Permanent TSB Overcharging.

  1. Permanent TSB Overcharging Borrowers

A mortgage is a contract between a customer and a bank; the bank lends the borrower money and the borrower repays the loan each month together with interest until the loan is repaid. A bank’s interest rate determines its profit on the loan. In the main, banks make huge profits on their mortgages.

Approximately 1,400 Permanent TSB borrowers’ mortgages entitled them to lower interest rate tracker mortgages. However as a result of the bank’s actions, these borrowers were forced to pay much higher variable rates for up to 6 years. As a result these borrowers were charged too much interest. The overcharging varies from borrower to borrower but it could have been as much as €900 per month or in excess of €10,000 per year.

To put it as simply as possible, Permanent TSB is required by law reimburse borrowers any amounts they overcharged together with interest. Permanent TSB must also adequately compensate their customers for overcharging them in the first place.

Permanent TSB have sent out letters to all of those affected together with details of their redress scheme.

Their redress scheme offers to do the following:

  1. To move the mortgage to the tracker rate (correct rate).
  2. To repay any amount overcharged (less any arrears on the mortgage).
  3. To provide compensation.
  4. Compensation

Permanent TSB has calculated the compensation payable at approximately 9.5% of the amount overcharged. From a legal viewpoint, Permanent TSB has no right to determine the amount of compensation that should be paid. From a practical point of view, Permanent TSB has no ability to determine the amount of compensation that should be paid. Compensation can only be determined on a case by case basis as the amounts overcharged and effects of the overcharging vary from borrower to borrower.

For example:

If Permanent TSB’s overcharging resulted in a couple’s home being repossessed, how can they quantify what compensation these people should get?

If Permanent TSB’s overcharging resulted in a couple struggling to make repayments over the last few years, how can Permanent TSB quantify the financial pressure, stress and hardship this has caused?

If Permanent TSB overcharged a borrower €40,000 over a 5 year period, how can they quantify the loss of opportunity this has caused? For example, one borrower might have invested this money in shares that have now doubled in value. Another couple may have put this money into a pension which would have entitled them to tax relief on their income. Another couple may have used this additional money to send their child to a private school.

Therefore, it is very important that you consult with your solicitor if you have been overcharged.

Read more about mortgage overcharging

  • Questions & Answers
  • Q. We accepted Permanent TSB’s offer of compensation. They sent us a confusing 13 page letter stating they overcharged us and details of their redress scheme. We didn’t seek legal advice from our solicitor and accepted the compensation. We now think the compensation we received was inadequate. Is there any legal remedy open to us at this stage?
  • A. Yes, even if you accepted the compensation offered you can still pursue Permanent TSB for more compensation. As Permanent TSB has admitted in their 13 page letter that they have overcharged you, you are entitled to sue them for breach of contract (breaching the terms of your mortgage agreement). Any amount Permanent TSB has already paid can be deducted from any court award or any settlement your legal team negotiates for you. We are currently representing a number of borrowers in this position.
    It is important that you contact your solicitor as soon as possible.
  • Q. We received a letter from Permanent TSB advising that they incorrectly have our mortgage on the higher rate and have overcharged us. However, they will not move our mortgage to the lower tracker rate straight away unless we complete and return the Mortgage Instruction Form and accept the compensation offered. Are they allowed to do this?
  • A. No. Regardless of whether or not you want to accept the compensation, Permanent TSB should immediately repay any arrears over charged and move your mortgage to the correct tracker rate. You should consult with your solicitor and seek advice from him or her as soon as possible.

Q&A   The PTSB Overcharging Controversy.

Q. Why were these PTSB customers overcharged?

  1. A. The overcharging row dates back as far as 2008, when the bank was still called Irish Life and Permanent and offered insurance as well as banking.

Affected customers had taken out tracker mortgages with either Permanent TSB or its subsidiary company Springboard Mortgages Limited. Some of them availed of an offer that allowed them to move to a fixed-rate mortgage for a set period – with the agreement that they could move back to their trackers after the time had expired.

Midway through, interest rates started falling. Some customers contacted the bank to see if there was a way to escape their fixed rate early. Crucially, they were told they could do this with no penalty.

The bank failed to inform them that leaving the fixed rate early would mean they could not go back on to a tracker, but would get a standard variable rate instead. So the customers unknowingly lost their tracker mortgages – just as the value of these products was becoming clear.

