The Central Bank has fined Ulster Bank Ireland almost €38m for dozens of regulatory breaches in its handling of its tracker mortgage customers.
The fine of €37.774m is the largest ever levied against any firm by the regulator.
During its enforcement investigation, the Central Bank uncovered what it described as "serious failings" by Ulster Bank in its treatment of 5,940 customers over a 16-year period form 2004 until last year.
In total, Ulster Bank has admitted to 49 separate regulatory breaches.
Its actions, the Central Bank found, caused avoidable and unacceptable harm, including extended periods of overcharging and the loss of 43 customers' properties, including 29 family homes.
"Our investigation identified the numerous opportunities that UBID had to do right by its customers and the efforts that UBID went to in order to evade its obligations to these customers," the Central Bank's Director of Enforcement and Anti-Money Laundering Seána Cunningham said.
"Despite it being clear to UBID from customer complaints that certain customers were paying more for their mortgage than they should be, UBID continued to deny customers the lower tracker rates that they were entitled to," she stated.
Tracker mortgages use an interest rate that tracks the main European Central Bank rate.
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Ulster Bank introduced tracker mortgages in 2001, but like other banks withdrew them in 2008 when the financial crisis hit and made them more costly.
The bank's CEO Jane Howard said she was deeply sorry for the impact that its handling of the tracker mortgage issue had on its customers and their families.
The Central Bank said that Ulster Bank had failed to disclose to impacted tracker customers all the consequences of fixing their interest rates.
It also devised and implemented a deliberate strategy not to provide certain customers with their correct tracker mortgage entitlement, unless they complained.
The Central Bank has fined Ulster Bank Ireland DAC €37,774,520 for serious failings in the treatment of its tracker customers holding 5,940 mortgage accounts between August 2004 and April 2020. https://t.co/DOKmp6rdYN pic.twitter.com/YXPnDNVcwz— Central Bank of Ireland (@centralbank_ie) March 25, 2021
Ulster Bank also failed to meet a statutory deadline for the provision of information in the context of the Central Bank's investigation.
"In deciding in 2011 to only return customers who complained to their tracker rates, UBID calculated the cost of returning all impacted customers to their tracker mortgage rate," the Central Bank said.
"Instead, informed by that financial analysis, it decided to take the option that cost it the least and return only customers who complained to their correct rate," it said.
"Having initially provided its customers with unclear information and having failed to warn them of the very real consequences of their mortgage-related decisions, UBID put further impediments in its customers' way," it said.
"The onus was placed on customers to complain, and to do so in a certain way, in order to get what they were entitled to," it added.
The Central Bank fined Ulster Bank nearly €54m, but reduced this by 30% under its settlement discount scheme.
The fine is much larger than the €21m sanction imposed on Permanent TSB in 2019 for similar breaches, and the €18m that KBC Bank Ireland was fined last year following the regulator's probe into its handling of tracker customers.
Ulster Bank has also paid out €128m in redress, compensation and account balance adjustments to customers.
The Central Bank's Director of Financial Conduct has said "choosing to do absolutely the wrong thing by your customers" is at the heart of the issue around Ulster Bank's handling of tracker mortgage customers.
Speaking on the News at One, Derville Rowland said the fine was intended to punish Ulster Bank and to send a message to other lenders that this conduct would not be tolerated.
She said she was sympathetic to "the devastating impact that conduct of the lenders has had on people" but the responsibility falls on lenders to treat their customers fairly.
The overall tracker mortgage investigation is ongoing and investigations into individuals and other firms are open.
"All angles are being considered," Ms Rowland said.
Central Bank issues stark warning to all lenders
The Central Bank's Director of Financial Conduct also issued a stark warning to lenders that the behaviour uncovered in Ulster Bank will never be tolerated and "decisive and relentless action" will follow any similar conduct in the future.
Derville Rowland said the tracker mortgage investigation into Ulster Bank is "a sorry tale of poor conduct" by the bank which involved deliberate behaviour informed by its "bottom line" rather than its customers rights.
She said the near €38m fine is the highest fine ever imposed to punish the bank and to warn others against similar actions.
"The root of this problem is choosing to do absolutely the wrong thing by your customers and that attitude and stance permeates all aspects of this cases. That thinking runs right through this horrible set of actions," she stated.
She said that it is plain to see that Ulster Bank had ample opportunities to see the problems caused by their own deficiencies and yet chose to take the wrong course of action.
Ms Rowland said Ulster Bank failed in its duty to provide 6,000 customers with really important information about the products they had and the consequences for them of moving from a tracker mortgage to fixed-rate products.
She said neither did it warn customers who sought to change from a tracker mortgage that they would lose their entitlements.
Ms Rowland said instead Ulster Bank implemented an "ultimately failed strategy in 2018" to seek to encourage customers to convert their valuable trackers rates to fixed rates and never informed they they would lose their entitlement.
