Brendan Burgess
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From the Central Bank's appearance at the Oireachtas Finance Committee. Full transcript
Ms Derville Rowland: I have some information to assist the committee understand where this has landed. At the entry level, if I may call it that, are some of the marginal cases or cases for a short duration. It may have been an error for a number of weeks and one might end up with small sums. It could be a few hundred euro. That is at the entry level.
The committee has also heard about advice payments. However, everything scales up the more severe the detriment. Then we move into the category where I think most people affected will fall. The range of compensation is between 10% and 15%, depending on what the lender arrived at. Some put floors in the system. For example, there would be a minimum payout of €1,000. Others did not. The minimum ranges might be between €125 to, say, €1,500, but they are in a scale of percentages.
Then we move up to the next level where, at the highest point, we have the loss of one's home. We had to do a huge amount of fighting with the lenders to improve the schemes. We had that conversation in October. My colleagues had in excess of 200 turns of documents to try to keep improving the offers where there was desire not to have any compensation at all, which was utterly unacceptable. It was to push them to minimum levels. By and large, we pushed for a minimum cash payment of approximately €50,000 for everyone who suffered the appalling circumstance of losing his or her home, which should not have happened.
Senator Gerry Horkan:
Is that compensation on top of the value-----
Ms Derville Rowland: It is compensation to try to assist with the misery that all of this caused, although there are other elements to it too. Then there are payments for the increase in the property value, if that has occurred since, and any residual debt write-off because people may have been in difficulties. This is where the banks caused the loss of the home ownership, that is, but for the behaviour of the bank they would have been able to pay their mortgage at a lower and correct rate. This is where causation has been accepted by the lenders. It is important to say that we are going to test the banks hard on that. It is very important that they take full responsibility for all of the homes lost as a result of their conduct. That is another feature of our intensive intrusive supervisory stage that we are now entering. We are going to inspect the ones that they do not take responsibility for - not the ones that they do - to be assured about the numbers. Therefore, we might see the number in that category quite rightly increase. If caused by the lenders, they will be forced to take responsibility for it. It is important to say that the scale of legal payments and advisory payments also should quite rightly increase the more the detriment suffered. There is also provision in the schemes for vouched expenses where it goes beyond the caps. This is important because these things can be complex.
Chairman: Will Ms Rowland go through those headings again? If a customer loses a house valued at €200,000, what is the Central Bank expecting to happen?
Ms Derville Rowland: At a minimum the customer can expect to be properly redressed and compensated for all the impacts and detriment that happened. I am not saying these are ceiling amounts. By and large, one can see across all of the lenders' schemes a minimum that we pushed-----
Chairman: With the house worth €200,000, what can the customer expect?
Ms Derville Rowland: The customer should expect a payment for any increase in the property value since the loss of the home. If the customer should have not lost the home, he or she should be entitled to any uplift in the value of the property. Further, people were left with residual debt with the lenders after this happened and we did not think that was right either. Therefore, we also pushed that it should be written off so that people do not have to deal with the overhang. To try to assist somewhat with the wrong circumstances people find themselves in, we pushed the lenders to accept that they should make a cash payment of €50,000 to families who need it. This is with respect to home loss caused by the lender's conduct.
Professor Philip Lane: That is the situation now. We expect that in the case of anyone who has lost their home, we will test that through appeal.
Chairman: Before the witnesses finish that matter, is it not the case that there are other things? There are vouched expenses.
Ms Derville Rowland: Yes.
Professor Philip Lane: To assist in bringing the appeal or whatever else someone wants to do, the amount of legal support for someone losing his or her home will be much greater than if someone is querying a margin, for instance. There is a mix between having upfront payment to pay lawyers or some upfront payment plus the covering of reasonable expenses such that as the individual submits lawyers' bills, the bank will pay them. There is a range there.
Of course the most acute cases involve the loss of home. The schemes are designed to provide reassurance to those who have been affected that they will have redress, not only in respect of the consequences of losing the home but will also be compensated.
