# FAQCalculating the refund when a tracker is restored

#### Pat123

##### Registered User
Brendan, I am looking at the 3rd post above, i.e. borrowing 100,000 and being charged 3% a year, instead of 1% a year for five years.

Now the borrower owes €76,841.86 which he would now owe had he been charged the correct level of interest and has cash of €5,682.18
The calculations are correct but it seems an overcomplicated way of looking at it.
The way I see it is as follows :
From your first set of calculations (3% per year), the total repayment for each year (Principal +Interest) is €6,655.20.
So, for 5 years, the total repaid is €33,276.
From your 2nd set of calculations (1% per year), the total repayment for each year (Principal +Interest) is €5,518.68.
So, for 5 years, the total repaid is €27,593.40. This is what should have been repaid.

So, the overpayment is (€33,276 - €27,593.40 i.e. €5,682.60).

So, the bank should refund you this overpayment of €5,682.60, and set the outstanding amount to what it should have been if you had been on the 1% rate i.e. €78,841.86.

Is this too simplistic ? Maybe there is a reason to do it as you have shown and I am missing it.

#### Brendan Burgess

##### Founder
Yes, that is too simplistic.

You must look primarily at what interest was charged and what what interest should have been charged.

If you get that right, then you have a correct outcome.

Using repayments which include capital is wrong.

Brendan

#### Pat123

##### Registered User
Brendan, with all due respect, I don't see why I am wrong. I just did it a different way, and it gets exactly the same result.

Yes, I agree that you need to calculate the repayment (and break it down into Principal and Interest each time) which is what you did.
I just interpreted the results in a different way.
I'm not saying it's any better but it makes more sense to me.

Why is using repayments that include capital wrong ?
Surely if you subtract what you should have paid from what you did pay, then that is the overpayment ?

Thanks

Pat

#### Brendan Burgess

##### Founder
Hi Pat

I used a very simple example with a constant interest rate and all payments met and an exact number of years.

Would your approach be able to handle that?

Brendan

#### Pat123

##### Registered User
Yes Brendan.

I agree that one would have to work out the repayment amounts (showing principal and interest), as you did in your example.

So, then
(a) using the incorrect rates, one would be able to calculate the total repayment amount made in the relevant period.
(b) Similarly, using the correct rates, one would be able to calculate the total repayment that should have been made in this period.

Subtracting (b) from (a) above would show the overpayment.
So, the bank should refund this overpayment, and set the outstanding balance to what was calculated using the correct rates.

Pat

#### Brendan Burgess

##### Founder
Hi Pat

That sounds more complicated than the way I have suggested.

It seems really clear and simple to me. If the wrong interest rate was charged, then they should reissue the statement with the right interest rate, while keeping the actual repayments made.

1) If nothing else is done, then the resulting balance is the correct figure.
2) It is very easy for the borrower to check.
3) The lender can go through the additional step and work out the overpayment. They can then refund this and increase the balance due accordingly.

Brendan

#### Pat123

##### Registered User
Hi Brendan.
In both of our methods, the hard work of calculating each repayment amount, including interest has to be done.

It's just in the interpretation that we differ, and the amount of work required in both our interpretations to calculate the overpayment is minimal.

Thanks for your time, I just wanted to ensure that when I deal with Ulsterbank that I will be able to check their figures.

Thanks again

Pat

#### corktim

##### Frequent Poster
Not 100% on how it all works but this is my question.

If I was on interest only since I lost my tracker I take it that there is a refund of the overpaid interest and no capital reduction.?

#### Brendan Burgess

##### Founder
Yes. If you have been charged too much interest and if you have paid it, you should get it back.

Brendan

#### Mauritius

##### Frequent Poster
@corktim @Brendan Burgess - all my overpayment of interest was “refunded” by taking it off my mortgage. Isn’t this what the banks are all doing in general?
Will some people challenge this and say they want the money rather then paying down debt? Has this come up yet anywhere?

#### estuarine

##### Registered User
@Mauritius Hi, I'm an impacted KBC customer also and I am currently waiting for further developments after the 5th January letter. Congratulations to you - I've read your other posts and I'm delighted that the process has concluded for you. I imagine it's a huge relief. However, I am a little confused by this post. You overpaid by an amount of money each month, therefore you were entitled to a refund (redress). KBC was supposed to adjust your mortgage balance to what it would have been had the error not occurred using the amount you should have paid on a lower interest rate and refunding you the difference. This is what the Central Bank principles say:

"1.1.1 “Adjusted Amount” refers to the difference between the monthly amounts that customers were charged in respect of their impacted accounts and the monthly amounts that they should have been charged had the relevant issue identified not occurred.

