AIB fined €96.7m over tracker scandal

AIB was hit with a record fine for its role in the mortgage scandal.

The bank and its subsidiary EBS were fined a total of €96.7 million, far more than the amount the bank had set aside to prepare to impose penalties.

AIB had said it set aside 70 million euros for a central bank fine in previous financial results.

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

AIB’s fine is more than double the fine imposed on Ulster Bank for the same tracker issue.

AIB is being sanctioned for refusing cheap tracker mortgages to more than 12,000 customers at a time when interest rates were rising.

The tracker chaos has cost AIB in the region of 600 million euros, including refunds and compensation, legal fees and other administrative costs, even before the fine.

AIB’s fine has been reduced by a third from the potential fine of 119 million euros, the central bank said. A standard practice that allows for error. AIB has acknowledged 57 separate regulatory violations.

The central bank’s director of enforcement and anti-money laundering, Seána Cunningham, said the fine reflected serious and long-standing failings by the bank.

“Our investigation found that AIB did not adequately consider or worry about the impact on its customers in withdrawing its tracker mortgage offering. What followed was a litany of failings, with customers incorrectly denied their tracker permissions and others losing their tracker interest rates due to AIB’s shortcomings in providing day-to-day mortgage services. In relation to many of its deficiencies, AIB had opportunities to act to correct those deficiencies and prevent further breaches of its customers’ claims – AIB failed to take advantage of those opportunities.”

The bank has a culture where it doesn’t properly consider and recognize the rights of its customers and their obligations to them, she said.

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.

The AIB and EBS fines are the fourth and fifth episodes in the tracker scandal. The central bank had already imposed around 82 million euros in tracker penalties on four lenders in 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.

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

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