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Categorized | Banks

Central Bank of Ireland fines Springboard for mortgage mispricing


Posted on November 29, 2016

The Irish central bank has imposed one of its highest ever penalties on an Irish financial institution after completing an investigation into mortgage mispricing that in some cases led to customers paying tens of thousands of euros more than they owed in mortgage repayments.

The Central Bank of Ireland said on Tuesday it had imposed a fine of €4.5m on Springboard Mortgages, which at the time the mispricing happened was a wholly owned subsidiary of Permanent TSB, a high street bank that was badly hit by Ireland’s financial crisis.

The fine is the latest in a series of stiff penalties imposed on Irish lenders failures in how they deal with customers or other operational issues.

The central bank is taking an increasingly tough line on operational or business conduct failures as it seeks to restore the bank’s reputation for customer protection after the crisis.

The fine for Springboard is understood to be the largest penalty imposed on a financial institution for business conduct failures. It followed an investigation by the central bank into tracker mortgages, where the interest rate tracks that of the European Central Bank. The regulator said Springboard failed to apply the correct interest rates to 222 customer mortgage accounts over a seven year period between August 2008 and July 2015.

Derville Rowland, the central bank’s director of enforcement, said:

The consequences for impacted customers were serious and totally unacceptable. All 222 customers paid more than required, some fell into mortgage arrears, and some were subjected to legal proceedings.

She said the fine “demonstrates the central bank’s determination to take all necessary action in order to protect customers’ best interests, and serves as a clear and timely warning to all regulated firms of their obligations to customers.”

Springboard Mortgages was a new lender in the Irish mortgage market at the height of the country’s construction and house-price boom in the late stages of the “Celtic Tiger” era. It was established in 2007 as a joint venture between Permanent TSB and Merrill Lynch.

It was effectively a sub-prime lender, and its emergence coincided with the collapse of Irish house prices and the global financial crisis. The Irish bank took full control of Springboard in 2008. The loans in the Springboard Mortgages portfolio were acquired by Mars Capital, a venture capital fund, in 2014. At the time it had a mortgage portfolio with a nominal value of €468m.

Springboard is no longer operating. Permanent TSB declined to comment. The central bank said its investigation into Springboard had now closed.