1.1.2 Loan balances are to be adjusted (the principal balances on impacted customer accounts to be adjusted to the correct level as if the issue giving rise to redress had not occurred and appropriate Tracker Interest Rates had been applied to the accounts from the appropriate time).

1.1.3 Impacted customers are to have the option of receiving direct payments in respect of Adjusted Amounts as opposed to Adjusted Amounts being set off against the balance of their mortgage accounts (see below for when the account is in arrears). These repayments to take into account the time value of money."

I think it's important that you clarify for those of us still waiting for redress and compensation from KBC whether you received any upfront payment of redress (refund) for overpaid interest or whether you only received compensation, €650 for advice and time value of money as this post, taken alongside your other recent post, would imply. The Central Bank principles make it clear that KBC must offer an upfront refund of the difference between the interest you actually paid each month and what you should have paid.

#### Brendan Burgess

##### Founder
Hi estuarine

I have read those principles a few times and they are very confusing.

KBC is doing the same as other lenders, other than BoI. They are working out two figures - what the borrower was overcharged and what the borrower overpaid. Say a borrower was overcharged €15,000 interest, but actually underpaid €20,000 before the adjustment. Then they will have their balance reduced by €5,000 and will get no cash payment for the overcharge.

Brendan

#### Brendan Burgess

##### Founder
Just to clarify, here are the Principles in full

2.Redress and compensation to impacted customers

2.1.Redress will result in impacted customers being returned to the position that they would have
been in had the relevant issue not arisen.

Appendix B - Supplementary Guidance for Redress and Compensation for Tracker Mortgage-

related issues

1.Redress and Compensation

1.1Redress

1.1.1“Adjusted Amount” refers to the difference between the monthly amounts that customers
were charged in respect of their impacted accounts and the monthly amounts that they should
have been charged had the relevant issue identified not occurred.

1.1.2 Loan balances are to be adjusted (the principal balances on impacted customer accounts to be adjusted to the correct level as if the issue giving rise to redress had not occurred and appropriate Tracker Interest Rates had been applied to the accounts from the appropriate time).

1.1.3 Impacted customers are to have the option of receiving direct payments in respect of Adjusted Amounts as opposed to Adjusted Amounts being set off against the balance of their mortgage accounts (see below for when the account is in arrears). These repayments to take into account the time value of money.

1.1.4 The adjustment of loan balances and the Adjusted Amounts to be calculated from the time that the relevant issue occurred. This may be, for example, from the time that the impacted customer should have been able to avail of a Tracker Interest Rate, was erroneously moved from a Tracker Interest Rate or did not have material information brought to their attention by the lender, with the result that the customer made an uninformed decision that led to them losing an entitlement to a Tracker Interest Rate.

1.1.5 Adjusted Amounts due to impacted customers can be offset against arrears owing on the relevant mortgage account, provided the lender is satisfied that it is appropriate to apply setoff in the circumstances.

#### Brendan Burgess

##### Founder
So for a customer not in arrears...

Let's say that they were overcharged €15,000. They actually only overpaid by €10,000 and the balance on their account is €5,000 higher than it should be.

So to put this person back to the position they would have been in, the lender gives back the €10,000 and reduces the balance by €5,000.

For a customer in arrears...
Let's say that they were overcharged by €15,000 but they were in €20,000 arrears.

So, even if they had been charged the correct interest rate, they would still be €5,000 in arrears.

The lender is correct to set the €15,000 against the arrears and reduce the arrears to €5,000.

Brendan

#### Mauritius

##### Frequent Poster
Hi @estuarine: Thank you for highlighting this issue. It's a very important point and not one I fully understand.
You are correct. I received only received compensation (a % of the "overpayment"), €650 for advice, and also the time value- 1% of the "overpayment" figure. The "overpayment" amount was credited to my mortgage account and cancelled out the arrears. @Brendan Burgess will explain further as he understands the complexities of this very well.
@Lightening

#### estuarine

##### Registered User
@Mauritius @Brendan Burgess Thank you very much for those clarifications. Mauritius, obviously the bit I was missing was that you had been in arrears also. It just highlights again the hell that many people have been through in this scandal. I truly hope that the settlement you've received will allow you and your family to move on and look forward to a happy and secure future.

#### Mauritius

##### Frequent Poster
Dear @estuarine thank you so much for your very kind message.
Please let me know when your case gets resolved. All the best for everything. Maur

#### peemac

##### Frequent Poster
The "overpayment" amount was credited to my mortgage account and cancelled out the arrears.
@Mauritius If this cancelled out your arrears, that would mean you would not have gone into arrears if the correct rate was applied, therefore you should request that KBC amends the records that they sent to the ICB and thus restoring your credit record.

#### Mauritius

##### Frequent Poster
@peemac thanks you’re right. I will request that. Though the tracker booklet I received from KBC says they do this as a matter of course.