Bank of Ireland Bank of Ireland fined €100,520,000 for tracker scandal

Brendan Burgess

Brendan Burgess

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I attach the Central Bank statement

ENFORCEMENT ACTION

Central Bank of Ireland and
The Governor and Company of the Bank of Ireland

The Governor and Company of the Bank of Ireland reprimanded and fined €100,520,000 by the Central Bank of Ireland for regulatory breaches affecting tracker mortgage customers

On 27 September 2022, the Central Bank of Ireland (the “Central Bank”) reprimanded and fined The Governor and Company of the Bank of Ireland (“Bank of Ireland”) €100,520,000 pursuant to its Administrative Sanctions Procedure (“ASP”) for a series of significant and long-running failings in respect of 15,910 tracker mortgage customer accounts which were impacted between August 2004 and June 2022. Bank of Ireland has admitted in full to 81 separate regulatory breaches.

The Central Bank determined the appropriate fine to be €143,600,000,1 which was reduced by

30% to €100,520,000 in accordance with the settlement discount scheme provided for in the Central Bank’s ASP.2 This is the largest fine imposed to date by the Central Bank and is in addition to the more than €186,400,000 Bank of Ireland has already paid to impacted customers identified prior to and as part of the Central Bank’s Tracker Mortgage Examination (“TME”).
The investigation found that Bank of Ireland failed in its obligations towards its customers under the European Communities (Unfair Terms in Consumer Contracts) Regulations, 1995, the Code of Practice for Credit Institutions, 2001 and the Consumer Protection Codes 2006 and 2012. Bank of Ireland’s failures resulted in the loss of 50 properties, including 25 family homes, which would have been avoided if Bank of Ireland had complied with the most basic and fundamental of its consumer protection obligations.
 

Attachments

  • Final PS BOI.pdf
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4. Bank of Ireland implemented an unfair complaints handling practice in respect of customers. Bank of Ireland implemented an unfair practice of returning customers with these unclear MLOs and MFAs to a tracker rate only in the event that they queried and/or complained about their rate. Other customers with the same unclear mortgage documents who did not complain were not offered a tracker rate.

6. Bank of Ireland wrongfully excluded customers from the protections of the TME. Bank of
Ireland wrongfully excluded over 5,000 customers from the TME who had received unclear
documents. These customers were excluded arising from the narrow focus of Bank of
Ireland’s consideration of all matters required under the TME. These failures persisted, until
these customers were finally included in 2017, following significant challenge by the Central
Bank. Additionally, during the conduct of its TME review, Bank of Ireland failed to implement
the protections afforded by the Stop the Harm requirements, resulting in loss of ownership
occurring.


Our investigation exposed a culture in Bank of Ireland which, when faced with a choice, prioritised its own interests with little to no regard for the impacts on its customers. There were a series of missed opportunities during which Bank of Ireland could have done the right thing by its tracker mortgage customers. Despite these opportunities, Bank of Ireland repeatedly interpreted unclear contractual terms in its own favour and against the customer, which continued the harm and loss caused to customers over many years.

The way in which a business measures its success must include how it treats its customers. If a firm has the right culture, the Central Bank’s role should not - as was required here - extend to prolonged engagement to ensure fair outcomes for consumers. We expect firms to promptly make things right when things go wrong. Such a consumer-centric culture should not be viewed as a burden or an impediment. It can, and must, sit equally alongside a firm’s other business objectives.
 
Bank of Ireland concluded that
certain groups of customers were not entitled to revert to a tracker rate after a fixed rate period
ended, despite identifying ambiguities in their MLOs and MFAs relating to whether or not
customers were entitled to revert to or be offered a tracker rate. Bank of Ireland’s actions in
doing so were in breach of its regulatory obligations. Bank of Ireland maintained that position
until 2017, despite the fact that it either knew or ought to have known that its MLOs and MFAs
were unclear.
 
Wow, I had not heard of Project Lima before. The Central Bank took action as far back as 2010! I thought that BoI remediated these customers at their own initiative.

