Banks deny ‘spoofing’ the Government on payment break interest
THE head of the banking lobby group has denied that banks were caught “spoofing” the Government on the charging of interest on mortgage payment breaks.
It comes as Finance Minister Pascal Donohoe is to call in the banks to discuss the issue, which has ignited in the past few days.
Chief executive of the Banking and Payments Federation Brian Hayes has defended the sector from accusations that it misled then Taoiseach Leo Varadkar and Finance Minister Paschal Donohoe in a meeting in May.
Bank chief executives and the banking federation had insisted in that meeting that they were required by banking regulators to impose interest charges on those availing of a payment break.
A family with a €300,000 mortgage that takes a sixmonth payment break will end up with a €4,300 interest bill.
Almost 80,000 have availed of the breaks, a move that will mean total interest charges of €150m accrue, to be paid by the mortgage holders.
Banks insist they have no choice but to charge interest while people take a mortgage break. A failure to do so will trip the mortgage account into arrears, banks argue.
However, both the Central Bank and the European Banking Authority (EBA) confirmed on Tuesday that banks are not required to charge interest.
Not charging interest will not trigger a default event, the regulators stated.
Sinn Féin finance spokesman Pearse Doherty accused the banks of misleading the then Taoiseach and Finance Minister at the May meeting.
“You tried to spoof the Taoiseach and the Minister for Finance and you were caught out. You were caught out spoofing and ripping off customers,” he said on RTÉ Radio.
But head of the banking federation Brian Hayes denied misleading the politicians.
“Absolutely not. And the deputy knows he is being totally disingenuous,” he replied. “The pretence that we are doing something different [to what regulators recommend] is a lie.”
It came as Taoiseach Micheál Martin said banks should not profit from Covid-19 mortgage payment breaks.
Highlighting the issue in the Dáil, Labour leader Alan Kelly said interest being charged can lead to significant costs over the lifetime of a mortgage, to the tune of “thousands and thousands of euro” and asked Mr Martin to outline the Government’s immediate plans to ensure mortgage holders “won’t be charged thousands of excessive euro”.
He said: “The Minister for Finance (Paschal Donohoe) will now engage with the banks in relation to this latest clarification from the EBA and the comments of the Central Bank governor”.