Senator Gerry Horkan: On legal action and the solicitors for which the Central Bank is paying, the banks are ultimately paying for legal people to go in and advocate on behalf of people. They will ensure that in a case where a client lost a house that was worth €400,000 when he or she lost it but which would cost €700,000 now, were the client to try to buy it back, that client would receive €700,000. The Central Bank is not going around buying properties for people but is compensating them to the extent that they could buy them themselves.
Ms Derville Rowland: That is very important. It is the causation. Considering the harm caused to a family by the conduct of the lender where the home was lost to them as a result of that, as well as the consequences that flow from that, it is absolutely right that the banks should stand full square and shoulder that and that a family should be put into the position in which they should have been, had this not occurred to them.
Professor Philip Lane: Plus compensation.
Ms Derville Rowland: Yes. There is all the damage, the emotional and family distress that occurred, which is very important. What is also very important is that the banks treat these families sensitively and prioritise them and progress these claims in order that people are not further distressed by delay. That is something that we are very mindful of and I have been very clear in my communication with the leaders of the banks that we expect that to happen and that families be assisted and dealt with proactively and sensitively.
Senator Gerry Horkan: It is important that we acknowledge that. I was not aware that the system was as has been outlined today, and I am glad to hear that it is, but we still need to acknowledge the mental trauma and anguish, regardless of whatever monetary compensation is put in place, as it should be. We have discussed previously how people have committed suicide and lost family members and how many families have experienced breakdowns. They will never be able to be compensated for what should never have happened and what was not their fault. They were duped by the institutions they trusted to give them a financial product that they were going to repay over a period and were put under such pressure. Regardless of whatever monetary compensation is paid and should be paid - I note much of it is their own money, although I accept that compensation for increased property values is a cost to the bank - it should never have happened in the first place.
I acknowledge the process and thank the witnesses for outlining it but I still wonder if the Central Bank has figures which show the ranges of payments. There are 33,000 clients, of which some 13,000 are unresolved cases and payment has not been made, and then there are around 20,000, including the first 7,100 to whom payments have been made. Does the Central Bank have figures showing, for instance, that so many people were paid below €10,000, €20,000, €30,000 and all the way up? What is the top payment made to anyone as a result of this scandal? Do we know that figure?
Professor Philip Lane: We have given the committee aggregate figures in order that members can work out the average payment. It is a good question to explore with the individual banks as they come in because they will have full sets of their data.
Senator Gerry Horkan: Does the Central Bank have the data?
Professor Philip Lane: We have aggregated data. Remember, ultimately, the banks are responsible. We have provided minimal guidance and told the banks that they must have followed the principles that we have just outlined but we have always made sure to maintain the focus that the ones who are responsible and need to be held to account to ensure that the level of payout is appropriate are the ones who caused the problem, namely, the banks. As the banks come before the committee and through any questionnaires the committee gives them, it may explore not only the aggregate figures but how they have dealt with the full range of cases.
Senator Gerry Horkan: We are a finance committee. We all know that averages can hide as much as they show up. If one divides the €47 million first tranche of compensation by the 7,100 clients, it works out at around €6,000 each. Then it increases to about €18,000 each and the last batch seems to be about €22,000 each, but within that there are people who received €100 and there could be people who received €200,000. Professor Lane is saying that the Central Bank does not have those figures. Is it the case that the banks have not told the Central Bank those figures or that the Central Bank cannot provide them to the committee?
Professor Philip Lane: The Senator may have noticed as this has moved along how, back in October, the 13,000 cases that the banks had accepted were broadly split between wrong margin and being denied a tracker rate. Being denied a tracker rate is much more costly. What we have now is three-quarters of the cases are those who were denied a tracker rate. There are more big cases now compared with earlier.
Senator Gerry Horkan: So what is left is bigger than what was paid out.
Professor Philip Lane: Exactly. We have more big cases coming through.
Professor Philip Lane: That has to be the case. How else could it be?
Senator Gerry Horkan: That is the question I am asking because until now I did not know that.
