Record fine for PTSB but no heads roll

Almost four years after Permanent TSB first admitted a "failure" in its treatment of tracker mortgage customers, it was yesterday fined €21 million by the Central Bank of Ireland for 42 regulatory breaches.

It was a record fine imposed by the regulator, although it might not hold that distinction for too long given that enforcement proceedings are pending against the other domestic lenders in relation to the tracker scandal, and some of those fines are likely to be higher than PTSB’s.

The bank was actually fined €30 million but this was reduced by 30 per cent for good behaviour in co-operating with the enforcement investigation.

There is no turning the clock back for those who lost their homes while most of the 2,007 account holders must have suffered financial stress from the tracker scandal

The Central Bank has the power to fine a bank up to €10 million or 10 per cent of its turnover, whichever is the greater. Based on the PTSB fine, which amounted to around 5 per cent of its turnover in 2018, the final sum levied in fines on the various banks could total between €300 million and €400 million.

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According to the Central Bank, the size of the fine reflected the “gravity” of PTSB’s failings and the “unacceptable harm” caused to its tracker mortgage customers.

PTSB had introduced tracker mortgages products in 2004 before withdrawing them for new customers in July 2008, on the cusp of the global financial crash.

The Central Bank’s investigation found that PTSB did not “adequately protect” the rights of its customers who were either on tracker mortgages at the time of their withdrawal or had a tracker mortgage entitlement in their terms and conditions, with the result that those customers suffered “significant detriment”.

The fine, of course, will be cold comfort to the 2,007 PTSB account holders affected by the bank’s failure to offer them a tracker rate a decade ago, especially the 12 families who lost their homes and the 19 customers who lost their buy-to-let properties.

Taxpayers’ money

Taxpayers, who gave the bank a €2.7 billion bailout in 2011 and who still own 75 per cent of it, are the other losers in this case. Some €15.75 million of this fine is effectively taxpayers’ money.

PTSB has also paid out €54.3 million in redress and compensation to the customers. And it had to pay a €4.5 million fine on the same issue relating to its former subsidiary Springboard Mortgages. All of this makes for a serious destruction in shareholder (taxpayer) value at the majority State-owned lender.

It should be remembered that PTSB initially fought tooth and nail against customer complaints on the tracker mortgage issue.

It took an enforcement investigation by the Central Bank in the middle of 2014 to give the bank pause for thought on the matter.

It wasn't when the Financial Services Ombudsman found against the bank following complaints from a number of account holders, or when the High Court upheld the FSO's ruling in August 2012.

At that time, the bank pressed on with a Supreme Court appeal against four customers who held two mortgages between them. The appeal was only dropped in February 2015.

Initially, PTSB admitted a failure in relation to 1,372 accounts. This figure grew as part of a thorough examination of its mortgage books (110,000 accounts were examined), as part of an industry-wide probe ordered by the Central Bank in late 2015.

This failure isn't confined to PTSB

The Central Bank’s director of enforcement and anti-money laundering, Seána Cunningham, said PTSB had “failed to put their customers first, with distressing and, in some instances, devastating consequences”.

The Central Bank found against PTSB on four counts. It said PTSB failed to warn certain customers that they would lose their tracker mortgage entitlements as a consequence of their request to break early from a fixed or discounted interest rate.

It also found operational and systems failings. “PTSB did not have adequate systems and/or operational controls in place to enable them to meet their contractual and regulatory obligations to certain customers,” the regulator said. “This included over-reliance on manual intervention and a lack of clarity at that time in relation to who was responsible for mortgage products within PTSB.”

In addition, the Central Bank found that PTSB made a decision to deny certain customers their entitlements to the correct lower tracker rate between 2009 and 2010 “unless the customer specifically requested it, or queried or complained”.

And PTSB denied certain customers their “enduring contractual right to a tracker mortgage as a result of PTSB’s incorrect interpretation of the extent of certain customers’ contractual entitlements”.

“We keep giving, so you can keep living,” is Permanent TSB’s current marketing slogan for its mortgage products. The Central Bank’s findings make a mockery of this claim, which must also stick in the throat of those who were impacted by its “failures”.

Financial stress

There is no turning the clock back for those who lost their homes while most of the 2,007 account holders must have suffered financial stress from the tracker scandal.

“At a minimum, customers should be provided with clear and timely information and warnings about their mortgage,” added Cunningham. An annual mortgage statement is about as much visibility as a bank wants to give its customers and only recently have they been required by the regulator to inform customers that cheaper mortgage rates might be available to them.

PTSB chief executive Jeremy Masding apologised "unreservedly" to the customers affected by the tracker issue, and for the "distress caused as a result".

“We are confident that we have fully addressed the operational and procedural weaknesses which have been identified in this exercise and we remain committed to improving our policies and procedures for all customers.”

We’ve heard all of this before from blushing bankers, and Masding’s apology will cut little ice with customers.

As noted by a number of commentators, nobody within the ranks of PTSB has been held accountable for this major failing. At least not publicly.

"Until such time as that happens there will be no real motivation to do the right thing by consumers," said Diarmuid Kelly, chief executive of Brokers Ireland.

This failure isn’t confined to PTSB. Some 39,800 mortgage accounts across a raft of lenders have been impacted, with the banks setting aside €1 billion to deal with the issue.

PTSB has walked the plank first but other lenders will be forced to do the same in due course. The real shame is that consumers seeking a mortgage today have little choice but to deal with the very same banks who have acted so disgracefully towards their tracker customers.