Bank of Ireland’s Deficient Tracker Remediation Programmes
In 2010, the Central Bank challenged Bank of Ireland regarding the lack of clarity of its MLO and
MFA documentation. In particular, the Central Bank told Bank of Ireland that those documents
were unclear regarding customers’ right to a tracker rate after a fixed rate period. Arising out
of that engagement, and beginning in early 2011, Bank of Ireland engaged in a voluntary
remediation scheme (known as “Project Lima”) resulting in 2,819 impacted customers being
redressed and returned to a tracker mortgage, with an additional 2,409 customers offered a
tracker mortgage at the end of their fixed rate period that they otherwise would not have been
offered.

However, during the course of the TME the Central Bank uncovered that Bank of Ireland wrongfully excluded 1,650 customers from Project Lima solely on the basis that they signed the MFA prior to the introduction of the Consumer Protection Code 2006 (“Pre-CPC customers”). Bank of Ireland did this in circumstances where these customers received the exact same documents as those customers who were deemed impacted by Bank of Ireland. Bank of Ireland failed to notify the Central Bank regarding the exclusion of these customers from remediation at that time.

In 2014, on foot of further supervisory engagement, the Central Bank wrote to Bank of Ireland
asking it to undertake an additional review to assess whether or not a group of almost 3,000
customers identified by the Central Bank should also have been offered the option of a tracker
rate at the end of a fixed rate period. In this engagement, the Central Bank noted that its original
concerns relating to the transparency of Bank of Ireland’s mortgage documentation, raised in
2010 in respect of Project Lima also appeared to be applicable to this cohort of customers
(“Tracker Switchers”). In conducting this review, despite identifying specific issues concerning the clarity of the MLO and MFA across all customers assessed, Bank of Ireland wrongly determined that 90% of Tracker Switchers were not entitled to be offered a tracker rate at the end of their fixed rate period. This occurred despite the fact that the customers Bank of Ireland excluded from remediation had the same MLO and a very similar MFA to the customers who were remediated at that time.
 
2. Bank of Ireland failed to interpret its unclear contractual documents in customers’ best interests

Between October 2008 and November 2017, Bank of Ireland interpreted unclear and ambiguous MLOs and MFAs in its own favour and against the best interest of its customers by not providing impacted customers with an offer of a tracker rate at the end of the fixed rate period. Bank of Ireland maintained its stance regarding the clarity of its documents during that period in circumstances where it knew or ought to have known that the documents were unclear from a plain reading thereof. Further, Bank of Ireland had numerous opportunities to give customers back their tracker mortgages and had been told by customers, the Financial Services and Pensions Ombudsman (the “FSPO”) and the Central Bank that its MLO and MFA
were unclear.
 
Delighted by this ..... the worst of it was my shock at being asked by BOI why I would not put the returned money back into the account!!!!! This was early on in the time and while you might think its a prudent approach I wanted to say 'how dare you!' but I was actually speechless as the person on the phone was just clueless as to the extent of the damages done to people's lives.
 
RichInSpirit said:
That's an eye watering amount of money.
Click to expand...
Is it? BoI made a €1.4bn profit before tax just last year, a large minority of it from its mortgage book which is €40bn in Ireland.

Over the decade or so of this overcharging BoI made billions in profits from mortgages.

This fine is orders of magnitude away from forcing the bank to close its doors, but it's still plenty to make it pretty sure they won't do something equivalent again.
 
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I wonder did the central bank consult with the treasury to make sure they had their full holdings in BOI offloaded before they hit them with the fine. Is it a coincidence that last week the government announced that they had offloaded their full holding in BOI with a 6billion euro profit and then a week later they get hit with the fine
 
Brendan Burgess said:
+1

I wonder what amount they overcharged tracker customers by?
Click to expand...
I don't know the details that well.

I do know that financial sanctions have to really hurt or else it's just another cost of doing business.

This is €100m the bank can't spend on hiring staff, or higher pay, or IT projects, or all sorts of other things.

€1m or €10m would not be noticed but €100m surely will.
 
From the Irish Times

The Bank of Ireland fine is on top of the €186.4 million that it has already paid to 15,910 affected customers, who were identified prior to and as part of the Central Bank’s tracker mortgage examination.

And later in the same article

The tracker issue has so far cost Bank of Ireland almost €330 million since 2016 in refunds and compensation, legal fees and administrative expenses, and provisions set aside for a Central Bank fine.

