Confirmed: Banks to repay TRS To Revenue

SaySomething

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As reported in the Irish Times today, from Minister's questions in the Dail yesterday.:

https://www.irishtimes.com/news/politics/banks-to-pay-millions-to-revenue-in-wake-of-tracker-scandal-1.3284637

I know this was discussed at length before. Once the mortgage accounts are reinstated to the point at which they should be (at the end of redress), the banks will have refund the Revenue Commissioners directly for over claimed TRS on mortgages.

There will be repayment due from affected customers because of the over claim because it happened at bank level.
 

peteb

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Seems a bit unfair for those of us who fought like dogs through the FSO with the banks to get our trackers back and then had to pay our own refunds to Revenue.
 

SaySomething

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Seems a bit unfair for those of us who fought like dogs through the FSO with the banks to get our trackers back and then had to pay our own refunds to Revenue.
I would agree. But if your account was impacted at the time, you should now contact the bank requesting a review (I'm sure you've already done this) as you should be able to request this charge back from the bank. You're probably 'deemed impacted' as part of the review anyway and may receive it in due course....she says optimistically.
 

Mackem

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Am I to assume the reference to taxation in the principles for redress as issued by the Central Bank in 2015 also applies equally to those of us with BTL mortgages who in good faith claimed the higher interest paid as a legitimate expense ?.
 

Sarenco

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Am I to assume the reference to taxation in the principles for redress as issued by the Central Bank in 2015 also applies equally to those of us with BTL mortgages who in good faith claimed the higher interest paid as a legitimate expense ?.
As far as I know, there is still no guidance from Revenue on that issue.

Mind you, I don't think there is any guidance as to whether or not any compensation payments (over and above the redress payments) will be taxable.

https://www.askaboutmoney.com/threads/will-tracker-refund-and-compensation-be-taxable.201278/
 

Emma3003

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I am one of the BOI customers that was charged the wrong rate on my tracker mortgage.

I received my redress letter today and BOI have deducted the TRS overpayment from my refund (€2,200 less €600). This doesn’t seem to be in line with anybody else’s redress package or Pascal Donohoe’s statement.
 

Sarenco

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Hi Emma

Was the €2,200 figure the gross amount of the interest overpayment? In other words, did that €2,200 figure ignore (what turned out to be) the TRS overpayment that you received?

You would hardly expect to receive double the TRS amount plus interest on that amount, plus compensation of double that amount. Would you?
 

Emma3003

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Sarenco,

The €2,200 figure was calculated by subtracting (B) What I should have paid, if I was on the correct rate, from (A) What I actually paid.

I would expect that interest and compensation be calculated on this amount - as this is the money that the bank took from me. Then the TRS should be deducted.

It looks to me like the bank are benefitting from dealing direct with Revenue, as they are deducting the TRS overpayment before calculating interest and compensation, saving themselves a hefty amount. In my opinion, they should pay interest and compensation on the FULL amount that they took from customers, then deduct the TRS.

At least this way, the outcome favours the customer, who was the victim in all this.
 

Sarenco

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Fair enough.

I would have thought it was more logical to run the interest calculations off the net figure (overpayment, less TRS) because that's what you would have actually received if you had been on the correct rate throughout the relevant period.
 

Brendan Burgess

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Can I just clarify my understanding of this?

To establish the principle, let's keep it simple. Ignore interest on the overcharge and compensation.

Say, Bank of Ireland overcharged me €1,000 interest.
I got €200 TRS on this.

So in effect, Bank of Ireland overcharged me €800
and overcharged the Revenue by €200.

I was out of pocket by €800

Bank of Ireland should give me back €800.
And they should give the Revenue back €200.

Is this what is proposed? If so, it seems to me to be the correct way to do it?

Brendan
 

Sarenco

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Bank of Ireland should give me back €800.
And they should give the Revenue back €200.
I think we're agreed on that Brendan but I think Emma's point is that interest (and compensation) should be applied to the €1,000 and the excess TRS should be deducted from that figure (as opposed to calculating interest on the net figure of €800).

So, say, 101% of €1,000 less €200 is €810, versus 101% of €800 which is €808.

I think it's more logical to use the net figure (€800) for the interest calculation because that's the amount by which the borrower would actually have have been out of pocket as a result of the overcharging.
 

Emma3003

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Yes, that’s right Sarenco.

In my opinion, of the two options for calculating interest and compensation, I think the bank should be paying compensation and interest on the full amount they overcharged and took from customers.

