State-controlled Permanent TSB is facing fines of up to €20 million from the Central Bank and compensation payments to customers of more than €35 million following a "serious failure" in how it managed interest rates on 1,372 mortgage accounts.
Some 1,152, are accounts of PTSB with the remaining 220 held by Springboard, a former subsidiary of the bank.
The failures were described by the Central Bank as “serious” and include mortgage overpayments, mortgage arrears, legal proceedings and a loss of properties in 61 cases.
In 22 of these cases, the bank has concluded this loss would not otherwise have happened.
The issues involve PTSB’s failure to inform certain customers of the consequences of breaking early from a fixed- rate or discounted tracker period. The consequences of breaking early were that customers lost their contractual right to be offered a tracker rate in the future. Instead they were put on standard variable rates, which proved more expensive.
The Central Bank also found PTSB had failed to inform some other customers of their right to be offered a tracker at the end of their fixed-rate period.
In the case of Springboard, it was a failure to apply the correct interest rates to mortgage accounts. These incidents occurred mostly between 2006 and 2011.
"We apologise unreservedly to all the impacted customers," PTSB's chief executive Jeremy Masding said yesterday.
The bank has set up a mortgage redress programme that will offer compensation to customers for any overcharging, and the offer, going forward, of the tracker rates that should have applied previously.
The bank is offering €50,000 compensation for those who lost their homes and €25,000 for buy-to-let investment properties. It is also offering to write off the balance of debt owed on these loans.
PTSB, which is 75 per cent owned by the State, has also set up two panels, with some independent members, to consider appeals to offers made to customers.
PTSB and Springboard will contact affected customers by letter over the next two weeks to set out the details of its redress programme.
The Central Bank has also required that a reduced interest rate be applied to all impacted customers accounts as an interim measure.