So
Redress & Compensation €186m
Fine: €100m
Legal fees and admin: €44m
Total : €330m
 
joe sod said:
Is it a coincidence that last week the government announced that they had offloaded their full holding in BOI with a 6billion euro profit and then a week later they get hit with the fine
Click to expand...

Yes, it's a coincidence.

Bank of Ireland had made a provision of €120m for the fine, so the lower fine is "good news" for BoI.

Brendan
 
c. Misleading and inaccurate representations made in response to staff complaints

Between October 2008 and December 2015, Bank of Ireland responded to complaints received from staff customers in relation to an internal staff notice with answers that were inaccurate and/or misleading. In particular, when customers complained regarding the content of a notice issued to staff concerning the withdrawal of tracker mortgages and the future entitlement of staff to tracker rates, Bank of Ireland responded to them saying that the notice was clear. However, internally Bank of Ireland acknowledged that the notice was confusing and could be misinterpreted concerning customers’ entitlement to a tracker mortgage rate at the end of a
fixed rate period.
 
Furthermore, the investigation found that Bank of Ireland’s Court of Directors, when making decisions as to whether these cohorts of customers were impacted or not, did so in the absence of key material information to enable it to make an informed decision in line with the
requirements of the TME Framework.
 
... in May 2016, Bank of Ireland failed to put in place adequate controls and/or measures to ensure that the STH [Stop the Harm] procedures then in place were followed at all times. This resulted in further harm to those customers it had identified as impacted or potentially impacted under the TME, including the progression of legal activities. Additionally, Bank of Ireland failed to disclose to customers who contacted Bank of Ireland seeking to sell their properties or requesting redemption figures that they may be impacted under the TME and may be due redress and compensation, resulting in these customers making uninformed decisions relating to their mortgages, resulting in the loss of properties, including the family home.
 
Brendan Burgess said:
From the Irish Times

The Bank of Ireland fine is on top of the €186.4 million that it has already paid to 15,910 affected customers, who were identified prior to and as part of the Central Bank’s tracker mortgage examination.

And later in the same article

The tracker issue has so far cost Bank of Ireland almost €330 million since 2016 in refunds and compensation, legal fees and administrative expenses, and provisions set aside for a Central Bank fine.

So
Redress & Compensation €186m
Fine: €100m
Legal fees and admin: €44m
Total : €330m
Click to expand...
working it out if everyone was on the same rate its approx 6 k per account ...which
Brendan Burgess said:
+1

I wonder what amount they overcharged tracker customers by?

The Prevailing Rate issue alone cost AIB €300m.

Brendan
Click to expand...
It varied ... the amounts of redress quoted would mean average 6k redress. Ours was in excess of 50K so varied greatly.
 
Foxy007 said:
It varied ... the amounts of redress quoted would mean average 6k redress. Ours was in excess of 50K so varied greatly.
Click to expand...

Not sure what you are referring to?

The AIB Prevailing Rate issue cost AIB €300m for 6,000 customers or an average of €50k each.

Bank of Ireland had about 4,000 customers who were identified back in 2012, so it cost BoI almost nothing to refund them.

They also had about 5,000 customers who were on the wrong tracker rate by a tiny margin e.g. .8% instead of .7% , so again the redress and compensation was tiny.

In total 16,000 BoI customers were impacted, but "only" 7,000 of these were seriously impacted.

Brendan Burgess said:
Redress & Compensation €186m
Click to expand...

So an average of about €27,000 for those seriously impacted. And huge variability within this group.
 
I'm referring to the BOI redress and specifically those who took out ICS mortgages as we did. Ours was in fact way over the 50k and was part of the review. We were included in the compensation as we were paying over double what was correct. We were only offered an extortionate rate that was fixed (back in 2007) and ICS did not give us any alternative despite being eligible for the tracker as per very, very, tiny print in the contract we signed. BOI was managing ICS at this stage so we were part of the redress and compensation. ICS tends to be forgotten about but I see a few other posters on here who were with them as well.

You did ask
" wonder what amount they overcharged tracker customers by?

The Prevailing Rate issue alone cost AIB €300m.

Brendan"

I can can confirm anyone dealing with ICS at that stage would have been charged double. I have a tendency to keep everything I signed and they didn't have a leg to stand on for the redress portion as it was there in black and white. Just was happy to get any compensation on top.
 
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