Allied Irish Bank Fined €83,300,000 by the Central Bank of Ireland for Tracker Mortgage Breaches
The Central Bank of Ireland has fined Allied Irish Bank (AIB) €83,300,000 for a series of significant and long-running failings in the treatment of its tracker mortgage customers.
A statement from the Central Bank said that AIB’s failings caused unacceptable harm and loss to those impacted customers over the course of nearly 18 years. Thousands of customers were overcharged, customers lost 53 properties, 13 of which were family homes.
According to the Central Bank, the actions of AIB had devastating consequences for its customers.
Tracker mortgages were widely on offer in Ireland during the economic boom years prior to the economic crash in 2008. Interest rates on tracker mortgages typically tracked the interest rate set by the European Central Bank (ECB). The mortgages proved to be highly beneficial for homeowners as the ECB rates remained low but were loss-making for banks as the interest charged was less than the cost to the bank of funding the loans.
The Central Bank described the actions of AIB as ‘a litany of failings’ with Director of Enforcement and Anti-Money Laundering, Seána Cunningham saying, ‘The Central Bank has imposed a significant fine on AIB in respect of serious and long running failings in meeting its obligations to its tracker mortgage customers. The consequences of AIB’s prolonged failings were serious and included significant financial strain and distress for those affected and their families.’
He said, ‘Our investigation found that when AIB withdrew its tracker mortgage offering there was no proper regard or concern for the impact on its customers. What followed was a litany of failings where customers were wrongly denied their tracker entitlements and others lost their tracker rates due to AIB’s deficiencies in its provision of day-to-day mortgage services…’
AIB introduced the tracker product to its suite of mortgage product offerings in October 2002. When AIB withdrew the tracker product on 10 October 2008, it also ceased to offer a tracker rate to its existing customers who had contractual entitlements to avail of or return to a tracker rate in their mortgage agreements. The withdrawal of the tracker product was consistent with decisions taken across the banking industry, which saw a number of other lenders withdraw tracker products from their offering. It was not until 5 December 2013 that AIB re-introduced a tracker rate for certain customers on a go-forward basis only.
The latest fine imposed is separate from the more than €125,000,000 that AIB has been required to pay to date in redress, compensation and account balance adjustments to impacted customers, including as part of the Central Bank’s Tracker Mortgage Examination (TME). The TME was established by the Central Bank as an industry-wide review in 2015 to ensure that lenders were providing tracker customers with their tracker mortgage entitlements and to address any circumstances in which they were not.