Ulster Bank is still working to make contact with some of the 90,000 current and former customers it overcharged on their mortgages months after first disclosing the latest widespread problem in its home lending operations.
Customers, most of whom have now left the bank as it winds down its Irish operations, have been told that they may have had their mortgage spread over a longer period than agreed, incurring extra interest charges.
The bank will also incur millions of euro in charges to cover goodwill payments and sums to recognise it wrongly had use of customers' money, in some cases for more than a decade.
The bank was unable to explain why it has taken months to make contact with customers, including some who remain at the address the bank would have had for them on file.
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The letters say the bank made mistakes calculating the normal monthly payment homeowners should be paying on their mortgages.
These payments need to be recalculated every time a mortgage loan is affected by a change in interest rate or when the mortgage holder makes a lump-sum payment against the loan or makes changes to extend or reduce the term of the loan.
The end of a payment break or some other “forbearance arrangement” on loans where the mortgage holder has been struggling to meet payments will also require a recalculation of how much needs to be paid each month.
When the bank gets its sums wrong, it affects the interest that is applied to the loan.
In Ulster Bank’s case, it concedes that its mistakes meant that the monthly payment was lower than it should have been. The effect of this was that the mortgage balance did not fall as quickly as it should and therefore attracted more interest charges than it should have.
[ 90,000 Ulster Bank customers to be contacted over mortgage payments errorOpens in new window ]
The bank is offering customer a payment broken into two components.
The first is a refund of the interest the homeowner was overcharged “plus an amount to recognise the time the money was not available to the account holder(s)” – in some cases spanning a decade.
The bank has also offered a goodwill payment. In the letters seen by The Irish Times, this amounts to €40, which could see the bank facing a bill of more than €3.5 million for its mistake.
However, to get their money, the affected customers must contact the bank on one of two phone numbers they are given to confirm their up-to-date details. This would include their new bank accounts.
The bank says it will also want from customers some information about the mortgage that was held with the bank.
Failure to get in touch will see the bank hold on to the proposed payments. The bank said the average amount overcharged was about €50.
The Ulster Bank accounts attached to the affected mortgages are no longer active as the mortgages have either been paid off – some many years ago – or transferred elsewhere as the bank comes close to the end of its winding down of operation in the Republic.
A spokesman for the bank said Ulster Bank was “working closely with all financial institutions who have purchased and/or are servicers of Ulster Bank mortgage portfolios to rectify the matter”.
“The payment that is being made to customers ensures that no current or former customer is out of pocket as a result of this issue,” they added.
About one in 12 of the bank’s customers was affected by this overcharging.
Ulster Bank was one of the lenders affected by the tracker mortgage scandal which saw it fined a then record amount of €37.8 million by the Central Bank, which said it had devised “deliberate” strategies to shift borrowers off cheap mortgages during the financial crisis and rectify matters only for those who complained.
Ulster Bank paid more than €128 million in refunds and compensation to about 6,000 overcharged customers in that instance. The numbers affected by the latest overcharging are far higher though the sums involved are much more modest.