I fully understand your thinking Sarenco, that the bank is only responsible for putting things back to the way they should have been for the customer had the overcharge not happened. However, they were not out of pocket in relation to the TRS overpayments. That was between the customer and Revenue, yet it feels like the bank are using this situation to their advantage by effectively offsetting the TRS against their overcharge and reducing their interest and compensation by almost 25% in my case.

I know it is neither here nor there in my case, but I imagine it will make quite a significant difference for others impacted on a much larger scale.

Edit:
Sorry, I should add that I am not actually sure that BOI have actually done this yet, as it is not clear from their breakdown supplied to me.
But if they haven’t, then their calculation for interest and compensation is even lower, and way below what other banks are offering.
 
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Sarenco

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Thanks Emma.

I absolutely agree that it's worth teasing out the basic principle regardless of any individual case (and I do appreciate that we haven't yet seen BOI's workings).

To your point, when the calculation is run across the full cohort of impacted borrowers a seemingly trivial difference at an individual level can become quite a material sum at an aggregate level.

A few other nuances:-
  • Working off a gross (as opposed to a net) figure has a compounding effect over time (although this effect is somewhat muted in a low interest rate environment);
  • If the compensation payment tees off the interest calculation (which seems to be the case) then this has a multiplicative effect;
  • We are assuming that Revenue will not apply a similar interest payment in respect of the excess TRS payments; and
  • We don't know what interest rate was used in the calculation or whether a single weighted average rate was applied across the relevant period.
 

Brendan Burgess

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There really is not basis for BoI to pay the borrower compensation based on more than they were overcharged. None at all. Maybe they should pay compensation to the Revenue?

Brendan
 

Emma3003

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Supposing BOI have calculated as I have suggested:

BOI overcharged the customer by €2,200.
Consequently, Revenue overpaid the customer by €600.

What gives BOI the right to claim credit for Revenue’s overpayment?
Ah yeah, we took €2,200 of your money, but sure lookit, didn’t Revenue give you too much anyway? So really you were only out of pocket by €1,600. Let’s just use that figure when we work out your interest and compensation, as it works out better for us.

BOI took €2,200 and that is the figure they should be using to calculate interest and compensation.

If Revenue decide to claim interest from the customer on the amount they overpaid, then the banks should be liable to cover that cost, due to it arising as a result of their error/failure/mistake (all their own words used in their redress letter). Isn’t that common practice? I’ve heard of cases where a bank error causes a missed payment, and the bank has covered the arising costs for their customer.

If Revenue aren’t claiming interest, which appears to be the case, then why should the bank be the one to benefit, and not the customer?
 

Sophrosyne

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I received my redress letter today and BOI have deducted the TRS overpayment from my refund (€2,200 less €600). This doesn’t seem to be in line with anybody else’s redress package or Pascal Donohoe’s statement.
Emma,

Are you saying that this is the only information that you received from BOI, i.e., that you were overcharged interest in the sum of €2,200 but not how this was calculated?
 

Emma3003

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Emma,

Are you saying that this is the only information that you received from BOI, i.e., that you were overcharged interest in the sum of €2,200 but not how this was calculated?
Not at all Sophrosyne. This thread was about the treatment of TRS. Therefore, I was just giving an outline of how BOI had dealt with mine.

BOI gave a full breakdown of what I was overcharged, alongside their calculations of what I would have paid had I been on the correct rate - approx 6 or 7 pages of detail, dating from Dec 2009 to Jan 2017.

Where the transparency tails off, is in their calculation of the time value interest and compensation. There is no explanation of how they arrived at either figure, and it isn’t clear if they were calculated before or after deducting the TRS from the overcharge.
 

Sophrosyne

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it isn’t clear if they were calculated before or after deducting the TRS from the overcharge.
As you correctly said, mortgage interest relief is a tax credit, which just happens to be applied at source rather than included in your tax credit certificate or claimed by end-of-year review.

Therefore, the interest overcharge and resulting compensation should be based on the gross amount before deduction of TRS.

When that has been calculated, the over-allowance of TRS should then be subtracted.

Perhaps that is what BOI has done, but as you say, it may not be clear from its calculations.
 

noc231073

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This was announced by the minister and the central banks gave direction to the bank that they will be the one to pay the TRS .
I just received my letter of what is owned to me yesterday from BOI and they have deducted 4800 euros for TRS out of the money they owe me ... so were do I stand . if they were directed by the central bank that they were going to take the hit for the TRS payment why the are they hitting me again!!!!!
 
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