Professor Philip Lane: Okay.
Ms Derville Rowland: I have some information to assist the committee understand where this has landed. At the entry level, if I may call it that, are some of the marginal cases or cases for a short duration. It may have been an error for a number of weeks and one might end up with small sums. It could be a few hundred euro. That is at the entry level.
The committee has also heard about advice payments. However, everything scales up the more severe the detriment. Then we move into the category where I think most people affected will fall. The range of compensation is between 10% and 15%, depending on what the lender arrived at. Some put floors in the system. For example, there would be a minimum payout of €1,000. Others did not. The minimum ranges might be between €125 to, say, €1,500, but they are in a scale of percentages.
Then we move up to the next level where, at the highest point, we have the loss of one's home. We had to do a huge amount of fighting with the lenders to improve the schemes. We had that conversation in October. My colleagues had in excess of 200 turns of documents to try to keep improving the offers where there was desire not to have any compensation at all, which was utterly unacceptable. It was to push them to minimum levels. By and large, we pushed for a minimum cash payment of approximately €50,000 for everyone who suffered the appalling circumstance of losing his or her home, which should not have happened.
Senator Gerry Horkan:
Is that compensation on top of the value-----Ms Derville Rowland: It is compensation to try to assist with the misery that all of this caused, although there are other elements to it too. Then there are payments for the increase in the property value, if that has occurred since, and any residual debt write-off because people may have been in difficulties. This is where the banks caused the loss of the home ownership, that is, but for the behaviour of the bank they would have been able to pay their mortgage at a lower and correct rate. This is where causation has been accepted by the lenders. It is important to say that we are going to test the banks hard on that. It is very important that they take full responsibility for all of the homes lost as a result of their conduct. That is another feature of our intensive intrusive supervisory stage that we are now entering. We are going to inspect the ones that they do not take responsibility for - not the ones that they do - to be assured about the numbers. Therefore, we might see the number in that category quite rightly increase. If caused by the lenders, they will be forced to take responsibility for it. It is important to say that the scale of legal payments and advisory payments also should quite rightly increase the more the detriment suffered. There is also provision in the schemes for vouched expenses where it goes beyond the caps. This is important because these things can be complex.
Chairman:
Will Ms Rowland go through those headings again? If a customer loses a house valued at €200,000, what is the Central Bank expecting to happen?Ms Derville Rowland: At a minimum the customer can expect to be properly redressed and compensated for all the impacts and detriment that happened. I am not saying these are ceiling amounts. By and large, one can see across all of the lenders' schemes a minimum that we pushed-----
Chairman:
With the house worth €200,000, what can the customer expect?Ms Derville Rowland: The customer should expect a payment for any increase in the property value since the loss of the home. If the customer should have not lost the home, he or she should be entitled to any uplift in the value of the property. Further, people were left with residual debt with the lenders after this happened and we did not think that was right either. Therefore, we also pushed that it should be written off so that people do not have to deal with the overhang. To try to assist somewhat with the wrong circumstances people find themselves in, we pushed the lenders to accept that they should make a cash payment of €50,000 to families who need it. This is with respect to home loss caused by the lender's conduct.
Professor Philip Lane: That is the situation now. We expect that in the case of anyone who has lost their home, we will test that through appeal.
Chairman:
Before the witnesses finish that matter, is it not the case that there are other things? There are vouched expenses.Ms Derville Rowland: Yes.
Professor Philip Lane: To assist in bringing the appeal or whatever else someone wants to do, the amount of legal support for someone losing his or her home will be much greater than if someone is querying a margin, for instance. There is a mix between having upfront payment to pay lawyers or some upfront payment plus the covering of reasonable expenses such that as the individual submits lawyers' bills, the bank will pay them. There is a range there.
Of course the most acute cases involve the loss of home. The schemes are designed to provide reassurance to those who have been affected that they will have redress, not only in respect of the consequences of losing the home but will also be compensated.
