I thought it may be helpful to share some observations I had whilst going through the Tracker Appeal process:
1. Financial Engineering Part 1
The Bank will likely issue you a schedule of (over)charges in a letter. This will list the date, interest rate, interest charged, correct interest rate and over charged interest.
Look carefully at the date particularly if your schedule covers a number of pages (mine was over 5 pages both sides). The Bank will likely list the overcharge, one month per line at the start of the schedule and then split one month overcharge, over several lines later on in the schedule.
This makes the column showing overcharge interest stay at roughly the same amount - but in fact the overcharge is likely to have gone up considerably, as each line is no longer showing one month, but multiple lines must be added to show the total per month.
Example
Month Overcharge
Aug 2012 33.17
Sept 2012 48.32
------
Jan 2015 82.19
Jan 2015 92.11
Jan 2015 36.22
Feb 2015 76.99
Usually when the overcharge went over 300 EUR per month, the bank starts splitting payments out.
2. Financial Engineering Part 2
The Bank may present arrears on the account in a manner that is deliberately engineered to mislead (example used below);
'If the account was reconstructed to take account of arrears at that time EUR15,000 and redress due EUR 11,000' the customers repayment would have been EUR 975.'
Arrears:
This engineering of the numbers will lead the appeal Panel to decide that the arrears (EUR15,000) were greater than the overcharge (EUR11,000) and so the Bank overcharging was not material.
In fact, the overcharge was EUR 11,000 and the customer arrears were EUR 4,000 - giving a total of EUR 15,000 in arrears.
The overcharge tripled the arrears.
Capitalisation:
This engineering of the numbers also enables the bank to inflate the repayment cost 'on the correct rate' by adding the arrears to the mortgage balance. This method is not accepted by the Central Bank. More information here.
This is used to demonstrate the borrower 'couldnt afford the tracker mortgage'.
Arrears capitalisation is a 'treatment' for arrears that has legal implications and must be agreed to by the borrower.
If the arrears were caused by Bank overcharging - clearly this is not an appropriate 'treatment'.
2. Regulatory Breaches
The Appeal Panel will not consider Regulatory Breaches carried out by the Bank as material to the Appeal - not adhering to 'wait periods ' as required under MARP, CCMA etc.
3. Legal Demand for Possession
If the Borrower was in arrears solely due to tracker overcharging and surrendered the home on foot of a Legal Demand for Possession from the Bank.
The Appeal Panel will not consider this evidence that the Bank caused the loss of the home.
4. Principles for Tracker Redress
Its worth reading these from the Central Bank.
The Appeal Panel will not consider this as part of the Appeal.
5. Credit Review
The Bank will likely provide a 'Credit Review' establishing a potted history of the account and why their actions were appropraite to the Panel. This should be a historic document (i.e dated prior to the issuance of the Redress Letter you got).
The Appeal Panel will accept draft, undated, unsigned Credit Reviews from the Bank and will permit the Bank to rewrite these documents in response to any evidences you submit to the Panel.
These Reviews should in fact be based on a complete financial 'reconstitution' of the account. That is to say, had the overcharging not occured, what were the true arrears at each point the Bank / Customer took action, and was that action still valid in light of the 'true arrears'.
This will not be done by the Bank, and it should be, based on how the UK banks addressed similar issues. Instead you should do it.
6. Interest Refund / Amortisation
The Bank will have calculated the interest overcharged and will have refunded this to you, together with a payment for 'time value of money' / 'interest' and possibly some money for 'compensation'.
This is the biggest con foisted on the Irish Public throughout this matter.
Overcharged interest should instead be applied to the account as part of the 'reconsititution' - as overpayments.
Over time, the amortisation of these payments means a significnat reduction in both the capital and interest on your mortgage.
This does not mean you should not get your money back, or that it should be put toward your mortgage.
It means that the method used to calculate your refund does not take account of how mortgages work, but does take account of how the Bank can 'return' the overpayment and ignore the true cost to their customers.
This can mean the difference between a 30,000EUR 'interest refund' and a 70,000EUR amortisation value.
The Appeal Panel will not accept this method of calculation, despite this being the correct treatment for monies 'over paid' to any mortgage account.