  1. Q. Why has the bank taken so long to fix this?
  2. A. Resolution of the error has been delayed by a series of appeals Permanent TSB decided to take through the courts. The Financial Services Ombudsman found against it as far back as 2010.

But the bank appealed to the High Court and then, in 2012, to the Supreme Court.

Q&A   The PTSB Overcharging Controversy

In February of this year it abruptly dropped its appeal, as the Central Bank launched an investigation into the matter. But while all this rumbled on, affected customers were forced to continue paying at the standard variable rate – whether they could afford it or not.

  1. Q. How much will the affected customers get?
  2. A. The damage this caused to the affected customers’ lives is hard to quantify. Forced to pay higher interest rates on their mortgages, some lost their homes, some saw their credit rating affected, and some experienced health problems their doctors blamed on stress from financial worries.

The bank hasn’t yet told individual customers how much compensation they will receive, but has said the average payout will be €25,000. People who lost their primary homes directly linked to the bank’s actions will get €50,000 in compensation, while those who lost investment properties will get €25,000.

They will also get a write-down of the remaining balance on their mortgage. All 1,372 affected customers will be contacted by letter over the next two weeks. In the meantime, a reduced interest rate will be applied to their mortgages.

  1. Q. How much will this cost the bank?
  2. A. Up to €86m – mostly paid for by taxpayers, since the State owns 75pc of PTSB. The compensation bill will total €76m, Finance Minister Michael Noonan said, while another €10m in fines could be imposed by the Central Bank.
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Who has been affected?

So far, it seems the people mainly affected by the scandal are those homeowners who were either denied a right to, or the option of, a tracker rate of interest, or the correct tracker rate of interest was not given to them in accordance with their contract.

AIB, for example, says its affected customers were on a tracker interest rate and then moved to a different rate, such as a standard variable rate (SVR) or a fixed rate, or were on a tracker interest rate but their margin increased.

Who has been notified?

As part of the review and investigation, lenders have started writing to their customers informing them of the mistake, advising them of the adjustment to the rate applied on their mortgage, and indicating how much they will be reimbursed.

But it’s important to remember not everyone has yet been notified.

It’s understood that AIB sent out some 2,600 letters in November, but the bank says the process is “ongoing” so new cases could still be identified. Permanent TSB sent out letters to the 1,300 or so of its impacted customers last year but as its mortgage review is also ongoing, the banks say it is still possible it will identify additional customers.

Similarly, Bank of Ireland says it has commenced contacting impacted customers, but its review is “still in progress”; while Ulster Bank says it has not yet contacted everyone as its review is also “in progress” and it will “take a number of months due to the scale and complexity of the review”.

So, there is still potentially a significant number of people who are likely to hear from their lender over the coming weeks and months.

How much am I owed?

If you suspect you were overcharged, you may be anxious to find out how much you will be due back. However it’s not an easy calculation.

An example of someone with a €100,000 mortgage over 20 years at an interest rate of 5 per cent. As the correct rate on the mortgage should have been 4 per cent, the person should be due a refund cheque of some €12,036.

But in addition to the amount people are owed, calculated as the differential in interest between the rate that should have been applied and the rate that was, mortgage account holders are also being offered compensation, but this differs from bank to bank.

Ulster Bank declined to indicate how much it is offering, but it is understood that Permanent TSB is offering 10 per cent, while AIB is offering up to 15 per cent on home loans, and 7.5 per cent on buy-to-let mortgages. Those affected are also being offered a fee towards the cost of professional advice. This means that if you are owed €30,000 from PTSB for example, you could stand to gain an additional €3,000 in compensation.

However, as the process is “ongoing”, those affected may not receive the money owed to them until sometime in 2017.

Remember, if the bank says you were overcharged and tells you by how much, make sure you get a copy of its calculations and either check the figures carefully yourself, or get them verified professionally.

Can I appeal the compensation offered?

Accepting compensation and cashing your cheque shouldn’t mean you’re giving up your rights to appeal the decision. If you feel the compensation offered isn’t sufficient, you can bring a case, where appropriate, to your bank’s appeals panel, the Financial Ombudsman, or the courts. A number of legal firms are understood to be acting for some affected customers.

Read more about mortgage overcharging