Ireland’s AIB fined record 97 million euros for mortgage overcharging

DUBLIN (Reuters) -Ireland’s AIB and its EBS subsidiary have been fined a record 96.7 million euros ($101.6 million) by the country’s central bank for overcharging customers denied mortgages that track base rates.

The fine was more than twice the highest previous penalty levied on any institution and brought to 178 million euros the amount all lenders have so far been fined for failing to offer a mortgage that tracked the European Central Bank rate that has been at or close to zero for almost a decade.

AIB, which had set aside 70 million euros by the end of 2021 to cover a potential fine, said it would include an additional charge in its 2022 accounts. It apologised “unreservedly” for the impact its breaches had on customers’ lives.

Irish banks have also paid out around 730 million euros to compensate some 40,000 borrowers denied the product that was widely offered during the housing boom in the mid 2000s and withdrawn for new customers when the financial crisis hit.

When banks withdrew the tracker products for new customers, they failed to offer a tracker rate to its existing customers who had contractual entitlements allowing them to a return to a tracker rate in their mortgage agreements.

Of the 12,845 individuals impacted by the failings, 53 AIB customers lost their properties as a result being unable to meet their mortgage repayments. A further 84 EBS customers lost their properties, despite it being a much smaller institution.

“The consequences of the prolonged failings were serious and included significant financial strain and distress for those affected and their families,” Irish Central Bank Director of Enforcement Seána Cunningham, said in a statement.

NatWest’s Irish unit, Ulster Bank, was fined 37.8 million euros over the same issue last year, with local lender permanent tsb and Belgian financial group KBC fined 21 million euro and 18.3 million euro respectively.

A former subprime unit of permanent tsb, Springboard Mortgages, also received a 4.5 million euro penalty after the central bank launched a probe into the overcharging in 2015.

Bank of Ireland, the country’s largest lender by assets, remains under investigation by the regulator over the issue.

($1 = 0.9518 euros)

(Reporting by Padraic HalpinEditing by David Goodman and Alison Williams)