Borrowers who were charged unlawful penalties at Irish Nationwide Building Society (INBS) must have their rights protected under the Building Societies Bill, campaigners Brendan Burgess and Eddie Hobbs said yesterday.
The Bill, which will allow for the demutualisation and sale of INBS, is expected to be pushed through the Dáil today.
However, Mr Burgess and Mr Hobbs are seeking amendments so that it includes a provision for part of the proceeds of the sale to be put into a compensation fund for borrowing members who were charged early-repayment penalties found to be "invalid and illegal" by the financial services ombudsman, Joe Meade.
Mr Hobbs, formerly a finance spokesman for the Consumers Association of Ireland, is calling on the Government to appoint an independent auditor to investigate the extent of the building society's liabilities to such members, a practice that he says occurs during the demutualisation of life assurance companies based in the UK.
An independent expert could sign off on borrowing practices before a conversion motion is proposed and put to borrowers, Mr Hobbs said.
Mr Meade's ruling, in which he ordered that INBS refund a penalty of €30,000 to a commercial borrower who repaid his loan early, could expose the mutual building society to compensation claims from other borrowers.
INBS challenged the ombudsman's decision but eventually dropped its proceedings, with the High Court awarding costs in favour of Mr Meade. No provision has been made for refunding affected borrowers. The ombudsman publishes his annual report today and may make further announcements on lending practices at Irish Nationwide.
Mr Burgess said a new owner might be more likely to deal positively with affected borrowers and that their legal rights would not change. But if a potential buyer was not made aware of the extent of the claims against Irish Nationwide before a sale, they might subsequently attempt to minimise their exposure, he said.
Proper corporate governance must be written into the Building Societies Bill so that the societies are not dominated by strong chief executives, added Mr Burgess, who is a member of INBS.
Mr Burgess is in favour of the society's demutualisation, but says it should not be done at the expense of those who had suffered from "predatory" lending practices.
