Central Bank compared to a ‘dog that doesn’t bark’ in tracker controversy

The Central Bank was likened to the "dog that doesn't bark" at the Oireachtas committee over its dealings with 11 banks who wrongly took customers of tracker mortgages.

When Sinn Féin TD Pearse Doherty asked the governor Philip Lane if the Central Bank had powers to force banks to restore tracker mortgages to people who are still overpaying, the governor said the bank did not have such a power.

Mr Lance said if there was a dispute between the Central Bank and a financial institution over whether someone belonged in the compensation and redress scheme connected to the tracker mortgage scandal, the regulator could not simply insist that the customer was put into the compensation scheme.

He said the regulator would instead make the banks identify the customers by name and write to them informing them of their rights to go to the Financial Services Ombudsman or the courts to challenge the bank’s decision.

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He said if the Central Bank were to take legal action in all such cases to force a bank to behave in a particular way, it would slow the process significantly.

“Any adversarial process is going to take a long time,” he said. He suggested that “rather than get into a legal dispute, which is going to take a long time to resolve, it is much better to persuade the banks on a voluntary basis to make a full, decent and upfront offer.”

He also told the committee the bank’s legal powers were “in reserve”.

Mr Lane pointed out that the Central Bank had been successful in some cases in changing the mind of banks over individual customers although he said there “remains cohorts where we think the banks should be conceding further”.

Mr Doherty said he was “shocked” at the response and said it was insufficient to tell somebody who is in dispute with a bank over being forced off a tracker that they could write to the Financial Services Ombudsman which, he pointed out was “in itself a lengthy” process”.

He said by telling affected customers they would need to “go to another agency of the State was … a dereliction of your duty under consumer protection” and added that if the Central Bank did not have the power to force financial institutions to restore people to their tracker mortgages it was a case of “the dog that won’t bark”

Mr Doherty said such an approach was sending out “a terrible signal to financial institution.”

When Mr Lane was asked about the bank customers who have not yet been brought into the compensation and redress system, he said could not “give too much guidance beyond saying it is significant”.

Fianna Fáil TD Michael McGrath said the ultimate cost of redress and compensation for all of the affected people could rise to as much as half a billion euro and said it would be "one of the greatest consumer rip-offs in our State".

He asked Mr Lane what the approach of the banks had and was told “there was not a collective and uniform approach” by the financial institutions.

He said some banks had put a lot of resources into dealing with the issue while in other instances had been “a lot more resistance with banks taking a narrow view of who has been affected and not offering redress”.

Mr McGrath said he did not believe the had scandal unfolded by accident and he questioned how all of the banks appeared to have made the same mistakes and face the same problem at the same time.

Mr Lane said there was an issue with the culture of the banking system. “We do think there is a common culture across the banks, which is that if there is any doubt or ambiguity about how to interpret a contract, they interpret it in the bank’s favour.”

He added he believed that the banks had a culture of seeking profitability at the detriment of their customers.

Mr McGrath also asked when customers who had been identified by the banks would receive their redress and compensation.

Mr Lane said he believed “a lot is going to happen between now and the end of 2017 and the early months of 2018. It is for the banks to ensure they satisfy their customers as quickly as possible, but a lot is going to happen in the next few months.”