Thats all for now
Any questions or comments, I'll do my best to respond.
1. Financial Engineering Part 1
The Bank will likely issue you a schedule of (over)charges in a letter. This will list the date, interest rate, interest charged, correct interest rate and over charged interest.
Look carefully at the date particularly if your schedule covers a number of pages (mine was over 5 pages both sides). The Bank will likely list the overcharge, one month per line at the start of the schedule and then split one month overcharge, over several lines later on in the schedule.
This makes the column showing overcharge interest stay at roughly the same amount - but in fact the overcharge is likely to have gone up considerably, as each line is no longer showing one month, but multiple lines must be added to show the total per month.
Example
Month Overcharge
Aug 2012 33.17
Sept 2012 48.32
------
Jan 2015 82.19
Jan 2015 92.11
Jan 2015 36.22
Feb 2015 76.99
Usually when the overcharge went over 300 EUR per month, the bank starts splitting payments out.
2. Financial Engineering Part 2
The Bank may present arrears on the account in a manner that is deliberately engineered to mislead (example used below);
'If the account was reconstructed to take account of arrears at that time EUR15,000 and redress due EUR 11,000' the customers repayment would have been EUR 975.'
Arrears:
This engineering of the numbers will lead the appeal Panel to decide that the arrears (EUR15,000) were greater than the overcharge (EUR11,000) and so the Bank overcharging was not material.
In fact, the overcharge was EUR 11,000 and the customer arrears were EUR 4,000 - giving a total of EUR 15,000 in arrears.
The overcharge tripled the arrears.
Capitalisation:
This engineering of the numbers also enables the bank to inflate the repayment cost 'on the correct rate' by adding the arrears to the mortgage balance. This method is not accepted by the Central Bank. More information here.
This is used to demonstrate the borrower 'couldnt afford the tracker mortgage'.
Arrears capitalisation is a 'treatment' for arrears that has legal implications and must be agreed to by the borrower.
If the arrears were caused by Bank overcharging - clearly this is not an appropriate 'treatment'.
2. Regulatory Breaches
The Appeal Panel will not consider Regulatory Breaches carried out by the Bank as material to the Appeal - not adhering to 'wait periods ' as required under MARP, CCMA etc.
3. Legal Demand for Possession
If the Borrower was in arrears solely due to tracker overcharging and surrendered the home on foot of a Legal Demand for Possession from the Bank.
The Appeal Panel will not consider this evidence that the Bank caused the loss of the home.
4. Principles for Tracker Redress
Its worth reading these from the Central Bank.
The Appeal Panel will not consider this as part of the Appeal.
5. Credit Review
The Bank will likely provide a 'Credit Review' establishing a potted history of the account and why their actions were appropraite to the Panel. This should be a historic document (i.e dated prior to the issuance of the Redress Letter you got).
The Appeal Panel will accept draft, undated, unsigned Credit Reviews from the Bank and will permit the Bank to rewrite these documents in response to any evidences you submit to the Panel.
These Reviews should in fact be based on a complete financial 'reconstitution' of the account. That is to say, had the overcharging not occured, what were the true arrears at each point the Bank / Customer took action, and was that action still valid in light of the 'true arrears'.
This will not be done by the Bank, and it should be, based on how the UK banks addressed similar issues. Instead you should do it.
6. Interest Refund / Amortisation
The Bank will have calculated the interest overcharged and will have refunded this to you, together with a payment for 'time value of money' / 'interest' and possibly some money for 'compensation'.
This is the biggest con foisted on the Irish Public throughout this matter.
Overcharged interest should instead be applied to the account as part of the 'reconsititution' - as overpayments.
Over time, the amortisation of these payments means a significnat reduction in both the capital and interest on your mortgage.
This does not mean you should not get your money back, or that it should be put toward your mortgage.
It means that the method used to calculate your refund does not take account of how mortgages work, but does take account of how the Bank can 'return' the overpayment and ignore the true cost to their customers.
This can mean the difference between a 30,000EUR 'interest refund' and a 70,000EUR amortisation value.
The Appeal Panel will not accept this method of calculation, despite this being the correct treatment for monies 'over paid' to any mortgage account.
Thats all for now
Any questions or comments, I'll do my best to respond.
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