The Financial Services Ombudsman has been locked in talks with the Irish Nationwide Building Society (INBS) over the past few weeks following a dispute about the building society's payment of refunds to customers who were charged unlawful penalties for repaying their loans early, writes Laura Slattery.
It is understood that customers who applied to INBS for a refund of early repayment penalties ruled to be unlawful by the ombudsman were sent letters in February giving details of a settlement that fell short of an agreement reached between the ombudsman and the building society last September.
Industry sources told The Irish Timesthat Irish Nationwide was offering these customers a payment that was less than the six months' penalty interest that they were charged.
Following meetings between the building society, the ombudsman and the financial regulator, Irish Nationwide eventually agreed to comply with the ombudsman's direction.
It is understood that the ombudsman, Joe Meade, threatened legal proceedings against the building society before the issue was settled between the two sides last week.
Mr Meade confirmed he had met Irish Nationwide last week to ensure that the actions agreed in the High Court last year were carried out. "I am now satisfied that the refunds will be correct and in line with what we have agreed," he said.
A spokesman for the society said it had no comment to make on individual or specific circumstances. He said the total cost of repaying the six months' interest to borrowers would be €3 million, as indicated by Irish Nationwide chief executive Michael Fingleton at a presentation of the society's annual results on Wednesday.
The spokesman said this settlement cost was fixed and denied suggestions that the eventual settlement would be significantly higher than this sum. It is not known how many customers are eligible for refunds.
A spokeswoman for the financial regulator said it could not discuss individual firms. "We have a memorandum of understanding with the ombudsman if remedial action is required," she added.
This is not the first time that the ombudsman and the building society have clashed over the refunding of the early repayment charges. Irish Nationwide started judicial review proceedings against Mr Meade's office last year following his ruling that the society must refund €30,000 of a €74,000 early loan redemption charge that it had imposed on a commercial borrower.
However, the society dropped its challenge last May after an agreement at the High Court that such charges would in future be "a genuine pre-estimate" of the losses it incurred.
That move triggered applications for refunds from customers who had been charged early repayment penalties in the previous six years.
It emerged later last summer that Irish Nationwide only paid the €30,000 award to the customer after Mr Meade pursued the matter for a second time.
