AIB faces massive tracker mortgage penalty

AIB is set to face a RECORD fine for its role in the mortgage scandal.

The group, which also owns EBS, is expected to be fined up to 70 million euros.

The tracker scandal is the biggest overcharging problem in Irish banking.

AIB’s fine is expected to be double the fine imposed on Ulster Bank for the same tracker issue.

AIB is being sanctioned for refusing cheap tracker mortgages to more than 15,000 customers at a time when interest rates were rising.

The tracker chaos has cost AIB nearly €600 million, made up of refunds and compensation, legal fees and administrative costs.

This comes on top of around 70 million euros that she has earmarked for a central bank fine.

There was no comment from the central bank but it is due to issue a media release tomorrow morning.

Originally, 9,348 AIB customers were incorrectly denied Tracker mortgages or placed on the wrong Tracker interest rates.

But another 5,900 cases were admitted by the banking group in 2020 after losing a case with the Financial Services Ombudsman.

These are the so-called Predominant Rate Tracker customers. AIB had admitted it denied this group the ability to switch to a mortgage that mimics the European Central Bank’s (ECB) benchmark rate more than a decade ago. But only offered them a small compensation.

It had argued that the prevailing tracker rate at the time was 7.9 percent.

But it conceded after losing the Ombudsman’s case.

Across all lenders, approximately €683 million in redress and compensation for 40,100 customers affected by lenders’ failures to address the Tracker mortgage issue.

These shortcomings included some customers being denied tracker mortgages when they were entitled to them, or charging the wrong interest rate.

AIB had no comment.

So far, the central bank has imposed around €82 million in tracker penalties on four lenders over the past two years.

These include Permanent TSB and its former subprime unit Springboard Mortgages, KBC

Bank of Ireland is yet to be fined for its role in the Tracker scandal.

It set aside 94 million euros in tracker-related provisions late last year, including monies for an expected fine.

Colin Hunt, chief executive officer of the AIB, told the Irish Times in an interview in April that he wanted the agency’s investigation to be completed before the end of this year.

“My ambition is to do everything in my power to restore AIB’s reputation,” he said at the time, adding that resolving the Tracker mortgage issue was “critical to my ambition.”

The Irish Independent first reported on the Tracker mortgage scandal in October 2009.

At the time, the banks denied there was any problem.