# How should compensation be calculated for comparatively small amounts of tracker redress?



## Brendan Burgess (15 Nov 2020)

EBS and Bank of Scotland are currently paying people refunds and compensation for getting their tracker margins wrong. 

This is an example: 






						EBS  overcharged me €2,400 interest over 13 years - compensation?
					

Hi, the margin is quoted in the loan offer letter. Interest Rate Basis: Variable ECB Base + defined margin.   My wife and I took out a 300k mortgage with EBS in September 2007, unfortunately for us given what was to follow over the next 18 months economically we substantially overpaid for our...



					www.askaboutmoney.com
				




Overpaid interest: €2,400
Legal fees 650
Compensation 800
Total €3,850 

It is my view, that being overcharged €15 a month on a mortgage would not warrant any compensation.    A full refund of course.  But not compensation

It would be interesting to establish some sort of framework for this. 

If your monthly income is €10,000, and you are overcharged by €15, then it would not deserve compensation.

However, if your monthly income is €2,000 and you were overcharged by €400 a month, it would indicate that your life was seriously disrupted by the overcharge. 

Or would it be judged on the mortgage repayment?  If your repayment was €1,000 a month, and you were overcharged by €15, you wouldn't have noticed it.

If your overcharge was €400 a month, then it would have had a huge impact.


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## Brendan Burgess (15 Nov 2020)

Here is a huge absolute overcharge for a BoSI customer over a 10 year period.

1) Amount of refund of overcharged interest: €115,972
2) Time Value of Money: 25,728
3) Compensation if any: 21,255
4) Advice Payment: €400
*Total: €163,355*

Tracker was: 0.7%
SVR: 1.50%
Over charged by 0.8%

€115k represents about 8% of the mortgage, so the mortgage must have been about €1.4m

It was probably an interest only mortgage so the repayments, were twice what they should have been c. €10k a year.

My gut feeling, in the absence of any other information, is that 15% would be more than adequate for most people.

Clearly, if this borrower struggled with their repayments, but they made the full repayments, then they would have a case for much more compensation. 

Brendan


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## Brendan Burgess (16 Nov 2020)

BoSI has set up an Appeal Panel to hear appeals, according to the letter accompanying the redress.


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## Brendan Burgess (16 Nov 2020)

And if you win, they will pay your reasonable costs.


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## Banquo (16 Nov 2020)

Any idea where the 15% figure came from ?? Is it used in other similar compensation frameworks.


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## Brendan Burgess (16 Nov 2020)

Yes. It varied from lender to lender. AIB did 15%. ptsb did 10%.

It's really only a downpayment. 

Anyone who wants to can appeal for more.

Only about 10% of people did appeal, which would suggest that 10% were either happy or thought it too much hassle to appeal.

Brendan


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## bbari1 (16 Nov 2020)

Overcharges continued for another three months!

BoS stated that the lower rate (0.7%) will be applicable from 30th April.
BoS working shows refund of overcharged interest up to April.

Pepper letter stated that the reduced rate of 0.7% will be applied from June and the monthly repayment amount will be reduced from June.

However, the repayment amount wasn't reduced till Aug.


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## Brendan Burgess (16 Nov 2020)

Hi bb

Check if they fixed the interest rate back in April.  Did they charge the same interest in May as they did in April?

It's just possible,though unlikely, that they changed the rate without fixing the repayment.  So you will have paid down  more capital than you would otherwise have done, but you won't be any worse off as your mortgage balance will be lower.

Brendan


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## bbari1 (16 Nov 2020)

Hi Brendan,

As the payments were interest only payments so they couldn't have reduced the capital. The repayments remained the same till Aug so there are 3 months (May-Jul) over charges.

The two sets of communications contradict each other. 

Hope they will apply TVM/Compensation/legal fee to this overcharge as well!


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## Brendan Burgess (16 Nov 2020)

Ah, I hadn't realised or I had forgotten that they were interest only.

Brendan


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## Banquo (16 Nov 2020)

Brendan Burgess said:


> Yes. It varied from lender to lender. AIB did 15%. ptsb did 10%.
> 
> It's really only a downpayment.
> 
> ...


UB used 12% fwiw


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## Banquo (16 Nov 2020)

I hadn't realised all the banks used different parameters to calculate redress and compensation. I had assumed the CBI would have standardised the approach. It would be interesting to know which bank was the most "generous".


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