TDS HAVE URGED the Central Bank to closely watch the behaviour of banks to ensure they do not pass on fines for their regulatory breaches to their customers.

This week Permanent TSB was handed a €21 million fine for breaches that impacted on more than 2,000 of its customers as part of the wider tracker mortgage scandal. It is expected that other lenders responsible for this overcharging of customers will also face fines from the regulator. 

Fianna Fáil TD and chair of the Oireachtas Finance Committee John McGuinness said the fines should “come off the bottom line”.

This should be affecting directors of the bank and the Central Bank should make sure that happens and that taxpayers and customers of the banks don’t end up having to pay in increased charges.

He said charges brought in by banks in the run up to fines and any subsequent increased charges for customers “need to be challenged by the Central Bank”.

“The banks can anticipate these fines and we have already seen they try every single day to get around the regulatory system.”

TheJournal.ie asked Permanent TSB if the bank wanted to offer reassurance to customers that they would not end up having to cover the cost of the €21 million fine through higher loan costs and fees.

A spokesperson said the bank “won’t be making any further comment at this time”. 

Following confirmation of the fine, PTSB’s chief executive Jeremy Masding had apologised for the distress caused. He said “building on the lessons learnt from this issue, Permanent TSB has invested heavily in enhancing the organisation’s risk management and control environment”.

Just this week it was reported that the bank will increase the fixed monthly payment for its Explore current account by 50% this summer. This will make it more difficult for the bank’s customers to qualify for free banking.

‘Individuals made decisions’

McGuinness said the fine was just “one piece” of the action being taken in response to the scandal. He said the Central Bank is still looking at whether individuals in the banks who overcharged their customers should also be financially sanctioned.

In evidence given to the Finance Committee, executives for the banks have blamed the scandal on systems failures, rather than deliberate decision-making, but McGuinness asked “who believes that?”.

“The fact is that they all made the same mistake at the same time with the same results and people are not foolish, they know what happened here,” he said.

Sinn Féin’s finance spokesperson Pearse Doherty said that while a large fine is “a blow” for a financial institution, “the only real deterrent will individual accountability”. 

“There will be a real test for the Central Bank here. The reality is that a fine, while it is a deterrent, it will end up on the shoulders of customers. 

It wasn’t a system that overcharged those 2,000 customers, it wasn’t systems that took homes from people, it wasn’t systems that told customers they were wrong when they were right. It was individuals – senior managers – who made decisions. 

Doherty said Permanent TSB, and other banks, should act ‘customer-centred’ when dealing with court challenges from customers in relation to the tracker mortgage scandal.

“There were some customers settling out of court this week and even though we’ve written to them Permanent TSB hasn’t given any guarantee that it will look at other files similar to those cases to see if they can also be settled,” he said.

“If they were customer-centred, they would do that. Not everyone has the financial ability to take them to the courts. The banks have an army of lawyers facing individuals who are already financially strained as a result of the actions of the banks.”

PTSB has admitted in full to 42 separate regulatory breaches of the Code of Practice for Credit Institutions 2001 and the Consumer Protection Codes 2006 and 2012.

The Central Bank’s Director of Enforcement and Anti-Money Laundering, Seána Cunningham, said that the investigation into PTSB found that they had “failed to put their customers first, with distressing and, in some instances, devastating consequences”.

PTSB failed in their obligations to do the right thing by their customers. In doing so, they broke the trust of their customers and damaged the public’s confidence in PTSB.

“At a minimum, customers should be provided with clear and timely information and warnings about their mortgage, the highest levels of customer service and a commitment from their lender to put things right promptly and fairly should they go wrong.”

Cunningham warned that where firms fail to protect their customers’ best interests, the Central Bank’s response will be “robust and the consequences will be serious”.