The banks need to be taught a lesson... so why can’t we have an Erin Brockovich class action here?
As the extent of the tracker scandal becomes clear getting justice for those who suffered will be hard
It’s déjà vu all over again. That immortal line from US baseball legend Yogi Berra sums up the latest tracker mortgage scandal. It has highlighted issues that we’ve seen before and, apparently, will see again – and again. Because little has been done to address their root cause: the failure to police banks and provide proper redress to wronged consumers.
The litany of abuses inflicted on up to 30,000 tracker mortgage holders is well documented. Alas, this is the tip of the iceberg. Tracker borrowers suffered so much because they went from a very low tracker mortgage to an extremely high Standard Variable Rate (SVR) – the root cause of the problem.
Yet, while tracker holders at least had a break while they were on the right rate – more than 300,000 people haven’t paid anything else but a penal SVR of up to 4.5%!
Even the average SVR, used in our comparison, is a painful 3.94% – more than double the eurozone average.
A tracker borrower with a €300,000 mortgage would lose out to the tune of €443 a month if put on an average SVR.
Yet an SVR payer also forks out €326 a month more than elsewhere in the eurozone – and this is perfectly legal.
The respective differences per year are €5,316 and €3,912.
There are at least ten times more SVR victims who will never get any form of redress. Forty thousand of them are in arrears.
To rub salt in the wound, forcing banks to pay for the tracker scandal could dash their hopes of further interest rate cuts.
The €500m cost of the tracker scandal and any increase in the bank levy will simply be passed on to them.
They even have less chance of tax cuts next year because the scandal knocked more than €440m off the collective worth of bank shares – and around €165m off the Government’s stake in Permanent TSB, Bank of Ireland and AIB.
Levying big fines on banks that will just be passed onto customers isn’t going to stop them from misbehaving.
What might is identifying the individual miscreants and calling them to account.
This is something the Central Bank shies away from but should consider in this case.
It has discussed possible Garda action.
‘Calling the guards’ is usually the last resort of citizens when faced with unacceptable behaviour by bowsies or criminals.
But not, alas, when it comes to alleged fraud.
The gardaí have a poor record of dealing with white collar crime. Look at the fiasco of the Anglo Irish Bank investigation.
Little wonder. As of last December, the Garda’s fraud division had two accountants on their staff, neither listed as forensic accountants. Two forensic specialists – vital in such cases – were due to be recruited but this hadn’t been confirmed as the Irish Mail on Sunday went to press.
How long will it take them to get through the tracker scan- dal involving 15 lenders and up to 30,000 consumers?
Whether fraud did or didn’t occur in the tracker scandal is something we will never know – unless we beef up our ability and willingness to prosecute it.
Another issue raised by the tracker scandal is the difficulty faced by individuals in getting their cases into court.
In fairness to the Central Bank, it got things moving.
Without its investigation, wronged customers would never have known about it, or would perhaps have been left with the prospect of having to take the bank to court on their own, risking further financial ruin.
Maybe 1,000 would have won their case but the remaining 29,000 would have lost or would never have gone to court in the first place, said consumer advocate Brendan Burgess, of www. askaboutmoney.com.
Mr Burgess called for legal reform to pave the way for class actions. These allow hundreds, or even thousands, of individuals to collectively fund a single action.
By pooling resources and spreading costs, the little guys can take on big corporations.
Anyone who saw the movie Erin Brockovich will know their value.
They not only make great drama – but also great justice.
Brockovich, a legal clerk, took a case on behalf of 634 people who had suffered appalling health issues from contaminated water supplies. She won settlements totalling €344m.
Similar US cases by lung cancer victims won billions in settlements for cancer victims against ‘big tobacco.’
This type of class action would be ideal for dealing with huge scan-
‘By pooling resources and spreading costs, the little guys can take on big corporations’
dals. When tens, or even hundreds of thousands, of cases are involved, the capacity of the courts, banks or regulators to deal with an issue on a case by case basis tends to get swamped.
However, if a single legal case could be taken by many, it could be largely resolved in one go.
Alas, class actions are largely a US phenomenon. ‘There is no legislative framework in Ireland to facilitate class actions,’ according to solicitors Matheson.
There is a possibility of taking multi-party litigation. However, many obstacles to such actions remain as moves to reform the law have stalled.
More than 10 years have passed since the Law Reform Commission recommended that a formal procedural structure be put in place to deal with multi-party litigation.
However, this recommendation has yet to be implemented and does not form part of the government’s current legislative programme, Matheson explained in a recent online article.
So if you want to take on a bank in court to get justice – you are pretty much on your own.