Former PTSB chief executive David Guinane has been found by a Central Bank-ordered inquiry to have participated in a failure by the bank in 2009 to act in the best interests of certain tracker mortgage customers, breaching consumer protection rules.
The chairman and sole member of the inquiry, UK barrister Peter Hinchliffe, said on Wednesday that he has found “on the balance of probabilities, Mr Guinane participated in PTSB’s failure, during the relevant period, to ensure that it acted fairly in the best interests of its customers”.
Speaking at the beginning of a hearing on whether Mr Guinane should face sanctions, Mr Hinchliffe highlighted, however, that “there is no finding of dishonesty against Mr Guinane” and that he “did not form an intention to harm or take advantage of customers”.
Mr Guinane was also entitled to receive better support from within the wider Irish Life & Permanent Group, of which PTSB was a part at the time, in relation to the tracker-mortgage stance that was subject to inquiry, he added.
“I am extremely disappointed to read the findings of the inquiry member. I have and still maintain that I have done nothing wrong,” Mr Guinane said in a statement to The Irish Times. “I do not accept the findings and am advised by my legal team that these findings are fundamentally flawed and I will be exercising my right to appeal at the earliest opportunity.”
The inquiry was into whether Mr Guinane participated between January 2009 and April 2010 in an alleged regulatory breach when the bank offered a low, original tracker rate to customers coming off a period of fixed rates only after they specifically requested it or complained about it. Public hearings were held early last year.
By not extending the more favourable rates to similar customers who did not complain, PTSB – and, by extension, Mr Guinane – were found by the inquiry to have failed in their obligations under a general principle of the Consumer Protection Code 2006 to act in its customers’ best interests.
PTSB stopped offering tracker mortgages, where rates are linked to the main European Central Bank (ECB) rate, in July 2008, at a time when banks’ funding costs on internal markets were spiralling at the outset of the financial crisis.
The inquiry centred around a special condition – known as special condition 706 – included in the paperwork of some PTSB tracker mortgages from when the bank first offered this product in early 2004. This required customers who moved for a period to a fixed rate to instruct the bank as they came off this rate to put them back on a tracker rate or another fixed product. Otherwise, they would default to a standard variable rate, the inquiry heard when public hearings took place early last year.
The ambiguous wording of the special condition led to questions in early 2009 about whether a customer opting to go back on to a tracker rate after a fixed period was entitled to a loan set at the original margin over the ECB rate, or a higher margin then on offer from PTSB.
The bank adopted a strategy in January 2009, on foot of legal advice, to only put customers who requested the original rate – or complained – on the more favourable rate.
The Central Bank position is that Mr Guinane signed off on the strategy when he responded with the words “okay to that” on January 19th, 2009, to an email from a colleague, which proposed only customers who contacted the bank would be allowed to revert to their original rate. This breached the Consumer Protection Code 2006, which requires financial firms to act in the best interests of customers, the regulator argued during hearings last year.
Paul McGarry SC, for Mr Guinane, argued on Wednesday that the 63-year-old former banker should not face any sanction on a number of grounds, including the claim that he has been “singled out”, as no other banker has faced inquiry for what was an industry-wide scandal.
[ Former PTSB chief being ‘singled out’ in tracker inquiry, hearing toldOpens in new window ]
However, Ailbhe O’Neill SC, for the Central Bank’s enforcement division, denied that the regulators had any policy to single out individuals. Enforcement is seeking sanctions, she said.
Sanctions allowable for the period in which the breach took place include a fine of up to €500,000 and a ban from acting in a management role at a regulated financial firm.
Mr McGarry said it is “inevitable” that the inquiry’s final decision will be appealed. The Irish Financial Services Appeals Tribunal (Ifsat) is the first port of call for an appeal. The outcome of that could face High Court challenge.
The barrister also said that it was “fundamentally problematic” that the inquiry made a “lack of care” finding against his client, when this concept was never explored during the public hearings and questioning of witnesses.
PTSB admitted to 42 separate regulatory breaches in 2019 when it was fined €21 million for its role in the tracker mortgage debacle. Mr Guinane, however, has only been found by the inquiry to have participated in one contravention.
Mr Hinchliffe could not say on Wednesday when he will be in a position to deliver his final decision, including potential sanctions.
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