AIB to be hit with massive tracker mortgage fine

It is expected the group, which includes EBS, is to be hit with a fine as high as €70m.

The tracker scandal is the biggest overcharging issue to hit 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 denying more than 15,000 customers cheap tracker mortgages at a time when interest rates were rising.

The tracker mess has cost AIB close to €600m, made up of refunds and compensation, legal fees and administrative expenses.

This is on top of some €70m it has set aside for a Central Bank fine.

There was no comment from the Central Bank, but it is due to issue a media notice tomorrow morning.

Originally 9,348 AIB customers were incorrectly deprived of tracker mortgages, or were put on the wrong tracker rates.

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

These are the so-called prevailing rate tracker customers. AIB had admitted it had denied this group the option of moving to a mortgage tracking the European Central Bank’s (ECB) main rate more than a decade ago. But only offered them a small amount of compensation.

It had argued that the prevailing tracker rate at the time would have been 7.9pc.

But it conceded after it lost the ombudsman’s case.

Across all lenders some €683m in redress and compensation to 40,100 customers affected by the failings of lenders over the tracker mortgage issue.

These failings included some customers being denied tracker mortgages when they were entitled to them, or put on the incorrect rate.

AIB had no comment.

So far the Central Bank has imposed around €82m in tracker fines on four lenders in the past two years.

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

Bank of Ireland has yet to be fined for its role in the tracker scandal.

It has set aside €94m of tracker-related provisions at the end of last year, including funds for an expected fine.

AIB chief executive Colin Hunt, told ‘The Irish Times’ in an interview in April that he wanted to see the regulatory investigation completed this year.

“My ambition is to do everything in my power to restore the reputation of AIB,” he said at the time, adding, that the resolution of the tracker mortgage issue was “critical to that ambition of mine.”

The tracker mortgage scandal was first reported on in the ‘Irish Independent’ as far back as October 2009.

At the time the banks denied there was any issue.