Senator Gerry Horkan:
On legal action and the solicitors for which the Central Bank is paying, the banks are ultimately paying for legal people to go in and advocate on behalf of people. They will ensure that in a case where a client lost a house that was worth €400,000 when he or she lost it but which would cost €700,000 now, were the client to try to buy it back, that client would receive €700,000. The Central Bank is not going around buying properties for people but is compensating them to the extent that they could buy them themselves.Ms Derville Rowland: That is very important. It is the causation. Considering the harm caused to a family by the conduct of the lender where the home was lost to them as a result of that, as well as the consequences that flow from that, it is absolutely right that the banks should stand full square and shoulder that and that a family should be put into the position in which they should have been, had this not occurred to them.
Professor Philip Lane: Plus compensation.
Ms Derville Rowland: Yes. There is all the damage, the emotional and family distress that occurred, which is very important. What is also very important is that the banks treat these families sensitively and prioritise them and progress these claims in order that people are not further distressed by delay. That is something that we are very mindful of and I have been very clear in my communication with the leaders of the banks that we expect that to happen and that families be assisted and dealt with proactively and sensitively.
Senator Gerry Horkan:
It is important that we acknowledge that. I was not aware that the system was as has been outlined today, and I am glad to hear that it is, but we still need to acknowledge the mental trauma and anguish, regardless of whatever monetary compensation is put in place, as it should be. We have discussed previously how people have committed suicide and lost family members and how many families have experienced breakdowns. They will never be able to be compensated for what should never have happened and what was not their fault. They were duped by the institutions they trusted to give them a financial product that they were going to repay over a period and were put under such pressure. Regardless of whatever monetary compensation is paid and should be paid - I note much of it is their own money, although I accept that compensation for increased property values is a cost to the bank - it should never have happened in the first place.I acknowledge the process and thank the witnesses for outlining it but I still wonder if the Central Bank has figures which show the ranges of payments. There are 33,000 clients, of which some 13,000 are unresolved cases and payment has not been made, and then there are around 20,000, including the first 7,100 to whom payments have been made. Does the Central Bank have figures showing, for instance, that so many people were paid below €10,000, €20,000, €30,000 and all the way up? What is the top payment made to anyone as a result of this scandal? Do we know that figure?
Professor Philip Lane: We have given the committee aggregate figures in order that members can work out the average payment. It is a good question to explore with the individual banks as they come in because they will have full sets of their data.
Senator Gerry Horkan:
Does the Central Bank have the data?Professor Philip Lane: We have aggregated data. Remember, ultimately, the banks are responsible. We have provided minimal guidance and told the banks that they must have followed the principles that we have just outlined but we have always made sure to maintain the focus that the ones who are responsible and need to be held to account to ensure that the level of payout is appropriate are the ones who caused the problem, namely, the banks. As the banks come before the committee and through any questionnaires the committee gives them, it may explore not only the aggregate figures but how they have dealt with the full range of cases.
Senator Gerry Horkan:
We are a finance committee. We all know that averages can hide as much as they show up. If one divides the €47 million first tranche of compensation by the 7,100 clients, it works out at around €6,000 each. Then it increases to about €18,000 each and the last batch seems to be about €22,000 each, but within that there are people who received €100 and there could be people who received €200,000. Professor Lane is saying that the Central Bank does not have those figures. Is it the case that the banks have not told the Central Bank those figures or that the Central Bank cannot provide them to the committee?Professor Philip Lane: The Senator may have noticed as this has moved along how, back in October, the 13,000 cases that the banks had accepted were broadly split between wrong margin and being denied a tracker rate. Being denied a tracker rate is much more costly. What we have now is three-quarters of the cases are those who were denied a tracker rate. There are more big cases now compared with earlier.
Senator Gerry Horkan:
So what is left is bigger than what was paid out.Professor Philip Lane: Exactly. We have more big cases coming through.
Professor Philip Lane: That has to be the case. How else could it be?
Senator Gerry Horkan:
That is the question I am asking because until now I did not know that.Professor Philip Lane: Okay.