She said the Central Bank has clear expectations of financial services firms, which means that if a problem is identified they sort it out and rectify it, but said that "the absolute opposite happened here".
The central banker also said she was glad to say that customers did not all fall for this, but the attempt was made to encourage them away from tracker mortgages.
Ms Rowland said that when Ulster Bank customers complained, the bank "deliberately devised and implemented a strategy to make sure that only those who complained got their tracker mortgage entitlements back" and they made it difficult for customers to be successful in their complaints.
She said that when complaints were received the bank "sat down and did the calculation for the bottom line and that is what informed their course of conduct, instead of doing right by its customers".
The Central Bank's tracker mortgage examination final report concluded in 2019 that 40,100 customers across the main banks had been affected by the controversy, and at that point the lenders had paid out €683m in redress and compensation.
In a statement, Ulster Bank's chief executive Jane Howard said she was deeply sorry for the impact the bank's handling of the tracker mortgage issue had on customers and their families.
"These customers placed their trust in us, and I regret the impact our failings have had on their personal lives, especially those customers who lost their homes," she said.
The Ulster Bank CEO said the Tracker Mortgage Examination has had a significant impact on its business, how it does things and how it serves its customers.
"We have learned serious lessons and made fundamental changes to the way we work. Most significantly there has been a profound shift in our culture and behaviour," Ms Howard said.
"When considering customer outcomes, we have learned that we need to consistently listen more carefully and act more swiftly, this must be at the heart of our culture," she said.
"Across the bank, we have made many changes, for example we have introduced the voice of the customer in decision-making, and fundamentally changed how we deal with and learn from complaints, the content of our customer documentation, how we sell products and our approach to operational risk and our control environment," she added.
Ms Howard also acknowledged and apologised to the Central Bank that Ulster Bank's responses to their investigation, in particular in relation to one statutory deadline, did not always meet the standards that they required.
She also said that today's announcement does not draw all tracker issues to a close and Ulster Bank will continue to work on those cases which are under appeal or are with the Financial Services and Pensions Ombudsman to bring them to a conclusion.
"Today is a significant milestone for our colleagues and, more importantly, the customers affected who have now received some €128,000,000 in redress, compensation and account balance adjustments," the banks CEO said.
"Whilst we cannot undo the past, I sincerely hope that today's sanction marks the start of some level of resolution for those customers," she added.
Ulster Bank fine 'too little too late'
Sinn Féin's finance spokesperson Pearse Doherty has described the Central Bank's multi-million euro fine imposed on Ulster Bank as "too little too late" for people who lost out.
Mr Doherty described the bank's action as "theft".
He said the whole affair underlined the need for the Government to close legislative loopholes and hold bankers to account.
Meanwhile, Ged Nash, Labour's Finance Spokesperson said the fine will not undo "damage to countless lives".
He said: "It is now 12 years since the tracker mortgage scandal first came to public attention, which has now cost the banks close to €1.5 billion.
"However, it is impossible to calculate the harm done to the lives, family relationships and finances of the 40,000 bank customers who were deceived by their lenders and moved off the tracker rates they were entitled to be on.
"We must never forget the victims of this scandal, and especially the 100 families who had their homes wrongly repossessed because of the actions of the banks."
'Another shameful chapter in the book of wrongs'
Fianna Fáil's Justice Spokesperson Jim O'Callaghan described the Ulster Bank fine as "another shameful chapter in the book of wrongs perpetrated by Irish banks on tracker mortgage customers".
Speaking on RTÉ's Drivetime, he said the original fine was €53 million, which was reduced by 30% by the Central Bank under the administrative sanctions procedure.
He said the question he thinks people are interested in is if there are going to be any criminal prosecutions in respect of this, if there was criminal wrongdoing.
"And politicians can't direct that", he said.
"The Central Bank has the power to report suspicious criminal activity to the Gardaí. The Gardaí I understand are investigating it, and if there's sufficient evidence there, there should be prosecutions. The amount of money involved in this rip off is extraordinary."
Mr O'Callaghan said he is sure the Central Bank could look for more powers, but there are "vast amounts of powers that they have" at the moment in respect of investigating this matter and holding individuals to account.
The prosecutor when it comes to criminal offences is the DPP, he said, and the investigator is the Gardaí.
"If there is wrongdoing it needs to be investigated," he said.
"If there's criminal wrongdoing it needs to be further investigated, and if there's sufficient evidence, people or institutions should be prosecuted."
Mr O'Callaghan said that when you look at the figures involved in this, it is "not acceptable" that regulated banks in this country have fines imposed on them.
When you look at the amount of money and damages they have had to refund to customers, he said, that "really indicates the wrongdoing".
He said that unless Irish banking and financial services changes its culture and recognises that it has to treat its customers with respect, we are going to be back here again.