AIB has announced it has set aside €105 million to pay compensation for tracker mortgage customers wrongfully put on variable interest rate accounts.
After years of denying that it was liable to pay compensation for tracker mortgage customers, AIB has made a €105 million provision in its 2014 Annual Report to pay redress to more than 3,000 mortgage holders. A further €85 million has been set aside for “other related matters” as part of a tracker mortgage review.
Three hundred AIB staff have already started the task of identifying which customers will be eligible for compensation. The bank has said that these customers will be given the option of converting their existing variable interest rate accounts to those tracking the interest rates set by the European Central Bank – potentially saving each household up to €12,500 per year.
The announcement of compensation for tracker mortgages comes as a major surprise. Just weeks ago AIB denied it had wrongly refused to restore tracker mortgages to property owners after their initial fixed rate mortgage term had expired. The bank removed tracker mortgages as an option in 2008 and converted many customers onto variable interest rate accounts which, at the time, were the most expensive in the Eurozone.
Last October the Central Bank launched an industry-wide review of the wrongful removal of valuable tracker mortgages after pressure from consumer groups and following an announcement from Permanent TSB that it was to pay compensation for tracker mortgage customers. The Permanent TSB paid compensation or reduced mortgage arrears in 1,372 cases.
According to the figures released by AIB, the average amount of compensation for tracker mortgage customers should be in the region of €65,000. However, as the calculations of compensation for tracker mortgage customers are being made by AIB, customers are advised to seek professional legal advice to ensure they receive appropriate redress.