Do right by the consumer or face consequences –
THE Central Bank of Ireland’s work on tracker mortgages so far shows that lenders wrongly denied around 33,700 customers their tracker mortgages or charged them the wrong rates. Lenders have had to pay €297m in redress and compensation to those customers to date, with more to follow.
This is a critically important result for those customers who ended up paying more than they should have. Some banks have been inexcusably slow in fixing their unacceptable failings which have caused so much hardship for so many people, up to and including the loss of family homes in the most devastating cases.
Many of those same banks put up barriers by relying on narrow interpretations of contracts. As regulators, we relentlessly pursued them in order to force them into doing the right thing by their customers.
We had carried out extensive work on tracker mortgages prior to 2015, pursuing issues in a number of lenders and ensuring 7,100 cases were resolved.
The more we learned in our pursuit of those individual lenders, along with concerns raised by individuals and consumer advocates, the more certain we became that those issues were industry-wide.
That is why the Central Bank set up the industry-wide Tracker Mortgage Examination in 2015. It is by far the largest and most complex consumer protection review we have ever undertaken.
During the course of this review, the Central Bank has succeeded in driving many of the banks to include all known groups of customers in their redress and compensation schemes.
This was done by requiring the CEOs and chairs to account for the conduct of the banks they run. The Central Bank was simply not taking no for an answer.
This has resulted in a big increase in the number of affected customers who will receive redress and compensation.
We have reached a milestone. An additional 13,600 customers have been included by lenders since the September update following challenge from the Central Bank. Of these, 3,700 have already received redress and compensation with more to follow. Of the 13,000 identified to end-September, meanwhile, 9,200 have now received redress and compensation. The majority of outstanding customers in this group can expect to receive redress and compensation by year-end.
We require lenders to put customers back on the right tracker rate, to pay them redress and compensation and to give them the right to appeal to an independent panel.
For those customers who receive their offers in the coming weeks, it is important to understand that you can “cash the cheque’’ and still appeal to your lender if you are unhappy with the offer. Your redress and compensation offer cannot be reduced if you make an appeal.
Affected customers will also receive a separate payment which they can use to pay for independent advice on the adequacy of their lender’s offer. Customers can also turn to the Financial Services Ombudsman, who will deal independently with unresolved complaints, if they are dissatisfied with any aspect of their offer or the outcome of an appeal.
We are now at the point where we believe the majority of customers who were wrongly denied a tracker mortgage or put on the wrong rate have been identified.
But our experience in dealing with some of the banks has underlined the value of our intrusive approach to supervision. That is why we intend to continue the process of challenging the banks, verifying the data they submit to us and completing our inspection programme, involving teams going onsite in the banks to sift forensically through files. This critical work is to ensure that all affected customers are identified, that all our requirements, including stopping the harm to customers, have been met, and that any emerging issues are addressed.
We are committed to using all our powers to hold the banks – and individuals in those banks – to account for their unacceptable behaviour. Three enforcement investigations are in train, and you can expect that all the main lenders will be subject to enforcement investigations.
Bankers need to be able to demonstrate that they put their customers’ best interests at the heart of their business. This approach would build consumer
‘The Central Bank is committed to using all our powers to hold the banks to account for their unacceptable behaviour’
trust and confidence in the lenders – ultimately supporting their long-term business interests. I believe that some lenders still do not have a customer-focused culture, and we are determined to tackle this deficiency head-on. What gets you promoted in a bank – high sales figures or high quality interactions with consumers? Are the right products being sold to the right people? Is there evidence that consumers’ interests are being taken into account when decisions are made in the boardroom? Is the tone from the top signalling the right values to staff?
These are important questions for the Central Bank which has the twin mission of protecting consumers and safeguarding stability.
Earlier this year, we launched an enhanced model to determine how financial firms identify and manage consumer risk.
To supplement this, international leaders in the behaviour and culture of banks are working with us in undertaking a review of our retail banks.
The Central Bank of Ireland expects lenders to demonstrate a consumer-focused culture. I have a clear message for bank boards that have yet to fully embrace this value: Either you change to ensure your practices are truly consumerfocused, or we will force change on you. Derville Rowland was appointed director general (financial conduct) of the Central Bank on September 1