the legal profession would benefit.

He asked them how much it would cost the bank but they had not costed it or provided for it in their accounts.

Michael finished his first slot with a brilliant wrap up
  • We agree that Prevailing Rate is not defined in the contract
  • We agree that you should have offered a prevailing rate to this cohort
  • It was either the rate at drawdown or the last rate offered before you withdrew it for new business

He pointed out that AIB had done a lot of good things on mortgage rates, arrears etc. They should not allow this wound to fester. He asked them to do the right thing by customers. The new Chief Executive had said he wanted to draw a line under all these issues and this was his opportunity to set things right. He should not allow AIB to be dragged kicking and screaming into the High Court to have the matter decided against them.


This was followed by Gerry Horkan and Pearse Doherty who focussed on other issues such as remuneration and the sale of non-performing loans and the level of Corporation Tax paid.

Then Rose Conway Walsh from Sinn Féin followed up brilliantly on the prevailing rate issue.
She quoted from the Terms and Conditions on what a tracker rate meant to be told that they were "composite terms and conditions"

They are facing 60 legal cases on trackers, about 3 or 4 of which relate the the Prevailing Rate issue. They expect them to be finished in the High Court by the end of the year.

The Independent Appeals Panel had ruled on 96 prevailing rate cases and rejected 95. One was upheld because there were extenuating circumstances.

She again asked Colin Hunt to look back at this issue. "Would you not revisit it?". Out of your €1.25 billion profits even as a PR exercise?

Hunt replied: I have an obvious incentive to draw the line under it. I want to bring an end to the legacy issues. But this has been looked at very comprehensively. We are not the final arbiter. The final arbiter is the Central Bank.

Conway Walsh: No they are not the final arbiter. The final arbiter will be the High Court.

Again Hunt explained that he was satisfied with the bank's position.

There were other contributions from other members of the Committee and then it came back to Michael McGrath again. He spoke about a few different issues and then finished with a discussion of the new Banking Culture Board.

"I want to make an ask on my part. The real test of culture change is when the ball bounces, does it bounce on the side of the customer or the bank? You should ask yourselves not "What must we do?" but "What should we do?".

Pearse then came in again to echo Michael McGrath's sentiments. But added a really brilliant comment. "This is not just a stain on the bank's reputation, but Mr Hunt, if you don't resolve this fairly, it will be a stain on your personal reputation." [ I had to sit on my hands to stop myself clapping]

He revisited the "service failure " vs. "breach of contract" issue. "Are you saying that of the 11,924 people affected, there were no breaches of contract? "

They agreed that in some cases contracts were broken.
Pearse"When the contract is vague, when prevailing rate was not defined, you must find against the author of the contract"

AIB reiterated that the breach had no impact on the customer as the rates would have been higher.

The €1,000 compensation was what the Ombudsman typically awards in cases like this where no loss has been sustained.

Pearse asked Colin Hunt to look at it with a fresh pair of eyes.

And he asked if AIB settles one of these cases on the steps of the High Court that they won't insist on a confidentiality agreement. AIB said that when they lose a case, they look back to see what other customers might be affected by the issue.

But if we settle a case, it's often explained by extraneous issues.

Colin Hunt finished by saying
  • This is an issue of grave concern to us
  • We put customers first
  • We have come to a position on the prevailing rate issue
  • But we hear you.
Brendan
 
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Neverever

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But we hear you........

What a way to end, close the discussion but leaves it open like Hollywood does for sequels.


Great summary Brendan - thank you
 

October2019

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Wow, didn't see that on the RTE website!! Thanks Brendan, does anyone have a link to this so I can watch it later?
 

tnegun

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It would be great to find out more about this "One was upheld because there were extenuating circumstances". Also Pearse got AIB to admit that a service failure was a breech of contract so that has to be a plus too.
 

