Permanent TSB (PTSB) was dealing with “lots of fires” and felt like it was fighting for “its very survival”, when a decision was taken in January 2009 on tracker mortgage customers that would lead to its then chief executive facing an enforcement investigation, an inquiry into the matter heard on Thursday.
Niall O’Grady, PTSB’s marketing manager at the time, told the Central Bank of Ireland-ordered inquiry into an alleged regulatory breach by the lender’s then chief executive, David Guinane, that the marketing department was mainly focused on attracting deposits when a tracker-loan query “unusually” landed with his team.
The query a mortgage broker centred around whether a PTSB customer who had taken out a tracker loan with the bank, but opted to take out a fixed rate for a period, could revert to their original tracker rate, priced at a 0.9 percentage point margin over the European Central Bank’s main rate.
“There were lots of fires that were burning in the business at the time,” Mr O’Grady told the inquiry. “The business did feel like it was under pressure at this stage for its very survival.”
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The query related to whether the wording of a clause in a loan document of the borrower and 10,000 others — known as special condition 706 — and whether a customer electing to revert to a tracker rate after a fixed period was entitled to their original margin over the ECB rate, or a higher margin being offered at that stage by the bank.
A move by a member of the marketing team to seek the views of various departments — including in-house legal, compliance and operations officials — resulted in a position that while the wording of the condition was ambiguous, the borrower was “incorrect” in assuming that they were entitled to their original margin, Mr O’Grady told the inquiry. Still, it was decided that an exception be made to give the customer the benefit of their interpretation of the working.
[ Former PTSB chief being ‘singled out’ in tracker inquiry, hearing toldOpens in new window ]
The inquiry went into private session on Thursday afternoon as it discussed internal legal advice on the issue from 2009, over which PTSB has claimed privilege, but has allowed to be reviewed in-camera.
However, the investigation had heard on Wednesday — from John Breslin SC of the legal practitioner team supporting the inquiry — that Mr O’Grady forwarded a proposal to Mr Guinane on January 16th 2009, on foot of internal legal advice. This proposed only customers who actually contacted the bank requesting the original margin should be offered the more favourable rate.
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Mr Guinane responded three days later with the words, “okay to that” the inquiry heard.
The central bank alleges PTSB — and by extension, Mr Guinane — treated customers who did not request the lower rate unfairly and contrary to their best interests.
The regulator claims this breached a principle of the Consumer Protection Code 2006 which requires financial firms to act “honestly, fairly and professionally in the best interests of its customers”. The central cank does not suggest that PTSB or Mr Guinane acted dishonestly.
Mr Guinane denies that PTSB or he breached regulations. The inquiry is set to run until March 15th and is scheduled to hear from 12 witnesses in total, including Mr Guinane.
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