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AIB latest lender embroiled in tracker mortgage scandal

AIB is the latest Irish bank to face sanctions for overcharging mortgage customers on its tracker deals.

This scandal – which goes back almost a decade – has involved a number of Ireland’s biggest mortgage lenders, such as Bank of Ireland, Ulster Bank, Permanent TSB and KBC Bank Ireland.

The Central Bank of Ireland said at the weekend that it is widening its investigation into this mortgage scandal.

According to the Irish Independent, around 20,000 cases of overcharging have already been identified, by the 15 banks who have been asked to re-examine their lending books.

But some estimates say the final number of affected borrowers could be closer to 30,000.

There has been surprise among Dublin-based commentators that AIB has been embroiled in this scandal. The bank – which is still 71 per cent owned by Irish taxpayers – had been seen as being more co-operative with the authorities regarding this issue.

AIB has already admitted to 4,6000 tracker overcharging cases and has set aside €190m to cover the cost of refunding interest payments, plus compensation.

The overcharging issue dates back to 2006, and the start of the financial crisis in Ireland. At the time many mortgage customers were on tracker deals, linked to the ECB’s main borrowing rates (currently 0 per cent).

With the Irish economy struggling, some borrowers asked to move their mortgage onto temporary fixed-rate deal – usually three years. There have also been reports  of banks encouraging customers to switch to fixed-rate options.

The controversy surrounds what happened when these fixed-rate deals expired, by which time the ECB had cut its main borrowing rate significantly.

Most customers assumed they would be moved back onto their original tracker rate, but this did not always happen.

Some back switched customers onto higher-charging fixed rate or variable rate loans; others moved them onto tracker deals but ones that tracked the ECB rate by a higher margin.

The Central Bank began its investigation into this scandal two years ago, amid concerns that many mortgage borrowers were being unfairly penalised, and it extreme cases may have had their homes, or buy-to-let properties repossessed as a result.

This issues hit the headlines more recently, as more banks have become embroiled in the fall-out from the scandal, and the Central Bank has been critical of how slow lenders have been to offer redress.

The regulator has said that it hopes all affected mortgage customers will be fully refunded, and compensated by the end of the year.


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