Michael McGrath has accused banks of wilfully abusing the rights of thousands of mortgage customers and demanded “punitive sanctions” in response.
Fianna Fail’s finance spokesman also said the Central Bank of Ireland’s review for the country’s tracker mortgage scandal should determine how the “systematic” practice arose and work out if senior bank executives had knowledge of the issue.
Close to 11,000 mortgage customers are so far known to have been affected by the issue — 87 of whom have lost their homes.
Mr McGrath said the Central Bank must “lay down a firm marker” to show that such abuses of customers’ rights will not be tolerated.
“It has become increasingly clear that the practice of denying mortgage customers their contractual right to a tracker rate was systematic and widespread across the bank industry,” he said.
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“This practice has changed the lives of thousands of families for the worse and has inflicted the devastation of losing their home on some.
“It is not credible to argue that this was anything other than a wilful abuse of the contractual rights of customers by the main lender in Ireland. The Central Bank — given its consumer watchdog role — has to lay down a marker for once and for all.
“In my view, it needs to deliver a watershed response that changes the dynamic of the bank-customer relationship in this country.”
His comments came as Philip Lane, governor of the Central Bank, prepared to be questioned by politicians over the regulator’s response to the scandal.
Mr Lane will appear before the Oireachtas finance committee tomorrow to provide an update on the progress it has made with the country’s banks in determining the full extent of the issue.
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The regulator has been criticised for failing to react to customers’ concerns in a timely manner.
Pearse Doherty, Sinn Fein finance spokesman, said last week that the agency had “sat on its hands” for years before launching an industry-wide investigation into the issue of tracker mortgage customers being overcharged last December.
The Central Bank has rejected any criticism that it was slow to investigate banks in response to customer concerns and has insisted that its supervision of lenders has been “intrusive”. It will also publish an update on its investigation today.
Bank of Ireland last week became the latest lender to admit serious failings in its handling of customers’ tracker mortgage accounts.
The bank admitted to overcharging more than 4,000 customers by either applying a higher interest rate to their loan or moving them off cheaper tracker mortgage rates in favour of more expensive variable rates.
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The lender said that it had identified 602 instances in which customers were denied a tracker rate they were entitled to. A further 3,916 borrowers were overcharged by the bank.
According to estimates provided by the country’s major lenders close to 11,000 customers are so far known to have been affected.
“The Central Bank has to send a powerful signal that the abuse of customers in this way will simply not be tolerated and will be met with punitive regulatory sanctions,” Mr McGrath said. “It can equally not ignore the question of who knew what about this practice across the banking system and this has to be part of the probe.
“Compensating customers and restoring tracker rates is the most urgent issue but we need to know how this practice developed in the first place, what was known at board and senior executive level and who made the key decisions.”
Mr McGrath said he was looking forward to questioning the Central Bank governor over the “vital issue”.
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Mr Lane’s appearance follows that of his colleague, Bernard Sheridan, head of consumer protection at the Central Bank, who earlier this month labelled banks’ mismanagement of customer loans a “scandal”.