BattleCorp

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Any idea how many people have appealed under the prevailing rate issue? If it was a small number, would the bank be more inclined to settle?
 

verywhys

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Thanks Brendan....video should be up tomorrow I think....they really said it as it is....let’s hope AIB start to listen!!
 

tonymac

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Anything about the Variable Base Rate group or have we been ignored yet again. These are under the AIB umbrella(EBS) so obviously if not ill have to email a few of them and ask why was it not raised. Michael McGrath in fairness appears to have played a blinder on the prevailing rate issue here which is good.
 

tnegun

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Nothing about the VBR issue I'm afraid. 96 prevailing rate appeals concluded and 95 have been turned down, 1 allowed but no figures for the number outstanding.
 

tnegun

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I did think Paul Murphy was going to bring up the VBR issue but he went on a different tangent.
 

KarenB

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Thanks for attending Brendan & Co and for the great summary. Sounds like it couldn't have gone better. Fair play to Michael McGrath and others for raising all the key issues...
 

Kevin Daly

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Just looking at RTE news 9.00 there’s more about FAI Ex CEO 100000 controversy than AIB 6000 mortgages that could equate to a couple of 100 million breach
 

elacsaplau

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Great summary, Brendan - thanks

So good I had to have a look at the real thing! I agree that McGrath done good. Thought Doherty, Conway-Walsh and Murph were also good.

A few additional comments:

1. I thought that that Paul Murphy covered the Consumer Protection obligations well and that AIB's (Dooley) answer was awful - as in completely misleading. It amazes me that they can so comfortably and publicly demonstrate so little awareness/contempt of their CPC obligations in full public glare - presumably in the knowledge that the Regulator isn't too bothered and will just look on with its customary passivity!!

2. Colm Hunt was sly. He talked about how investors wanted variable pay/share option benefits for staff. Pearse told him that the largest shareholder was the taxpayer and that he hadn't noticed a widespread clamouring from the public for such arrangements, etc. Hunt replied "when I talked about institutional investors earlier, I was...…" (and then went on to explain the needs and wants of institutional investors). Of course, the point being that he hadn't talked about institutional investors earlier. Struck me as particularly sly!

3. Hunt was again ridiculous in relation to the case Murph referred to. [At the last AIB appearance, Murph had brought up an individual case and one of the AIB attendees at that meeting, Jim O'Keeffe, promised to look into it. O'Keeffe was there again today and Murph asked him what happened to his written request. "Oh I thought that that had been dealt with!" replied poor O'Keeffe (OUCH!)...…..a pretty unbelievable gaff...…..like you'd think he'd have read the minutes from the previous meeting!!] Anyway, the discussion continued and moved from the specific to the general and back to the specific and at one point Hunt authoritatively requests Murph to send in the details of the individual case again and we'll look at it. DIG OUT THE BLOODY CORRESPONDENCE YOURSELVES!!

4. In relation to the case in 3, Kinsella says that AIB will look into it prompto and not only will they review it but if they find that they have erred in relation to this particular customer, not only will they make him good but they will automatically make good all other similarly impacted customers.

This was all fine and dandy until later in the meeting when Pearse (who also played a blinder, wet and windy) asked where AIB makes an "on the steps of the court" settlement - will they then follow through on the concept of making good all similarly impacted customers. Guess what the answer was to that one...……alas, no similar commitment could be made......often extraneous circumstances, blah, blah.

[Pearse said he knows of cases were AIB settled. I am personally aware of a case also. In the case I am aware of, I am as certain as one can be about the motivation of an adversary that they did so, not because of extraneous circumstances as claimed, but because they wanted the details to be hushed. The settlement was probably greater than if the case was won.] Ask yourselves, lads and lassies, why that might be?!

But hey...…...we want to put all this behind us and put the customer first...:rolleyes:
 
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Brendan Burgess

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tnegun has extracted the best bits in the following few posts so you can see for yourselves.

I may well have missed bits of it.

Brendan
 
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