Galway couple overcharged by €1.23m in tracker scandal

A Co Galway couple were overcharged €1.23 million by KBC Bank Ireland after they were incorrectly moved to higher interest-rate mortgages on their properties instead of a tracker rate.

It is the biggest single case of overcharging by a bank to emerge in the tracker mortgage scandal, which has cost almost €1 billion and so far affected at least 33,700 customers.

John and Christine Foye of Milltown, Co Galway, were overcharged by the Belgian-owned bank on loans across a portfolio of investment properties. They were incorrectly moved off a fixed interest rate to a higher variable rate instead of a lower interest tracker rate tied to the European Central Bank rate.

The bank has offered the Foyes almost €380,000 in compensation.

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The sudden switch to higher repayments pushed the couple into insolvency as they struggled to cope with making increased monthly repayments of between €20,000-€30,000.

Unable to cover the repayments, the couple eventually lost their properties to a bank-appointed receiver and had to apply for a financial rescue deal known as a personal insolvency arrangement.

“I have never seen a tracker overcharging case as high as this,” said Eugene McDarby, a Dublin-based personal insolvency practitioner who is advising the couple on their financial difficulties.

“It effectively knocked them over straight away.”

A spokeswoman for KBC Bank Ireland said that it did not comment on individual cases.

Debt solution

While the overcharging reduces their overall indebtedness from about €5.8 million to €4.5 million, the couple, who are in their early 60s, still cannot afford to repay their debts and need a debt solution approved by the court. KBC Bank Ireland had objected to their debt write-down proposal.

Where the compensation sum will end up is still in doubt as the couple are seeking a new personal insolvency arrangement and want a write-down of their total debts to the current market value of their home.

The Central Bank has said that the banks have set aside €900 million to cover the tracker mortgage scandal. About €600 million of this is for redress and compensation.

KBC Bank Ireland chief executive Wim Verbraeken told the Oireachtas finance committee earlier this month that customers ended up losing their properties in 33 overcharging cases, the highest number of any bank caught up in the tracker controversy. These involved six family homes and 27 buy-to-let properties.

He disclosed that almost 3,000 customers were wrongly denied a low-cost tracker mortgage or had the incorrect interest rate applied to their accounts – double the number the bank admitted in October.

Right of debtor

The overcharging of the Foyes came to light in the High Court last Monday.

It emerged during a hearing on legal costs in a case lost by the banks where they challenged the right of a debtor to take a court review on the rejection of a personal insolvency arrangement by a bank or other creditor. The couple were two of five parties to the case.

John O’Donnell SC, who represented the Foyes with Keith Farry BL, read out a letter to Ms Justice Marie Baker sent from KBC Bank Ireland to the couple that detailed the scale of the overcharging.

The couple did not seek their legal costs against KBC as the bank withdrew their objection before the judge’s ruling earlier this month. Bank of Ireland was left bearing an estimated €250,000-€300,000 in costs.

In her ruling Ms Justice Baker rejected the arguments from the banks that court reviews of personal insolvency arrangements could only be taken by a borrower’s personal insolvency practitioner.

Her ruling removes a logjam of cases involving insolvent personal borrowers looking for debt write-offs through the courts. About 400 cases were on hold pending the outcome of the technical issue and the clarification of the roles of debtors and personal insolvency arrangements in the court reviews.