AIB’s treatment of 4,000 of its customers as part of the Tracker Mortgage Examination needs to be more robustly challenged by the Central Bank, according to Fianna Fáil Spokesperson on Finance Michael McGrath TD.
Deputy McGrath commented, “Last December, AIB included an additional 4,000 customers in its tracker redress programme under pressure from the Central Bank. These are customers who typically started out their mortgage on a fixed rate of interest but who had an entitlement at the end of that period to go on a tracker at the ‘prevailing rate’. The ‘prevailing rate’ was not defined in the mortgage contract but the contract did specify that the tracker was the ECB rate plus a margin (which remained undefined in the documentation).
“These customers were never offered a tracker mortgage following the expiry of their fixed rate period because the bank had withdrawn the tracker product at that stage. However, they had a contractual entitlement to be offered a tracker rate and this was denied them. The Bank now claims that the tracker rate it calculates they would have been entitled to be offered was 7.9% due to high funding costs – dramatically above the variable rate at the time – and therefore the customers suffered no ‘financial detriment’.
“However, the bank is now paying these customers €1,000 in compensation and €615 towards professional advice as a result of this breach of contract. It would appear the Central Bank is backing AIB’s interpretation of the ‘prevailing rate’ and believes it is fulfilling its obligations.
“AIB acknowledges it breached these customers’ contracts. However, I believe its interpretation of this ‘prevailing’ tracker rate needs to be challenged. A 7.9% tracker mortgage rate never existed. It has been manufactured to enable AIB to reach the conclusion that these customers suffered no loss.
“If the spirit of the Tracker Mortgage Examination is to be upheld, where the bank breaches the terms of the contract, the interpretation of contractual clauses should favour the customers. The 7.9% rate is a concoction and it needs to be vigorously challenged by the Central Bank,” concluded McGrath.