The Central Bank of Ireland has fined Permanent TSB €21 million for the “unacceptable harm” it caused certain tracker mortgage customers, including some who their lost homes, when it wrongly denied them their discounted rate.

The fine, which was originally set at €30 million but discounted by 30 per cent due to PTSB’s agreement to the terms of a settlement scheme, is the largest ever issued by the State’s banking regulator.

The fine was levied against PTSB over its treatment, including overcharging, of more than 2,000 holders of tracker mortgages - mortgage products with a price promise to track a fixed amount above European Central Bank rates.

Trackers were commonly sold at the peak years of the Celtic Tiger housing boom, but the products proved heavily loss-making for banks during the crash.

Breaches

PTSB has admitted 42 separate breaches of banking codes of practice, covering mortgages between the years 2004 and 2018.

Some customers were put on higher rates than those to which they were entitled, while others were denied tracker rates altogether.

Among the customers affected, 12 lost their family homes and 19 lost buy-to-let properties due to mortgage arrears incurred.

The regulator identified four areas of breach for PTSB, including failing to warn customers of the consequences for switching rates; a lack of automatic controls; PTSB’s “decision to deny” some customers rates to which they were entitled in 2009 and 2010; and its incorrect interpretation of customers rights.

“Our investigation found that PTSB failed to put their customers first, with distressing and, in some instances, devastating consequences,” said the regulator’s director of enforcement and anti-money laundering, Seána Cunningham.

“PTSB failed in [ITS]obligations to do the right thing by their customers. In doing so, [IT]broke the trust of [ITS]customers and damaged the public’s confidence in PTSB,” she said.

Compensation

The Central Bank says this marks the end of the first of its series of in-depth investigations of Irish banks for tracker mortgage breaches, known in the industry as the regulators Tracker Mortgage Examination.

As of the end of 2018, almost 40,000 affected customers had been identified across six lenders in the TME, and €647 million paid in redress and compensation. PTSB agreed to pay close to €54 million to its affected customers.

It is expected that further fines will follow against the other banks, some of which have already set aside cash in anticipation of heavy financial sanctions.

In reaction to Wednesday’s record fine, PTSB’s chief executive Jeremy Masding said: “I apologise unreservedly to all customers affected by the Tracker Mortgage issue, and for the distress caused as a result.”

He said all 2,007 PTSB mortgage account holders who were affected had been offered compensation. About 12 of those had declined the offer, PTSB said.

“Addressing and resolving the tracker mortgage issue... has been of the highest priority for the board and management team in Permanent TSB. We are confident that we have fully addressed the operational and procedural weaknesses which have been identified in this exercise and, we remain committed to improving our policies and procedures for all customers,” said Mr Masding.

PTSB also highlighted that the 2,007 accounts affected were drawn from a pool of 110,000 that were examined.

PTSB also suggested that its affected customers accounted for a small share of the accounts examined in the Central Bank process.

“The affected accounts identified in the PTSB investigation account for circa 5 per cent of the industry total impacted by the [Central Bank’s] enforcement investigations,” it said.

Signal

Central Bank director general of financial conduct Derville Rowland told RTÉ news on Thursday evening that the regulator needs to “send a signal to Permanent TSB and to all of the lenders, that this will not be tolerated by the customers in Ireland, or by the regulator”.

“Unfortunately, the largest piece of supervisory work the Central Bank ever undertook has been necessitated by the conduct of not just Permanent TSB but all of the main banks in the tracker mortgage scandal,” she said.

“Today we’re announcing the largest fine ever imposed by the Central Bank to mark the seriousness with which we view the serious failings we have observed in the course of the enforcement investigation.

“It is at this level to deter Permanent TSB from ever engaging in conduct of this standard again, and to clearly send a message to all participants in the financial system that consumers in Ireland expect a far higher standard and the regulator will take decisive action when they fail in that standard.”